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A Bad Credit Mortgage can give you a Second Chance

Bad Credit Advice — Sun, 04 Jul 2010 21:39:04 +0000

Today more and more people are defaulting on their home mortgages. The recent fiasco involving home loans is evidence of the hard economic times. If you find yourself in the situation that you may face foreclosure on your home, you may want to look into bad credit mortgage options. These loans are second mortgages and can help to lower your total monthly payments by paying off your first mortgage and setting up a payment schedule you can handle. Using this type of loan can actually help to repair your credit rating.

If you are trying to purchase a home with bad credit, this type of mortgage can give you a chance to realize your dream of home ownership. While interest rates will be higher, there are lending institutions and companies who are willing to loan you money if you can prove that you are able to make your payments. This can also help to repair your credit rating if you can keep your payments current.

There are some questions that you will want to ask your financial consultant or lending institution before you take out this type of mortgage.
What is the interest rate?
How long will I have to pay the loan back?
If I have declared bankruptcy can I still take out this type of mortgage?
What happens if I miss a payment or I am late on a payment?

You need to know the answers to these questions before you borrow money to purchase a home or refinance your current home. Take your financial situation into consideration and be sure that you can afford to pay the loan back. A mortgage with bad credit may be the answer to your problem of getting a loan, but you want to be sure that you don’t end up worse off than you started.

A Mortgage Refinance With Bad Credit – The Pros And Cons

admin — Sun, 12 Jul 2009 12:03:30 +0000

To many, the term ‘bad credit’ is the end of the world when it comes to getting financing in the near future. However, it doesn’t always have to be like that, you can take the bad credit mortgage refinance option!

Mortgage refinance vs. equity finance

It is essential at the outset that you understand there is a fundamental difference between mortgage refinancing and equity financing. Basically, with equity financing you are using the surplus amount you may have stored up in your property between your outstanding mortgage amount and the appraised value of your home. However a mortgage refinance is where you find a new lender willing to lend you the whole appraised value of your property, the sum of which you then use to repay your existing mortgage lender and the remaining sum you can utilize in any manner you wish. Because of this, you are faced with a different set of problems than would be the case with an equity financing.

The pros of a bad credit mortgage refinance

Aside from any possible equity financing you can do with your property, without doubt the biggest upside to a bad credit mortgage refinance is the fact that it is a long-term and cheap form of borrowing. Interest rates are likely to be low and, possibly, can even be fixed. You could even possibly benefit from certain tax advantages from a bad credit mortgage refinance.

Because of this, bad credit mortgage finance can allow you to do things financially that may not otherwise be available to you as a person with a bad credit rating. You could use the equity you free up after you repay your original mortgage lender to invest in stocks and savings that will give you a better yield than you are currently getting on the property.

Alternatively, you could pay off all outstanding debts you have so that you have no interest and debt payments to make each month – merely a mortgage repayment. Finally, you could even use the equity you get to invest in a long- term investment plan like your pension. In fact the options are so limitless that you should really consult with a financial expert who can best advise you on how you should put that money to the best use for you!

The cons of bad credit mortgage refinance

The number one downside to any mortgage refinancing, whether it be bad credit or otherwise, is the fact that mortgage lenders do not like to be repaid early. As such they usually incorporate some expensive penalty clauses to try and make it not worth your while repaying them early. With this in mind, you will need to read your original mortgage agreement with your original lender very carefully to make sure you won’t have any onerous default payments to make; or, you could try and arrange for the new lender to swallow these.

That said, if you make any arrangements with the new lender that they agree to pay these fees for you, you then need to make sure they do not put any restrictive clauses in your new refinance mortgage agreement that would prohibit you from refinancing your mortgage again at some time in the future if the occasion warrants such.

Without a doubt, as a person with a bad credit history and bad credit rating, a bad credit mortgage refinance can open up avenues to you that would not otherwise be there. You do, however, need to give consideration as to whether or not you want to take this route. Not least because at the end of the day your house and family home is on the line!

Mortgage for People With Bad Credit

admin — Thu, 16 Oct 2008 16:26:58 +0000

Even those with bad credit dream of owning their own home, but to get a mortgage for people with bad credit can be a very difficult task for some. When you own your home you get to stop throwing money away on rent and you can do whatever you like with the property which is extremely liberating. So, how do you go about getting a mortgage for people with bad credit?

It might sound surprising, but there are actually many lenders out there who will do mortgages for people with bad credit. It’s a good market for them and can be profitable. If you’re looking for a bad credit mortgage the first thing you’ll need to do is find out exactly what your credit score is. You can get your credit score from many places on the internet. Some will give you a grade just like in school, but the top three credit reporting agencies report your credit as a score from 400-800. The higher the number the better your credit. You can get credit scores from Experian, Trans Union or Equifax and if you’re a U.S. citizen you’re entitled to one free report each year.

Anything under 620 is considered low and makes you a bad credit risk, but don’t worry too much about this. Lenders will happily make loans to people with bad credit, however because the loan is considered risky they will charge you a higher interest rate. They do this to compensate themselves for the perceived risk that they are assuming by extending a mortgage to someone with bad credit.

In addition to paying a higher interest rate, mortgages for people with bad credit typically have higher points and fees to be paid at the beginning of the loan. These points and fees are necessary because getting a mortgage with bad credit is more difficult than getting a mortgage with good credit. When you have good credit the mortgage broker doesn’t need to spend as much time getting the mortgage approved and so the costs associated with the mortgage are less.

Those looking to obtain a mortgage for people with bad credit should take the time to shop around with several lenders. You can then compare the offers to determine which one is the best for you financially. Just be sure to read all of the fine print because some clauses may be detrimental to you later, such as a pre-payment clause. A pre-payment clause may prevent you from paying off the mortgage early or even refinancing it to reduce your costs later.

While it may take a bit more work on your part it is possible to get a mortgage when you have bad credit. You’ll pay more for the mortgage, but the benefits of home ownership may outweigh the costs of getting a mortgage for people with bad credit. If you really want to avoid getting a bad credit mortgage then you could wait while you improve your credit score. Depending on how low your score is you may be able to do this in as little as 6-12 months. If you simply can’t wait, then shop around to several lenders and see what type of offer they make you for a bad credit mortgage.

5 Ways to Get Home Loans for People With Bad Credit

admin — Fri, 10 Oct 2008 16:56:07 +0000

Even though the credit market is currently in melt down mode it will come back as confidence is regained. In the past home loans for people with bad credit were pretty easy to come by, but no one is sure what the approval criteria will be in the coming months and years. There are still ways to improve your chances of getting a home loan with bad credit and here are 5.

1^st – Try to find a good deal on a house. If you can find a house that’s priced lower than the appraised value you might be able to get a mortgage easier on that property. The lender will view this as if you have additional down payment money since you will immediately have equity in the home when you purchase it. Don’t assume this will be the case and talk to your lender first if you find a deal like this to be sure it will help you qualify for a mortgage.

2^nd – This probably won’t work as well anymore, but you can try some creative financing options. Lenders have dozens of options when trying to get you a bad credit mortgage, see if they have one that might suit you. Talk with the real estate agent as well and see if the seller is willing to help with the down payment or is willing to carry a second short term mortgage.

3^rd – This is really a no brainer, but you should save more for a down payment. A larger down payment can be a huge help in getting home loans for people with bad credit. It will also help lower your interest rate and if you need to save for an additional 6-12 months you may even improve your credit score enough to get out of the bad credit/high risk category. If you have no down payment or even just 10% to put down it can make a lot of sense financially to keep saving until you can afford 20% at a minimum for the down payment.

4^th – Take some time and improve your credit score. This follows right along with the tip above, but there are ways other than time to improve your credit score. You should take the time to get a copy of your credit report from each of the three credit bureaus and go through them to make sure they are accurate. Many times people are hit with bad credit due to mistakes on their credit reports. Other ways to improve your credit score include making all your payments on time, closing unneeded credit card accounts and avoiding applying for any new loans in the 6 months leading up to your home purchase.

5^th – Take the time to shop around with different lenders offering home loans for people with bad credit. Some mortgage brokers will try to get you to believe that they are the only ones that can get a mortgage for you, but this is rarely if ever true. By simply talking to another mortgage broker you may find that not only can they help you, but they can actually lower your costs. Each mortgage broker has relationships with a variety of lenders and some are more flexible than others in their lending criteria. You should request quotes from a minimum of 3 lenders before making a decision. The good thing is that online mortgage lenders have made it easy to get quotes, even when looking for a bad credit home loan.

If you want to enjoy the benefits of being a home owner then don’t let your bad credit stop you. There are ways to improve your credit score to qualify for a home loan and there are even ways to get home loans for people with bad credit. Be persistent, shop around and keep working towards your goal of home ownership and you can find a way.

Avoiding Mortgages for Bad Credit

admin — Thu, 09 Oct 2008 16:29:15 +0000

Those of you looking for mortgages for bad credit will find that you are a bit limited in your options, but you do have a couple to choose from. Take the time to understand these two options and the impact that each can have on your finances. A mortgage is a big decision and will impact your finances and budget for the next 30 years, so taking a few weeks now to really understand your options is a wise move. When considering mortgages for bad credit you basically have the following two options:

Investigate various mortgage lenders and try to get the best interest rate and terms now with your current bad credit situation.

Step back and focus on repairing your credit score for the next 6-12 months so that you have more options when you apply for a mortgage.

If you go searching for lenders you’ll quickly find that there are any number of companies out there who will provide a mortgage to almost anyone, no matter what their credit score is. The problem here is that if you do have bad credit these mortgages come with a very high price. The fees will likely be higher than average, but more importantly the interest rate you get could be double that of a person with great credit.

Think carefully, because even a 2% difference in your interest rate will mean paying hundreds more each month to live in your home and tens of thousands more over the full life of the loan. Understand that when you begin paying your mortgage most of the money goes to the interest and very little goes to the principle of the loan. This means it can take a very long time to build substantial equity in your home, especially if you’re paying a high interest rate.

It doesn’t matter if you’re looking for a mortgage for a new home, for a second home or to refinance an existing home loan, if you have bad credit you’ll end up paying more for any of these in several ways. Your bad credit will lead to higher interest rates, higher closing costs and even private mortgage insurance which is nothing more than an additional fee you get charged due to your bad credit.

Much of this expense can be decreased by simple planning. Take 6-12 months to increase your credit score before purchasing a home and you’ll benefit in so many ways. While mortgages for bad credit can be had, isn’t the smarter course to improve your credit first and avoid all the unnecessary expense of a bad credit mortgage? I think so, and once you see how much money you save in fees and interest costs I think you’ll agree to that mortgages for bad credit should be avoided if at all possible.

Understanding Bad Credit Home Loan

admin — Mon, 06 Oct 2008 19:52:50 +0000

Everyone seems to want to get into their own home, now more than ever, but finding a bank to lend you money when you have bad credit can seem to be an impossible task. A bad credit home loan is always difficult to find, but in these troubled times they are becoming even more difficult to secure. Keep up hope though, because home loans for people with bad credit do exist.

It’s not only those with good credit that can get a mortgage; home loans are available to those with difficult credit histories and from a diversity of economic backgrounds. Those with good credit will still receive the most favorable rates, but bad credit home loans are out there if you’re willing to pay the extra to live your dream of home ownership.

There are several things to consider when you go looking for a mortgage and this applies whether or not you have bad credit. The first thing to think of is the cost and value of the home you’re looking to purchase. The home’s value should be at least equal to the cost of the home. One positive in today’s housing market is that you can find homes that are actually selling for less than they are worth. This immediately gets you equity in the home and is looked upon favorably by the mortgage lender.

The next thing you’ll want to take into consideration is the amount of money you are going to put as a down payment on the loan. I can’t stress enough how important this down payment money is. You should try your hardest to put 20% down as a minimum. This will benefit you in several ways. First off, the lender will be much more likely to finance the home purchase if the down payment is large. Secondly, with a 20% down payment you avoid having to purchase Private Mortgage Insurance or PMI, which can save you hundreds each month. Finally, the more cash you put down on the home purchase the lower your home loan and monthly payments will be.

One final consideration when taking a bad credit home loan is the interest rate. You will receive a higher rate of interest on a bad credit mortgage, so you want to factor this in. The good news is that interest rates seem likely to remain low so you could refinance the mortgage after a couple years, once your credit score has improved. Be careful though because no one can accurately predict what interest rates will do and you could end up locked into the higher rate you get now. If nothing else, be sure to compare mortgage quotes from several lenders to get the lowest rate possible.

You might not think so, but a bad credit home loan is just as competitive as loans for those with good credit. Lenders want your business and this can work to your advantage. Just realize that to keep interest rates lower on a bad credit home loan you’ll need to put down a large percentage of the home cost. If this isn’t possible you either need to accept the higher interest rate or wait and save money until you can boost your down payment. This will work in your favor because not only will you have better rates from the larger down payment, but chances are your credit score will have increased as well.

You’ll find that many companies are willing to extend a home loan to you, even if you have poor credit. They are experienced in working with bad credit borrowers and will do whatever is necessary to get your bad credit home loan approved.

Mortgages for People With Bad Credit

admin — Mon, 22 Sep 2008 19:27:05 +0000

Getting mortgages for people with bad credit can be a bit of a challenge. Having bad credit can be a problem when applying for any type of loan and with something as large as a mortgage this is especially true. It’s normal to go through periods of frustration and disillusionment when trying to get a bad credit mortgage, but all is not gloom and doom.

There’s actually some good news for those with bad credit histories. You can still get a home loan and bad credit loans are not nearly as difficult to get as they once were. You have every chance of success these days when applying for a bad credit home loan, in fact there are many mortgage companies specializing in bad credit mortgages. Even the larger traditional mortgage companies are now involved with bad credit borrowers. They understand that bad credit in today’s world is not as risky as it once was.

The companies offering mortgages for people with bad credit are often referred to as sub prime lenders and they work specifically with those who have poor credit. They will still use the FICO credit score to determine your credit worthiness, but they won’t necessarily decline your mortgage application solely based on a bad credit score. Typically anything below 620 is considered a bad credit score, but the poor credit mortgage companies will still work with you as long as your score doesn’t fall below 500.

Thanks to these bad credit mortgage lenders many who would previously be denied for a mortgage now have cause to celebrate. They now have a place to turn to in spite of their past credit problems and can enjoy all the benefits of home ownership. Keep in mind though that not all bad credit mortgage companies are kindly, some are only looking out for their own bottom line and care needs to be taken when choosing mortgages for people with bad credit. The worst of these companies will charge much higher interest rates, have excessive fees and may even try to get you into a loan that is inappropriate for your situation.

I’m sure you’ve already seen advertisements for mortgages for people with bad credit. The mortgage companies have been quite aggressive in advertising their services, especially on the internet and the ads are quite commonplace. Along with this you’ll also find that the application process for an online bad credit mortgage is both straight forward and quick. These bad credit mortgage companies know that they are in a profitable area and they are making things as easy as possible for those that need bad credit loans.

Just do yourself a favor and take the time to do some research before you start working with a mortgage lender. Mortgages for people with bad credit are definitely available, but it’s important to keep yourself safe as well.

Mortgage Companies for Bad Credit

admin — Mon, 22 Sep 2008 17:42:22 +0000

Because mortgage companies know the value of owning your own home they will do whatever is necessary to get you home loan. Even those with bad credit can now get a mortgage and mortgage companies for bad credit, which were once unknown in home lending have now become common place. As you can imagine, bad credit home lenders are quite popular and these mortgage companies are quite sincere in doing whatever is necessary to help people get a home loan, no matter what their credit looks like. Beware though as some mortgage companies are only concerned with their own profits and the interest rates and terms they offer may not be in your best interests.

The Trouble With Bad Credit

If you’re a victim of bad credit you know that getting a loan can be difficult and many opportunities are gone for you. Most lenders prefer to loan only to those with good credit and you’ll likely have to apply to several lenders before being approved if your credit score is below 620. You can find mortgage companies for bad credit, but the truth is that your options will still be limited when working with them.

More bad news is that because of your poor credit score you’ll be subject to higher fees and interest rates. Because this is the case you need to be extremely careful and selective when choosing a mortgage company to work with. Mainstream lenders shy away from risk and will tend to charge the highest rates to those with bad credit.

Because bad credit mortgage companies are very experienced in working with credit risk they will typically be able to offer better terms and rates than will traditional lenders.

Pushy Bad Credit Lenders

Some bad credit lenders will pressure you into making a decision before you’re ready and this is very bad for you. Usually these lenders are a bit shady and my recommendation is to walk away from any mortgage lender that tries to pressure you into a deal. Many of them are very convincing too and will make you think that they are the only ones that can get you into a bad credit mortgage.

In some cases these lenders will use very creative and complicated ways to get you into a home loan, but will fail to explain to you fully how the loan works. It’s possible that the loan has changing interest rates, balloon payments, prepayment penalties or clauses that prevent you from refinancing at a later date. If a mortgage company seems too pushy they may not have your best interests at heart and it’s probably best for you to find a different mortgage company for bad credit.

Research Bad Credit Mortgage Companies

With a little bit of research most people can easily avoid the poor mortgage companies out there. While there are some bad apples, not all poor credit lenders are bad, in fact many of them want to help you as much as they can. Even so, it’s best that you begin your search with caution.

The shady mortgage companies for bad credit prey on people’s ignorance of mortgages and home loans. They are hoping to get customers that are unfamiliar with lending practices and will take advantage of these people by offering loans that profit them, but do not benefit the borrower. You can easily avoid this by getting several quotes and when looking for mortgage companies for bad credit take your time and make sure they are legitimate before agreeing to anything.

Working With Bad Credit Mortgage Lenders

admin — Mon, 15 Sep 2008 17:34:29 +0000

In the past, having bad credit could stop your mortgage from being approved. These days however there are so many bad credit mortgage lenders that it is almost easy to get approved for a mortgage, even if your credit is tarnished. Now even the larger mortgage lenders are joining in, meaning higher approval rates and lower cost loans for everyone thanks to the increased competition. Bad credit mortgage lenders know that these types of mortgages are a huge business.

The bad credit mortgage lenders, also known as sub-prime lenders, work the same way as traditional mortgage lenders because they use your FICO score to determine your credit worthiness. FICO scores are reported by the big three credit reporting agencies, namely Trans Union, Experian and Equifax. In general, a FICO score below 620 is considered bad credit. A FICO score like this won’t prevent a mortgage lender from approving your mortgage these days, however once you get down around 500 and below most lenders will not provide you with a mortgage.

The thing is, even though you will get approved for a mortgage with bad credit, you’ll find that the mortgage lenders will also take advantage of your poor credit score in the form of increased interest rates. Of course, for the lender this means more profits, but chances are if you’re already in a bad credit situation you’re probably also in the worst position to get hit with high interest rates. To compound the problem, mortgage lenders will require a down payment of at least 20% before approving a bad credit mortgage. Although it may be difficult for you to come up with this down payment, this is actually a blessing in disguise at it will lower your loan amount and your monthly payments.

These days as new laws are being passed and the mortgage credit market is reeling there has been a blurring of the lines between those with good credit and those with bad credit. Mortgage lenders are approving more people than ever, regardless of credit scores and with the new economic term “non-status” to describe those such as the self employed who cannot prove accountability, many who once would have been considered bad credit borrowers are no longer included under that umbrella. If you can find a way to include yourself in the “non-status” group your interest rate will be virtually the same as a person with good credit.

You’ll find bad credit mortgage lenders advertising all over the place these days and they are especially apparent on the internet. In just a few minutes time you can fill out a simple online application and find out if you can get approved for a mortgage. These companies are increasing their business dramatically thanks to the ease of the internet.

If you do have bad credit, take advantage of the internet and the ease with which you can get quotes and compare loan terms and rates. Be careful of companies who will try to make you fearful that you can’t get a loan anywhere but through them. This psychological blackmail is unfair to you and is simply not true. This type of bad credit mortgage lender will put fear into you so they can trap you into a loan with a higher interest rate. It’s simple to avoid this by getting several quotes and comparing lending rates.

5 Tips About Home Loans for People With Bad Credit

admin — Mon, 08 Sep 2008 18:00:20 +0000

Even with the current mortgage crisis, home loans for people with bad credit are easier than ever to get. Here are 5 tips to improve your chances of getting a bad credit home loan.

Find A Good Deal

Finding a good deal on a property can be a challenge, but if you have bad credit then it could ultimately be the difference between getting a good bad credit home loan or not. The loan officer will view it as if you’re making a larger down payment if the property already has some equity when you buy it. The best way to see if these types of properties will help you to get a bad credit mortgage is to speak with your mortgage broker.

Investigate Creative Financing

There are a variety of creative ways to get home loans for people with bad credit. Adjustable rate mortgages (ARM’s) have been very popular lately and will continue in popularity so long as interest rates don’t begin to rise. Just be aware that if rates do start to rise you could see a significant jump in your monthly payments. Another option is to have the seller help with the financing by putting some money back into the deal as down payment money or by having them carry back a second mortgage on the home. This can get you the extra $10,000 or $20,000 you need to get that mortgage.

Have A Down Payment

OK, you can get a bad credit home loan with 100% financing, but if you can put down even 3-5% you could see a big drop in your interest rate, saving you tens of thousands of dollars over the life of the loan. Do whatever you can to save up for your down payment and make it as large as possible. It might even be wise to wait an additional 3-6 months before getting your home loan, especially if it means the difference between having a down payment or not. In case you don’t have a down payment now, keep in mind that you can always refinance later to get a lower rate.

Shop Around

A lot of mortgage brokers would have you believe that if they can’t get you a loan then no one can. Nothing could be further from the truth. Be persistent and you’ll soon find that even if the 1^st and 2^nd lenders can’t help you, it’s quite possible the next one can. This is one area where online mortgage brokers can be a huge help because they typically have relationships with multiple lenders and will shop around to find you the best deal. Plus, they are quite often used to finding home loans for people with bad credit. It really is nice to be able to compare several loan offers and choose the one that is best for you.

Boost Your Credit Score

One obvious way to improve your chances of getting a bad credit home loan is to increase your credit score. And there are some simple ways to boost your credit score quickly. First, check out the three major credit reporting bureaus to make sure there are no incorrect items on your credit profile. You would be surprised how often this happens. Next, make sure you are making all your payments on time to help your score. If you are looking to buy a house, don’t apply for any new loans or credit cards to keep the number of credit inquiries down. Too many inquires in a short time can hurt your credit score.

Really, if you want to buy a house then don’t let bad credit get in your way. You can get home loans for people with bad credit, it just might take a bit more time and creativity. Apply to several lenders and apply with online mortgage services. And especially look for mortgage services that specialize in home loans for people with bad credit. They will make it much easier to get you into your dream home.