Have you often wondered if you will ever own your own home, have your very own credit card with your name on it or how you will be able to purchase that special car you’ve had your eyes on for quite some time? Well, if you have ever asked yourself these questions before, this info will give you some pointers on how to get started in accomplishing this and not have to wonder any longer. Little do you know, even if you have bad credit or little credit, you are still be eligible to get a loan to buy that home you have always wanted. Even if your bad or insufficient credit disqualifies you as a good buyer, a home loan at standard interest rates may still be within your reach.
Homes are considered a extremely secure collateral. Because of this, the lenders feel more comfortable lending you money against the property. As opposed to unsecured credit lines, the lender will be primarily interested in your job security, debt-to-income ratio, and the ability to pay a reasonable down payment.
Your credit report will only represent a minor role in your mortgage approval. On the other hand, much depends on the mortgage broker whom you choose. Let's take for example you walk into a bank, apply for a home mortgage loan, and you are turned down. Now, on that exact same day, you go into another office, but this time that of an independent mortgage broker, and he immediately pre-approves you for a mortgage loan. Each mortgage broker uses one or more lenders to fund the home loans, which comes back to him/her. The mortgage broker’s job is to match you with the appropriate lender. For this service, you, or the home seller will pay the mortgage broker points. These points are equal to percentage points of the loan amount. If you are paying your broker 2 points on a $120,000 home loan, that will come to a $3000 payment to the broker. Almost inevitably, there will be problems that arise with your mortgage. Your mortgage broker and real estate agent are responsible for coming up with creative solutions to help solve those problems.
Some mortgage brokers will look at your less-than-perfect credit and suggest that you accept a B, C, or D paper mortgage. This means that the loan will require a larger down payment, a higher interest rate, better debt-to-income ratio, and, of course, more points for the mortgage broker. These high-risk loans are not very good deals. Many times, with the right mortgage broker, you could still qualify as a good buyer.
Even if your broker encourages you to go with the high-risk mortgage, don’t agree. Remember that you have other options. Most home loan programs today offer homeowners to get into a house with as little as a 3% to 5% down payment. But with less than perfect credit you may have to pay that higher percentage rate on a down payment. Don’t be discouraged if you are one of those people because you have other options that may help you. You can come up with a loan through the, gift from parents or close relatives, option. Make sure that you let your loan officer know this at the beginning of your loan application because some loan programs have different guidelines regarding the gift option.
You can also borrow against your cash value life insurance policies or the vested portion of your retirement plans. You’d be surprised how often this option for a down payment is overlooked. You can even turn in your old life insurance policy or get a low rate loan against it. The amount of the outstanding loan will be deducted from the death benefit of the policy at the time of the insured’s death. You can also look to borrow from your 401K plans from your work. Check with your insurance company and employer for these two options. If all else fails, you can always work out a rent to own lease option with the owner of the home.
This is a great option if you need the opportunity to clean up your credit and have some time to save up for that down payment. Another great option is to buy the home on contract. When buying on contract you just need to put some money down on the house and agree to pay monthly until you pay it off. The only catch with contract buying is, if you are late on a payment the house can be taken from you at any time. This is kind of like repossessing a car when the payment cannot be met. You will not be able to get the money that you put down for the down payment back. So if this is an option for you, make sure that you can afford to keep up your monthly payment on time. Whatever route you choose to take in obtaining that house, it will be well worth it to call it your own.
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