How To Qualify For A Bad Credit Loan And Change Your Life
How Do You Get One?
As many people watch the economy get worse with each passing year they believe that their chance of ever owning a home diminishes as well. The truth is there is plenty of money still available to be lent, you just have to know how to get it. We have found some of the best tips that you can begin to implement today. If you have been searching for a way to get the credit you need to purchase a home, this article is going to be invaluable to you.
Believe it or not, the criteria for qualifying for a bad credit loan does not differ much from a traditional loan. The main difference between the two is the area of defaults and bankruptcies, which in this case will not mean a certain denial. All an applicant with bad credit needs to do is show the ability to pay a loan on a monthly basis and have the income to do so.
Where do You Start?
The process begins with finding the right home. Ideally, this should be a home that is being sold for a considerable amount less than the fair market value. By choosing a home undervalued, you will have a much easier time securing the mortgage. Lenders love seeing potential buyers come in with a property that is undervalued as it takes off the majority of the risk. Many lenders are going to scrutinize the home for the loan to value ratio before they guarantee a loan. However, if you have bad credit, the lender will offer a loan if the loan to value ratio is 90% or lower.
Considering that you have bad credit, it is important to consider unique ways to finance your home. It is always possible to ask the seller to offer a second mortgage on the home. This type of tactic is only going to work on buyers who are really motivated to sell. When they are approved for the second mortgage, you can set a contract up where you will pay specific payments for the home. It is best to ease the seller with a specific end date to have the mortgage paid off. Many times, this is within a two-year time frame.
How Much Deposit do I Need?
The next important step is to have a generous down payment available for the home of your choice. Many times, even with bad credit it is possible to qualify for up to 95% of a home loan. If you are able to put down a down payment of 10% or more, the interest rates will be much lower. If you plan on buying a home with bad credit, one of the first priorities should be to begin saving as much money as possible. Typically, the best thing to do is to save up enough money over the course of months or the year and then begin applying for mortgages. If you are unable to come up with a decent down payment, it is always possible to refinance at a lower rate later on.
When shopping for a bad credit mortgage it is essential to take the time and do a wide range of comparisons as rates are going to vary. During this time, you should also focus on improving your credit rating. Take the time and request a report from any of the major credit bureaus and see what can be changed. If there are mistakes on the report, request that they be updated. If you have a lot of credit cards and they are not in use consider downsizing as that may be hurting your credit. Begin with these steps and do not stop until you have the home you desire.