Frequently Asked Questions about Mortgage and Home Loans – part 1 ( here: part 2 and part 3 ). Check from the list if your question is answered on this page, if no, feel free to ask yours in comments.
How To Get Low Interest Home Loans?
Getting a low interest home loan takes some planning. You aren’t going to walk into a bank and say the magic password that qualifies you for a 4% loan. However, there are a lot of people that have 4% loans – because they planned well.
There are quite a few things that go into finding and qualifying for low interest rate home loans and this lesson will serve as your guide. If you apply the principles in this article, you will find yourself in a much better financial position, as your credit will improve and your ability to get prime loans will increase.
The biggest and most important step in the process for anyone that wants to get a solid interest rate on a home loan (or a low interest home equity loan for that matter) is getting your credit in order. I would recommend doing everything it takes to get your credit score over 750. Most banks will lend with prime rates to anyone over 720 but your score can quickly change overnight and you don’t want a 10 point ding to get in the way of getting an awesome loan. Stay above 750 at all times.
There are a few simple techniques that you can use to improve your credit. First, you need to make sure that you have multiple, revolvling accounts. I personally have four credit cards and it’s recommended that you have around three cards. You need to keep the revolving balances low on these cards, in fact I would recommend paying them off in full each month for maximum benefit. 35% of your credit score is calculated by looking at the percentage of your credit that you use. If you use over 30% of your available credit, it’s going to impact your score negatively. If you carry a very small balance/no balance it will impact your score positively.
Never make a late payment if you want to improve your credit score. Late payments will really affect your credit score and you don’t want lenders seeing that you have a habit of paying your bills late.
A lot of people think that they can take out low interest loans even though they don’t pay their bills on time. If you feel entitled to the best of everything, you’re going to have to change your thinking. The world doesn’t owe you a low interest loan unless you earn it.
Another huge factor that you have to consider is timing. Interest rates are constantly going up and down and you have to have the solid credit score at the right time to get a home loan with low interest. A few months ago rates dropped to almost 4%, but now they are higher. You have to be ready to refinance and if you are, you’ll be able to score a much better loan.
What is Macro Trading the Housing Market?
Over the last two years we have all seen the devestation in the housing market. In fact some people reading this have likley been foreclosed on and driven from what is now the banks home. So what can you do now to profit from the housing crisis?
Well lucky for you the crisis is far from free and clear. Although it is slowing down foreclosures are still on the rise and recently hit a new all time high. On top of al the problems with residential real estate we have the newly started commercial real estate crash which is just getting going but is predicted to be really bad over the next few years. Bascially real estate is still a minefield or a battlezone if you will but like any great crisis there are plenty of opportunities to profit from it all if you know where to look.
One of the first things you leanr when researching real estate is that location is first second and third in order of importance, the saying actually goes “location, location, location.” If you are looking for area to invest your hard earned money one of the best tools is that of the Case Shiller housing indexes. They cover 20 different cities and allow you to find the strong and the weak markets. Most real estate speculators should probably shy away from the middle of the road performers as they dont have the stability of the top performers, nor the potential of the bottom performers. By only looking at the strongest and the weakest markets you will have a better chance at coming out ahead.
Your next step after finding an area is to go to a good real estate broker and find the good neighborhoods that are getting whacked by foreclosures. Many of these homes are in relatively new and nice areas, exactly the areas where you likley will want to own a home ten years from now. Now look at interest rates and what type of rate you qualify for. Personally we think you should try multiple lenders and even look at some alternate financing vehicles in order to ensure that you are finding the best possible rate and financing package.
Right now (mid 2009) rates are still realtively low on a historical basis but are all but guarenteed to go up over the next few years as we are still near historic lows. Because of this it is important to lock in a good rate now and not wait until later. After all if before you buy yoru house rates drop like a rock you can just get a new loan. Anyways once you have studied the interest rate trends and gotten a financing package it is now time to buy your home.
If you are buying a few homes it maks sense to spread them out geographically in a few different markets so that you aren’t wacked too hard if one of the markets does not recover. Yes, managing the properties is a bit harder but the overall risk is lowered substantially. Another option is to find a good residential REIT and invest in it. You won’t get the same bang for your buck but the process is simple as you only need a stock brokerage account. All the same principles apply in a REIT. You want their portfolio to be robust and purely in residential real estate.
Hopefully this has been helpful and you now have the beginnings of a plan for getting into real estate. You don’t need to buy only in your area but instead can take a macro trader view of things and go where the best risk to reward opportunities are. Markets like Vegas, Phoenix, Denver are all likely good markets over the next ten years or so and most people will do well that are buying right now.
Getting A Bad Credit Home Refinance
Today, it is very easy to have bad credit problems in America. Sudden economical downturns have caused massive layoffs, stock market or bank failures, real estate upsets, and a general realignment of the credit-style payment systems that many homeowners have grown to depend on since prior to the start of this century. In simple words, many Americans are broke, lines of credit have been cut, and new jobs are not on the horizon.
About bad credit home loan refinance methods:
The United States currently has people with college degree’s working as low-pay or unskilled labor, and many from the lower-pay labor sectors not working at all. Within both of these income brackets, real estate foreclosure rates are continuing to go up as individuals drain their savings on efforts directed at maintaining the status quo after their take-home pay has been lowered or cut-off completely.
Housing is the biggest worry to consider when facing personal economic hardships. Bad credit home refinance methods exist for both home and auto loans, but hey are often not handed out in a form that leaves individuals with their homes intact if mistakes are made along the way towards applying for these reductions. Whenever money is tight, realize that the related crime-rates are up, and that some criminal wants your assets.
When real estate is involved in any transaction, an expert is needed on both sides to protect assets while complicated real estate codes, rules, and laws are followed at local, state, or federal levels. Refinance methods are still a part of the real estate transaction process despite any concerns about credit ratings. The best method to refinance homes with bad credit often comes through the services of a debt reduction attorney.
Through hiring an attorney for the purpose of debt reductions, the homeowner acquires a trained individual to negotiate the mortgage restructuring on their behalf. Attorney’s are licensed by the State, and tested in their abilities before the licensing is allowed. Further, if negotiations cannot produce home refinancing due to credit problems, the attorney can still walk homeowners through other methods of debt reduction that may still save the home.
Debt reduction attorney’s can be found in local communities, or through referral services from the State Bar for your area. Alternative methods to home refinancing include lowering all other debts so that a homeowner can pay current mortgage costs. Debts are lowered through negotiations with sources that money is owing to, or at times, through negotiations associated with a bankruptcy procedure that is designed to save the home.
How To Get A Bad Credit Refinance Loan
In the past even individuals with bad credit were often able to get the financing they needed so long as they owned one important asset: a home. The current mortgage and housing market collapse has made it tougher than ever to get a bank loan even if you own a home for collateral. This leaves many people asking a very important question: Is it possible to get refinance loans for bad credit?
There are many reasons to refinance. A new car, home repairs, even paying off high interest credit cards are all good reasons to seek refinancing options. In the past the first place a home owner usually looked to refinance was their local bank. That may not be the wisest first option any longer. If you need bad credit refinancing, loans from a bank are unlikely. However, it is important to note that “bad credit” is a relative term and what used to be bad is not a total loss anymore. To consider your financial situation bad your credit score should be less than 600.
If your credit score is over 620 but still under 680 your score is now considered “okay” in the new economic viewpoint. Of course, from a refinancing standpoint it’s still shaky, but you do have several options. A bank not your best bet. Mortgage brokers are a good place to look and it is important to know that they will love you. The reason is that you are teetering in very dangerous territory and it will be difficult for you to get the refinancing you need any other way. They know they are your only real hope, and they also know that you are struggling. This puts them at a very unique advantage to get you the financing you need on their terms.
When you approach a mortgage broker it is still important to be prepared. Being prepared for what you are walking into may even give you a little bit of a bargaining edge. Knowing where you stand with your credit and what makes it bad, worse, or desperate can help you when it comes to negotiating terms of a loan. Of course you will need the regular paperwork: proof of employment and copies of current bills. What you should also have is a complete budget workup proving that you can afford the payment for the loan you are seeking. Have a copy of your credit reports from all three reporting agencies in hand as well. If there are any discrepancies make sure they have been cleared up before you apply for refinancing. Be prepared to explain troublesome spots on your credit report as well.
If your credit score is truly bad, as in less than 620, your only option may be an FHA loan. The FHA (Federal Housing Authority) has more access and up-to-date knowledge of any government actions to help home owners including recent stimulus advantages. The bottom line is that your bottom line is important, but you do still have options for bad credit refinance loans.
Finding A Good Bad Credit Mortgage Interest Rate
Finding a good bad credit mortgage interest rate sounds like two mutually exclusive things, sort of like having your cake and eating it too, but believe it or not it is possible with a little work and some research to not only quality for a bad credit mortgage but also to get a fairly decent interest rate. You may hit a few brick walls before you find a lender who will actually work with you, but take heart at the fact that they do exist, and they often work with people who have had past credit problems.
Mortgage loans in general are a little bit easier to qualify for than a loan for a car or furniture, or a credit card, one because your creditors will know where you are and the fact that you can’t exactly walk off with your home and head into the hills where creditors will never find you is a contributing factor as well. Also, I always recommend that people check their credit before they even consider bad credit mortgages because you may be surprised to find that your credit score qualifies you for a mortgage, or at least is so close that with a little bit of work you can get one.
If your credit score is above 650 then you’ll likely qualify for a mortgage at a conventional lender, assuming you have the income to back it up, and your not completely bogged down in debt that demands a monthly payment or payments that equal half of your income. If your score is borderline, like 635 or 625 then you still may be able to qualify depending on the lender, the size of your down payment and what your income is. If you are making a larger down payment than the average amount and your income is good you may be able to qualify.
If your credit score, income or other factors do not permit you to get a conventional loan, don’t worry. There are still lenders out there that will work with you. However, you’ll end up paying for the low credit score with higher interest rates and what are often very uncomfortable terms for the home buyer. These lenders are commonly called subprime lenders and they make up for the risk they are taking by financing someone with bad credit by charging a less than perfect interest rate, as well as possibly additional fees, or terms that protect them in case of nonpayment.
Interest rates for bad credit mortgages will fluctuate all over the place from lender to lender, so make sure that you apply at several different places and discuss what sort of interest rates you can qualify for. Many people are under the mistaken impression that applying at ten different home mortgage lenders will throw their credit score further out of whack, but in fact this isn’t true. Inquires for the same type of lender, over a certain period of time, will not affect your credit score negatively and in fact will only count as one total inquiry.
Conventional Mortgage Loans
Any prospective home buyer looking at conventional mortgage loans will want to do a little bit of research before beginning to send your credit report on its rounds through the finance companies. Buying a home has its own little niche in the financial market and mortgage loans have their own jargon and terms that will confuse a first time home buyer that is not familiar with them. We’ll go over some common home buying terms so that you can know what your broker or agent means when she begins speaking the language of the home loan.
Taking out conventional mortgage loans is a lengthy process and one of the terms that you will hear a lot is closing costs. Closing costs are any costs associated with paying for the mortgage on your home, which may include broker’s fees, attorney fees, any fees associated with filing documents or getting them notarized, as well as any inspection fees and costs to appraise the home. They may include recurring fees such as property taxes as well. Most closing costs are paid by the seller, but some the buyer will have to pay and each transaction differs.
Another term related to mortgages that you may not understand is the term equity. Equity is simply the part of the home that you own. After you pay on your home for a certain period of time, and the interest has been paid and you are paying off the principal, you will begin accruing equity. If you pay on your home for ten years you may have quite a bit of equity built up in your home, or to put it another way, you may own half of your $200,000 home, while the bank owns the other half still, and you may be able to get a loan on this equity. Equity also occurs when your home’s value goes up from the originally assessed value.
Two more terms that you may have heard in regards to regular mortgage loans are appreciation and depreciation. These two terms are opposites, appreciation meaning your home going up in value and depreciation meaning that the value of your home goes down over time. Many things affect a home’s appreciation or depreciation so ask your lender or broker to explain to you what the appreciation or depreciation values are on any homes that you are considering buying. Then you can make the best decision.
The final term that we’re going to talk about is escrow. This may be a confusing term to many because it can mean many different things. When it comes to buying a home, escrow is usually the down payment, deposited somewhere for safekeeping while the deal is closed, and then delivered to the seller after all the paperwork is signed. There are many other terms associated with buying a home and we have only covered a few so ask your agent to explain these terms to you. First time home buyers aren’t usually knowledgeable about these terms and he or she may explain them to you anyway.
A Second Charge Mortgage Explained
One of the options for homeowners out there is what is called a second charge mortgage. This type of mortgage is essentially a mortgage on your current mortgage and are available at many different lenders. Second charge mortgages are not for everyone and if you are thinking about getting one, or if you just want to keep your options open, then you should understand exact what these type of mortgages are, where to look for one, and what to watch out for while you are shopping for one.
There are specialists available that offer these type of mortgage loans and if you look carefully sometimes you can find a lender who is offering rates that are extremely competitive for mortgages and sometimes rates that equal or surpass the rates that of your current mortgage. The rates will fluctuate greatly from lender to lender so shopping all of your available options is definitely recommended. Ask all of the lenders that are available what their rates are and take special care when closing to ensure that you get the best rate you can.
The important thing is not to hurry with second mortgages. Remember the time you took on your first mortgage, choosing the right lender, agent and examining documents with an eagle eye. Do the same thing for this mortgage as well. A second charge mortgage is essentially a secured loan with your home as collateral, and if you are putting up something that means as much to you as your home you should be very careful and take your time. Don’t forget to find out who will pay fees or what any prepayment penalties are or other factors that must be taken into consideration.
One thing that I always recommend when shopping for any type of mortgage loan is to hire a mortgage specialist, also known as a mortgage adviser. Not only will you have a lot more options to choose from as far as which lender to go through, but the mortgage adviser is working for you, so any pitfalls or problems in the terms or fees will likely be brought to your attention. This is not to say that you shouldn’t check the paperwork yourselves as well. Also, you’ll save a lot of time, as the mortgage adviser will do the digging for you.
Also, you’ll want to make sure that you look over your paperwork carefully for fees that some companies use to try to generate extra revenue. Things like insurances that are required to complete the loan, such as unemployment for one thing, and even if they require insurance you can get a much better deal by getting the insurance yourself through a broker. Also, the insurance may not provide the coverage that you want. Be diligent when closing and examine paperwork carefully or better yet, go over it with your mortgage specialist.
Mortgage Refinancing Information
If you are looking for mortgage refinancing information you have come to the right place. You may have heard about a prime interest rate that you are hoping to refinance and get your home at, or you may be looking to refinance to cash out equity in your home for home improvements or other purchases. There are many places to look for mortgage refinancing, but the best place to start is where you originally financed your home, as a prior relationship may allow you to get better terms and interest rates than you could from someone new.
There are many reasons that you might be looking to refinance your mortgage, with a very common reason being the desire to make home improvements before the sale of your home, to be able to close a lot faster and get more for your home. If you are going this route than I recommend that you look at the flooring and appliances first, as these will increase your home’s appraised value, especially if the current floors or appliances are damaged or outdated. Also, a paint job will always be a safe bet for an investment in your home that will raise value.
A refinance mortgage comes in many different shapes and varieties, but with a good credit score you will find that the interest rates are pretty much the same all across the board. If you come across a lender that is offering you a subprime interest rate, and you have a credit score in the late 600’s or 700’s then be wary, because you can get a lower interest rate from nearly any lender. I’d be wary of trusting any lender that isn’t willing to offer you a decent credit rate, or has terms that don’t make sense or that you have never seen before with a decent credit score.
However, if you do have bad credit, that is the reason that these subprime lenders exist. A subprime lender makes money on the higher interest rate, which can amount to tens of thousands of dollars at even one percent over the prime rate, and they are willing to take a risk on someone with bad credit who wants to refinance a mortgage on the chance that they will make quite a bit from the higher interest rate. However, as before, you need to be very cautious with the terms, as these lenders will try to minimize their risk with terms that are unfavorable to the buyer.
With a good credit score however, you should be able to find a company that will refinance your home quite easily and most good lenders won’t have any terms that you are uncomfortable with or interest rates that are less than prime. Shop around a bit and find someone that you are comfortable with, that is, if you choose not to go with your original lender or the bank that you use, and make sure that they have a good customer service record and that they can be easily accessed if you have questions or problems.
The Home Mortgage Refinance Loan
If you own a home you have likely heard of a refinance loan. If you are looking at home mortgage refinance loans then you’ll want to know exactly how they work, and what the process is. Refinance loans are for those who already have equity built up in their home. There are many reasons that people refinance, key among them to take advantage of a low interest rate that is currently available, or to get a interest rate much lower than the initial one because of improvements in their credit score or other factors that influence a loan.
Refinance loans for home mortgage work by obtaining a brand new loan, with the interest rate and terms that you are happy with, and using that loan to pay off the remaining amount owed on your home. If you have equity built up in your home then that may mean that you will have cash leftover after paying off your home, which you can then use for home improvements, new purchases or anything else you choose to use the money for. Of course, you can also get a smaller loan with no cash leftover and have smaller payments or a shorter loan term.
When you apply for a refinance loan home mortgage companies will check your current credit score, estimate how much equity you have built up in your home, and check available interest rates. One thing that is important to mention is to shop around. Many people are reluctant to do so, because they are afraid of all the inquiries affecting their credit score. However, this is not the case. Inquiries listed over a certain period of time for the same type of loan is only considered one inquiry and will not damage your credit score, so shop around for the best rates.
Another reason that people refinance is to consolidate high interest debts into one low interest loan. This is accomplished by taking out a loan to cover the payoff on your current debt, including your mortgage and then paying them off. Then, you only have one payment to worry about rather than several, all at varying interest rates that are usually much higher than your refinance loan, especially if you have made improvements to your credit score, you have lived in your home for a few years or you have received wage increases that have made your income higher.
When you apply for these refinance loans home mortgage companies will also charge fees for the refinance so it is important to keep this in mind. Many times the company that you are obtaining the refinance loan from is the same company that originally financed your home, and in that case they will be losing money with a lower interest rate so be prepared for some fees. Also, you’ll want to know if your home is going up or down in value because this will change the interest rates that you are offered.
Mortgages For People With Bad Credit
If you are one of those affected by the economic downturn with bad credit or late payments then you may be wondering if you can even quality for mortgages for people with bad credit. Often, people don’t apply for mortgages and spend years paying rent and putting money in someone else’s pocket because they think that they cannot get mortgages with bad credit. The truth is somewhat different, but there are things that you should be aware of before you begin shopping for a bad credit mortgage loan.
First, you’ll want to find out exactly how bad your credit is. Bad credit mortgages, unlike conventional home loans vary greatly in interest rates and such, depending on factors like your down payment, your stability, your debt to income ratio and of course, your credit score. If you are wondering what sort of mortgage you can quality for, whether a regular mortgage or one that is especially for people with bad credit, then the first thing that you’ll need to do is obtain a copy of your credit report. If you haven’t seen your credit report, you can obtain one free each year.
Generally, someone who qualifies for a conventional mortgage will be someone with a credit score above 620. If you have a credit score above 620 or even close, then you should apply at regular mortgage lenders, and with the right down payment, with a history of stability at one address and job, your approval is nearly certain. If your credit score is near 620 or somewhere in the five hundreds then you may want to do some credit repair before you apply for your mortgage. If this is simply not possible then there are bad credit mortgage loans available.
Mortgages for bad credit are also called subprime mortgages, but you will generally not hear your mortgage lender refer to them as such. Since this is a turn-off word for many customers, many will simply use the word mortgages or other terms and you will not know if you are dealing with a subprime mortgage lender unless you specifically ask. This is important because the interest rates and terms will vary from mortgage lender to mortgage lender, especially in the case of those offered to people with bad credit and you’ll want to know if that is what you are dealing with.
To find a good mortgage loan, even if you have bad credit, do some research on what conventional mortgage loans offer as far as terms and what the prime interest rate is. If you know these things then it is much easier to determine whether or not the bad credit mortgage that you are looking at is worth it. Try to find a loan for your home that is as close to conventional terms and interest rates as possible, and ask your lender what would bring you from the subprime category to being offered the regular interest rates. It may take just a few months work on your credit to get the interest rate you want.
How To Locate A Mortgage For Bad Credit
If you have bad credit but are considering buying a home you are likely wondering how to locate a mortgage for bad credit. This isn’t as difficult as it sounds and in fact there are many companies in today’s economy that are offering these type of mortgage loans. Today, more and more people are struggling with the economy and loss of a job or reduction in pay and as a result companies have began offering bad credit mortgages more and more frequently. This means that even with bad credit you are certain to find a company that will finance you.
So, where do you begin looking? Many people turn to the internet for a bad credit mortgage but this is not always the best option. First, the internet is full of websites offering a mortgage loan application, but in fact they are sending this information to their ‘partners’ who may or may not offer mortgages. If you are looking for a mortgage bad credit or otherwise, then the first place you should begin looking is your local bank or credit union. Since you have a relationship with these people this may be the best place to start.
Many people think that their bad credit will keep them from getting a mortgage altogether, but in fact when it comes to mortgages bad credit is only one of the factors that are considered. When you begin at your local bank or credit union, ask what their loan criteria are. You may find that they are more interested in your income, as to whether or not you can pay for the mortgage than some credit problems that you had a few years ago. In fact, past credit problems from several years ago will likely not factor into your approval at all, and anything from seven years ago or more has likely dropped off your report altogether.
If you cannot get your bank to finance you then you may want to consider a new breed of company that has been springing up in today’s trying economic times. These companies are called subprime mortgage lenders and these companies specialize in offering credit to those who have a poor credit history especially in the case of mortgage loans. These companies exist in every major city as well as online. However, there are things that you need to look out for when considering going with a subprime mortgage lender as these companies do not usually have your best interests at heart.
The first thing that you’ll notice with a subprime lender is the interest rate. This will be higher than the prime rate offered by conventional mortgage lenders although by how much depends upon the lender. Unlike conventional mortgage interest rates subprime lenders vary considerably when it comes to interest rates and you will want to spend several weeks shopping around for the best rate. Another thing to watch out for is the terms of the loan. If you aren’t comfortable with the terms then you should move onto another subprime lender with better terms.
Bad Credit Mortgage Loan
If you are someone that is suffering from a poor credit score than you may think that you have no options when it comes to financing a home. However, there are actually several options for buyers with bad credit and a bad credit mortgage loan is something that has been offered more and more frequently as many people increasingly have financial problems, layoffs or other dilemmas that affect their credit score. There are more options for bad credit mortgage loans than ever before and you should be able to buy a home even with past credit problems.
As anyone knows that has shopped for mortgages bad credit is something that will stop conventional lenders from approving your application. However, it may not be as bleak as it looks, even though we’re talking about several tens of thousands of dollars, we’re also not talking about something that you could run off with, such as a car or a computer. This makes it a little easier to work with lenders and sometimes a simple explanation of why your credit score is as low as it is, can change that denial into an approval.
So even though with mortgage loans bad credit may be stopping you from getting an immediate approval there may still be steps that you can take. If you have already applied at conventional finance companies and banks for your mortgage loan bad credit may take you to a subprime lender. This type of lender specializes in lending to those with past credit problems and may not take your credit report as harshly as other lenders have. However, with these type of lenders there are some traps that are easy to fall into if you don’t know what to look for.
One of the things that you’ll want to look over carefully when dealing with a subprime lender is the terms of the loan. For instance, if you got approved for a mortgage, even with a decent interest rate, but the terms of the loan said that after one late payment the lender could repossess your home than you may want to rethink going with that lender. That’s not to say that all subprime mortgage companies have terms like this, but it is something that you’ll want to keep in mind when reviewing the terms of the loan.
Also, with a subprime lender you’ll likely get a much higher interest rate than you originally anticipated. The definition of a subprime lender, is one that offers interest rates that aren’t prime, or subprime. This will mean that you’ll likely end up paying many thousands of dollars more for your home than you wanted to, but if you have already applied at conventional lenders then this may be your only chance for approval.
Never Take Out Home Loans With Bad Credit
There are many reasons why you should never take out home loans with bad credit if you can avoid it. A bad credit score is generally anything below 620. You should always check your credit score yourself before you begin applying for home loans because if you are borderline you may be able to avoid the pitfalls of bad credit home loans altogether, even if you have to do a little bit of work to fix your credit before you begin to look for a mortgage loan. When it comes to home loans bad credit is only one of the issues however, and you may find that other factors influence your approval as well.
The first thing to do, as I said, is to check your credit score. Many people, especially those who have had past credit problems from several years ago and have never paid off the debts sometimes think that their credit score is as low as you can possibly get, and that they will have no chance to get financed. This can be a mistake, as past debt problems matter much less than current ones, and you may find that even if you have never paid off your past debts your credit score may be in the 550’s or 580’s, much closer to that 620 than you might have imagined.
As I said, other factors also influence your approval. Things like the down payment that you are making, your stability, such as time on the job and time at one address, can also make a big difference in whether or not you will get approved. You might find that increasing your down payment can make a difference, even a couple of thousand dollars, even with a poor credit score. Of course, if you have had a lot of recent credit problems, a foreclosure or a bankruptcy, than you may have to look for home loans for people with bad credit.
If this is the route that you must take than you should know that home loans for bad credit do exist, although usually at much higher interest rates than you would be offered if your credit score was up to par. There are lenders that basically do nothing but lend to those with poor credit scores hoping to make money from the higher interest rates and willing to take the risk of foreclosure to make that extra interest. Remember that even a one percent increase in your interest rate means a lot of money to the lender.
The best advice that I can give you, if you decide that you can wait for a mortgage and don’t absolutely need it right away, is to wait a year or two and improve your credit score. This is surprisingly easy to do, especially if all of your credit problems are several years old. You may find that financing one thing for a few months or a year will bring your credit score up high enough so that you are offered the mortgages with the best interest rates, so if you have a poor credit score and you think you may be able to rebuild it in a year or two, then wait to apply for a mortgage until then.
Bad Credit Mortgage Refinancing
If you are one of the millions of Americans suffering from bad credit you may think that there is no chance of refinancing your home with your current credit score. While this is mostly true, there are some options available to help those with bad credit refinance, and things aren’t as bleak as you may think. When you refinance your home, you are essentially putting up a bond (your home’s equity) and so terms and interest may be more favorable than you think. Of course, having a good credit score will give you much better offers and interest rates.
If you are looking for a refinance mortgage bad credit is certainly one of the issues that you should consider. However, it shouldn’t be the only thing since lenders look at many different factors in order to determine whether or not you qualify for a bad credit mortgage refinance. First, what are your reasons for getting bad credit mortgage refinancing? If you are looking for extra cash for anything but pre-sale home improvements, then you’ll want to look at the interest rate and terms that are offered, since you will be dealing with these long term.
However, many people make the smart decision to take out bad credit mortgage refinances in order to make home improvements that will allow them to sell their home for much more than the amount that they will have to spend to pay off their loan. If this is the case, you should consult with a specialist and determine exactly how your refinance money should be spent. They’ll be able to tell you which parts of your home you should remodel or refit with appliances or other high value sale items to determine whether or not your refinance is worth it.
As for how to finance a mortgage with bad credit, many questions plague the common homeowner who is considering this. Who to go to is always the first question. I always recommend that you first visit the company that you originally got your mortgage through and see what kind of rates and interest they will give you. Also, ask them smart questions about fixed rate and variable rate mortgages, how the term of the mortgage will benefit you and anything else that comes to mind. Make sure they have your best interests in mind.
Getting a refinance loan if you have a poor credit score isn’t the easiest thing in the world, but it certainly is possible and with a little work you should be able to get offers from all kinds of places with terms that you are comfortable with and interest rates that are competitive in today’s market. Start with your local companies, especially the one currently financing your mortgage and move onto the larger and web based companies to find a home mortgage refinance loan that works perfectly for you and your situation.
The Bad Credit Home Mortgage Loan
If you have bad credit and are looking for a home loan at a decent rate with terms that you can deal with then you may have encountered the normal struggles that those searching for bad credit home mortgage loans must face. You may have found that those who offer home mortgages do not want to work with those who have bad credit or are offering terms or interest rates that you find unacceptable. Depending upon how bad your credit is, and exactly what you have negative on your credit report you may be finding frustration in every corner.
Finding a home mortgage loan with bad credit is a struggle but it can be done. The first thing to do is to find out exactly what is bad on your credit report. Since a home is an item that is stationary and people are unable to run off with them, this makes the risk less for the lender. This is why when applying for a home mortgage loan bad credit isn’t the only thing that the finance company looks at. Another factor is how old your debts are, because people that get into credit trouble in their early twenties are generally more financially stable and responsible in their late twenties to thirties.
Your debt to income ratio is a major factor looked at by finance companies who are considering offering you credit to buy the home. If you can prove that your debts are old, and that you are now financially responsible, stable and most of all have the income to pay for the mortgage each month then you may just have a chance. Your debt to income ratio is very important when it comes to applying for your home loan, and in fact is likely the most important factor when deciding whether or not to extend someone credit. After all, a person with a good credit score, but can’t afford the payment will be denied.
So, what should your debt to income ratio be? For bad credit home loans, you’ll want your debt to income ratio be 35% or less. If you aren’t sure exactly what this means first keep in mind that your debt to income ratio is the amount of money that is required from your gross pay to pay your monthly debts. For instance, if your gross pay is $2000 a month and your total debts are around $1000 then your debt to income ratio is around 50%. You’ll want it at 35% to satisfy most lenders, which would be about $700 on a $2000 a month income.
You’ll also want to show a lot of stability, especially in recent years. If you took a job right out of college and are still working there, and you have lived in the same house for three years or more, then you will be looked at in a much more positive light than a person who has lived in their place for less than a year and has had several jobs for the past few years. Getting a mortgage when you have bad credit isn’t easy, but it certainly isn’t impossible and if you work on these things you’ll have a much greater chance of getting the credit you need.
Bad Credit Mortgage Lenders
You’ve likely heard about bad credit mortgage lenders and how they will finance your home even if you have poor credit. Before you sign your life away to one of these companies consider for a moment why they are offering to give credit to someone who obviously doesn’t know how to use it, or does not pay their bills. This is nothing personal about you, you may have been someone who just ran into a problem and their credit score went down because of it, but in general, people with bad credit are people who don’t pay their bills.
So let’s talk about a few of these types of ‘all credit’ mortgage lenders and why they exist. The first thing that you should know is that you can, with a little work, go to conventional mortgage lenders with bad credit and get a loan. When it comes to mortgage lenders bad credit is a consideration, but not always the top one. So always apply at mortgage and finance companies that you think that you have no chance with before considering one of the more heavily advertised ‘bad credit no credit’ mortgage lenders.
First thing that you’ll want to keep an eye out for when it comes to the bad credit mortgage lender is crazy fees that any normal mortgage company wouldn’t ask for. These aren’t the normal fees and closing costs that everyone who buys a home is required to pay, these are charges that seem extremely high and that you aren’t comfortable with. These are especially evident when a loan company tries to gloss over the fees, or fields your questions without actually telling you what the fees are for. This could be a sign that these are fees that no home buyer should ever have to pay.
Another thing that you may find you are uncomfortable with and may wish to stop the paperwork at a certain lender is the terms of the loan. For instance, a common practice with unscrupulous mortgage lenders for bad credit is to make your loan go into default with just one late payment. Also, there may be excessive fees associated with late payments that you just aren’t willing to deal with. Some lenders use the interest rate as leverage unless you agree to the terms, telling you that you must agree to a higher interest rate if he or she were to change the terms.
You’ll also want to make sure that you can get a hold of your lender if needs be. Sometimes, lenders who specialize in lending to those who have bad credit have very poor customer service and you may find that if there is a problem you are having or if you have questions that must be answered that it will take days or weeks to get someone to return your phone call and answer your questions. All in all, make sure that the lender you are going with is fair and honest. Some lenders cater to those who have bad credit because no one else will accept their terms and fees.
How To Refinance With Bad Credit
If you are one of those homeowners who have bad credit, but have seen the recent commercials on television and radio advertising low interest rates and want to take advantage of these interest rates by refinancing, you may be wondering if you are going to be able to do so with your current credit score. One thing is certain, people with bad credit are often offered a much higher interest rate than those with good credit and your dream interest rate may be out of reach if you have bad credit.
Banks and other finance companies know that they can get away with charging higher fees and higher interest rates to someone who wants to refinance loans with bad credit. Knowing how to refinance with bad credit, and what to look for, can save you a lot of headache and extra fees by going with someone who is trying to take advantage of your bad credit situation. If you go to one of the finance companies doing advertising at low interest rates to refinance bad credit may cause them to quote you a higher interest rate, explaining that the low low interest rate is for those with an A+ credit rating.
However, this doesn’t mean that all is lost when it comes to the bad credit refinance. You most likely can still get your loan, and if you shop around and refuse to take bad quotes laying down you may end up getting yourself a decent interest rate and favorable terms. Of course, if you can wait a few years to fix your credit before you begin shopping for a refinance, assuming you cannot find a great deal in the first place, then this might be your best option, as even a small increase in credit score can put you over the top and get you the interest rate you want.
One of the more recent trends is the springing up of sub prime lenders who offer refinances with bad credit. Sub prime simply means that the interest rate is higher than that of the “prime” rate that may be offered by the same company or comparable companies to those with good credit. These type of lenders are also called Second Chance lenders or Second Chance mortgages. In our current economy they are quite prevalent and exist simply to make money off of people who have bad credit, so be cautious when dealing with what is obviously a sub prime lender.
Many people don’t realize that there are other factors that influence your approval than your credit score. One of the bigger things is whether or not you can afford the refinance. Your debt to income ratio will cause several points to be dropped off (in the lenders scoring system) often many more points than a low credit score would give you. Ask your lender what factors affect your approval and try to make as many of them as possible positive so that these factors will work for you and not against you.
The Tracker Mortgage Explained
Unless you are a financial guru or happen to work in the industry odds are that you don’t know what tracker mortgages are. The best tracker mortgage definition is a similar type of mortgage to the variable rate mortgage, but one that updates far more frequently, and one that follows the rates set forth by the Bank of England. If you happen to like the system set forth by the variable rate mortgages then you will likely appreciate the beauty of tracker mortgages which work the same way but within a much smaller margin.
A tracker mortgage is required to kick in within fourteen days of the change in interest rate, as explained, set forth by the Bank of England. With a variable rate mortgage this can take up to a year to reflect in your interest rate and so you may not see some of the low interest rates throughout the year. What this means for you is that you will see your monthly payments go up and down quite frequently throughout the year with a tracker mortgage. This can be beneficial at times, but you could also see your payment go up higher than you want it to.
One thing to keep in mind as you research tracker mortgages is that anytime you make a deal on a tracker mortgage there will be an automatic profit margin already calculated for the bank. This can be seen in the difference between the base rate and the rate of interest charged so make sure you take a look at the arrangement fee. For instance, a tracker mortgage with a base rate of 2 percent may have a 3.39% rate which is 1.39 above, or for a three year it may be at 3.79% or 3.89% which is nearly 2% above the base rate.
The best tracker mortgages are set up to meet your own personal requirements but one major advantage is that these rates are based off of the Bank of England rather than a lender’s SVR, which they can change at will. If you are trying to decide between a discount mortgage and a tracker mortgage then we almost always recommend the tracker mortgage but as I said it depends upon your specific needs. Look online and shop around for the best tracker mortgage rates as well, and get a wide view of the market before deciding which type to go with.
As there are with anything that has pros, there are some cons to working with tracker mortgages. For one thing, there is the arrangement fee that the bank charges for getting you set up with a loan. You need to figure out if you want to pay this fee or go with the Standard Variable Rate. Also, tracker mortgages can be hard to predict and if high inflation raises prices then you could see a bunch of raises in your interest rate in a row. Talk to your financial adviser and find out if a tracker mortgage is for you.
How To Buy A House With Bad Credit
In order to buy a house with bad credit, you will first need to determine exactly how bad the bad is. For the purpose of practicality, we’ll be able to help you a lot by dividing you into two groups, those who have had a bankruptcy and those who haven’t.
If You Have Had A Bankruptcy
Getting bad credit home loans for you will be quite a bit more difficult than it would for people who haven’t been through a bankruptcy. However, there are still quite a few options that might be worth thinking about.
First, the waiting period for an FHA loan is two years. This is going to be your best option by far, as long as you can qualify for one of these loans. They don’t really use your credit score for FHA loans, so some individuals will qualify even with lower credit. They will look specifically at your credit report to see exactly what issues you have had with credit in the past.
If you can’t qualify for an FHA loan, there are still other options. If you have money to put down, hard money lenders will generally loan you money within a year of a bankruptcy. They will of course charge high interest and will take your home if you don’t pay them, but they may be your best option if you really want to buy a home.
Seller financing is also an alternative. You won’t be able to buy the exact home that you want, but there are often seller who will provide you with financing. If you choose this option, you will want to make sure that you make all of your payments, according to the terms and conditions of your loan. This will protect you from losing your home to a seller who gets tired of your delinquencies.
If You Haven’t Had A Bankruptcy
The road for you will be a lot easier. Many of you will qualify for FHA loans and that will probably be your best option. Those of you that aren’t able to take out an FHA loan will still have plenty of options. Banks generally don’t mind loaning money to people who have bad credit, as long as they don’t have a major issue like a bankruptcy.
However, you can expect to pay a lot more interest if you take out a loan with bad credit. For this reason, it’s often really smart to wait a year or two and work on your credit. You can often make huge gains in a 12 month period by paying down your debt and NOT missing any payments.
Home Loans For People With Bad Credit
Bad credit unfortunately, happens to nearly everyone at some point. If this has happened to you, and you are wanting to obtain a home loan with a poor credit rating, you may have heard that will be impossible to do. That’s absolutely not true. Obtaining bad credit home loans is something that people do quite often, and whatever your unique credit situation is, it is likely that you’ll be able to find a lender that will work with you. The trick is knowing how to talk to these lenders, where to find them, and how to prepare for applying for the loan.
The first step in looking for home loans for people with bad credit is to determine exactly how bad your credit is. You can obtain a free copy of your credit report periodically from www.annualcreditreport.com. This is in accordance with federal law that requires consumers to receive A) one free credit report per year and B) a free credit report when denied credit. You will want to look at your credit report and see what you have on it, whether everything is accurate, and whether there is anything on there that can easily be fixed.
Home loans with no or poor credit is a booming business, and while there are some lenders out there with ridiculous terms and interest rates, obtaining home loans with a low credit score is much easier than obtaining say, credit for a car loan or a new roomful of furniture. When lenders consider consumers for home loans bad credit is less of an issue if it is from a type of emergency such as unpaid medical bills, or simply a debt that you defaulted on long ago. The most important things when it comes to home loans is the ability to pay.
If you are shopping for home loans, you will notice that there are many companies offering loans no matter what your credit history. This is simply not something that reputable lenders do and while it is possible to obtain a home loan with bad credit, it’s not a as guaranteed as some of these companies make it sound. There are some important factors that lenders consider, besides things like being behind on your student loan, or a credit card that you defaulted on long ago. Time at one address and time at the job are two of these important factors.
As mentioned the ability to pay is a huge issue when it comes to home loans for people with bad credit. Still, in order to get the best interest rate, you should try to fix any problems that you can. Suppose that you pull your report and it shows nonpayment on a small personal loan several years ago. This is often quite simple to fix, because the loan has likely been bought out by a collection agency for less than was owed, and making a deal with them to pay the loan off in full can often result in removal of that item from your credit report.
The important thing is to reduce your debts so that you have a large chunk of your income left over, remove any inaccurate information and to pay off and anything negative that is a small amount and is easily fixed and have it removed. Just these simple steps can turn a denial of a mortgage loan into an approval with the right lender. Fix your credit, then shop around for a lender that will work with you.
Finding And Qualifying For A New Home Construction Loan
New home construction loans can also be known as “story” loans. This means before the lender is able to loan any funds, they must know the actual planned construction. Based on the fact that it is a story loan, it’s not going to be standardized as in the case with mortgage loans. Most construction loans require some type of payment during the construction process. These payments would be considered “interest-only” payment. They are not due until the end of the construction. In order for the bank to know the house is complete, a certificate of occupancy is shown.
Most new construction loans can come in the form of residential or commercial. With the real estate melt down, they are making it easier to obtain construction loans.
Home construction loans are usually considered variable rate loans. These loans are spread to the prime which is considered a short-term rate. The lender, you and the contractor will all draw a schedule based on the multiple stages of the building process. For new homeowners it is best to use programs that offer construction-to-permanent financing. This means that after the certificate of occupancy is issued, the loan is then converted to a mortgage loan from the initial construction loan. This can be seen as a good advantage since there is usually only one application at closing. Construction loans are not built to last long.
There is a possibility you can pay a higher rate on the construction loan if a construction-to-permanent loan will be used. Most people like this option when they are seeking or a better rate from the lender.
A rate-lock can also be purchased which is valued through the entire process of the construction. Just be prepared for the construction delays, as there are many with these types of agreements.
There are many resources that can be used to obtain a construction loan. To get the best loan, you should know exactly what your bank or lender is offering. Applicants can have a bigger advantage if they know more than their loan officer or adviser for purchasing construction loans. Staying a step ahead and investigating rates and terms will allow a better transition during and after the actual home construction. Online resources are available to obtain quotes and free consultation on which construction loan is best for your circumstances and personal request. Obtaining a construction loan for new homes does not have to be a hard task.
Finding Brokers That Provide Home Loans For Poor Credit
When you are in the market for a new home you may find that your credit rating is poor and you may think that there is no way you could get a mortgage. This may be true at a bank, but there are several mortgage lenders to choose from that offer home loans for people with poor credit. If you are willing to be a little patient and research your credit rating, you can qualify for a better loan than you might think.
Home loans when you have poor credit are available, but they can be quite expensive. When you credit scores are low, you will usually require a much larger down payment of a minimum of 25% or more, and you will have a much higher interest rate than what you see advertised. From a lenders perspective, the larger down payment requires you to make a larger equity investment in the home, so you would be less likely to default. The higher rate is simply because your poor credit rating makes you a higher risk to loan money to. If you are prepared for the additional costs, there is a loan for available for you.
The first thing a lender will do is to look at your credit report, so it is a good idea to look at your credit report before you shop for a mortgage. Take a close look at each item and be certain that everything is yours. Occasionally there are errors on credit reports that cause your rating to go down. Anything that you do not recognize you may dispute with the credit bureau. If it turns out the items do not belong to you, they will be removed from your report. Anything negative that is removed will improve your credit score which determines what loan programs you qualify for.
Then add some good credit references to your file. Get five letters from anyone you pay on time regularly. The most important reference would be from your landlord in the form of a letter from a management company or 12-24 months of cancelled rent checks. This will go a long way toward showing that you take paying your housing expense very seriously.
It is a great time to become a homeowner and you do not have to let poor credit stand in your way. There are definitely home loans for people with poor credit and there definitely loan programs out there and available for you if you’re in this situation.
You Can Still Get A Bad Credit New Home Loan
Most everyone, at one point, will need a home loan. Good credit and solid income can make acquiring a home loan extremely easy, but finding a new home mortgage loan can be quite a challenge. Banks will be hesitant to provide a home loan to those with bad credit as they are obviously taking a lot more risk. However, there are still lots of options for people who have bad credit, and it is possible to get bad credit new home loans. Even though there’s news everywhere about how terrible our economy is, banks are still financing people with bad credit, depending on the exact situation. Many times, proof of income and tenure is all that is needed to overcome a poor credit score. Also, with home loans, an actual person is much more likely to look at your credit report and see if you’re likely to be able to pay it back, based not on score and income alone, but based on the notes in the entries in your credit report, as well as explanations from you.
These loans would be described as a loan for someone who has a credit score under 620. If your credit score is above 620, you likely won’t have to worry about getting a home loan. The only thing that can get in the way of someone getting a home loan if their credit rating is over 620 is if they have late payments on their current mortgage.
Bad credit mortgage loans are for people that are trying to buy new homes. Also called bad credit new home loans, these loans carry a higher interest rate for those with bad credit. These interest rates are generally around 10% annually, though the exact rate can depend on credit rating and history.
The easiest way to find out if you can qualify for a new home loan is to simply walk into a bank and ask, or fill out an application for a loan online. A professional loan officer will be able to tell you if you can qualify or not. If you cannot qualify for a loan on your own, then you may have to find yourself a cosigner. Although somewhat embarrassing to some, it will get you into a new home. If this isn’t an option for you, you may need to just wait until you can improve your credit score.
The Keys To Getting Low Interest Home Loans
The interest rate that your mortgage or home loan is subject to can have a significant impact on your monthly payment, and how much you will pay over the life of your loan. Reducing your interest rate by even a fraction of a percentage can save you a great deal of money if you plan on staying in the mortgage for the long haul. Low interest home loans are definitely available, but you have to be willing to shop around and be flexible regarding what it takes to receive a reduced interest rate for your home loan.
Buying Points To Receive A Low Interest Home Loan
One popular way to get a low interest home loan is by buying points to reduce the interest rate associated with your mortgage. One point equals one percent of the total amount of the loan; therefore, one point of a $200,000 home loan equals $2,000. For every point that you buy at the time of setting up your mortgage, your interest rate is reduced by approximately 0.125%. This may seem like a small number – and for short term mortgages, it doesn’t make much of a difference – but for long term home loans, it can save you a bundle.
The Tax Benefits Of A Low Interest Rate Home Loan
Procuring a low interest home loan by buying points brings many great tax benefits along with it. Many people are sold on the concept of buying points when they learn that those transactions are tax deductible. When combined with the amount you will save over the term of your mortgage, these tax deductions can be the tipping point for saving extraordinary amounts of money. When you’re shopping around for mortgages, talk to your broker or agent about buying points and what it can do for you.
Low Interest Home Loans Through A Good Credit Rating
If buying points doesn’t appeal to you – but you have an exceptional credit score – you can probably get rock bottom interest rates for your mortgage loan. With a high enough credit score, you should have mortgage brokers knocking down your door. Use your credit rating to your advantage and shop around with as many different lenders as possible. You should easily find a low interest home loan that will suit your budget and ultimate financial goals. Under these circumstances, you won’t even need to put down a lot of money up front.