Home Loans Articles

Claim a Home Loan Even With Bad Credit

Do you have a bad credit? Have you, in your previous life made mistakes pertaining to the repayment of loans which you regret till now? Is it true that you fear that you would not be able to claim a home loan, with a bad credit attached to your name? If you have these problems, you do not need to worry.

There are many companies which give home loans to the people like you. There is no denying the fact that most of the companies will be skeptical about helping you, to get a home loan. The companies will naturally believe that you are a 'high risk' customer and they may not be able to help you at all.

However, that does not mean that you should give up hope. It means that you need to search for home loans in places where you normally won't. It is a sad fact that people with bad credit do face discrimination while applying for the loan. As humans, aren't we susceptible of making mistakes? There are many reasons why you may have suffered from a bad credit problem.

Reasons for poor credit credentials

Your circumstances matter a lot when it comes to repaying credit. Your circumstances will affect your chances of getting credit in the first place and also repaying it. It is possible that the loan vendor will treat your case with sympathy, if you have lost your job, or if your lay off period is too long. This situation is better than abandoning a house completely without informing the vendor about it, due to poor repayment skills. This is frowned upon especially if you do have money to pay off the loan.

You need to prove to the credit vendors that you have taken control of your life. The best way to demonstrate is by proving your ability to pay bills. The more bills you pay, the larger is the possibility of securing home loans designed for you. You will slowly be able to increase your credit rating to a level which you would not have thought possible. This will make you a lucrative buyer from the viewpoint of the bank or the money vendor. The money vendors are likely to approach you and give better services once they know that your credit rating is changing for the better.

You need to think of the whole situation from the viewpoint of the bank. The banks exist to do business. They take security charges in the form of mortgages as they want to secure the payments made. They hardly want to entertain people who cannot repay the amount given by them in the first place. Hence, the banks will go all out to check your credit history.

Do not feel dejected; there are millions of people like you in the market who suffer from bad credit. To all those who want to live a better life despite having bad credit, here is a piece of advice for you. You should stay on course and try to increase your credit rating by paying bills on time. You will be able to manage to raise your situation to the point which will convince banks to loan you the money for your home.

Steps to get a mortgage even with bad credit

Try to begin the procedure of improving your credit- There are several ways in which you can improve your credit rating. However, the simplest one is to save more by spending less. You can take up special classes for debt counseling, take up a second job or simply spend wisely.

You will clearly be able to see the difference in your credit score within few months. You should boost your financial confidence and saving skills in order to increase your credit rating. If you have made some bad decisions in the past, it is the time to balance them up with some sound financial decisions.

Make a compilation of income, debt and assets- You need to have all your finances planned out. If you are a owner of a house, you should find its value so that you know how much your house is worth. You will be able to calculate your assets based on the property value of your home and your annual income. You should make sure that you have copies of returns, well planned out. You should preserve these financial numbers carefully as they are important for reference in the future.

You should plan for a mortgage which is realistic- You should not try to spend on something which you can't afford. Moreover, you should not try to spend money which you do not owe. You need to have the approval of a mortgage lender when you are serious about buying a house. It is not a good idea to buy a house of $250000 if you make $25000 in a year.

The debt-income ratio needs to be healthy and positive to meet your financial demands for the future. Your monthly debt should always be less than your monthly income. A healthy debt-income ratio will secure your financial future. Incidentals and food should not be included in the ratio as these are necessary expenses.

If you earn $3000 and you have to spend $ 500 in debt, the ratio is pegged at 16%. You should ideally keep the debt-income ratio to be below the percentile of 33%. You need to keep in mind that the moneylenders simply exist for business and that they will try to lend you more money than what is needed by you. You should keep in mind that you should take the loan of as much money as are necessary. However, this practice has died down owing to the burst of the housing bubble.

Find a reliable person or institute to deal with- You need to find an institute or a person who you can trust. If you think that trust is not a very important issue, think again. In case, you are not able to give back the money taken as loan on time, you will have to face the dire consequences which may include appearing in the court. Thus, you need to find an institute which is liberal on repayment and which is trusted by many people.

Wisely compare home lenders and home loans- You should begin your procedure as to which mortgage lender to choose from. It is highly possible that some institutes will reject you downright owing to your bad credit. Nevertheless, it is important for you not to lose confidence in yourself. Most of the banks will look at your previous credit history. Nevertheless, there will be many banks that will be willing to offer you a home loan mortgage despite having a bad credit record. If you have personal rapport with financial institutions, the process will become even easier.

There are many institutes in the market which offer mortgages especially to the people with a bad credit. Many banks are keen to cash on this segment of population. However, you should be careful not to choose an offer which is highly lucrative, as chances are that some hidden clauses may be present.

There are mortgage lenders in the market who cheat innocent people, so you need to be very careful while choosing your lender. You should keep the following things in mind while choosing a mortgage provider-

Closing costs- The closing costs varies from one lender to another. You should check all the fees including mortgage fees, processing fees and legal fees.

Interest rate- The interest rate is of obvious interest to you. You need to make sure that you are getting a healthy interest rate as compared with other competitors. You should also determine if the rate of interest fluctuates or if it is fixed.

You should know that though your bad credit does not allow you to access the best deals in the market, you will be able to find some good deals, with some market research. You may need to negotiate the terms if your financial situation changes.