Archive for September, 2009
Bad Credit Mortgage Refinance – How to Fill Out the Application
Posted by Owen in Bad Credit Mortgages, Bad Credit Refinance on September 24, 2009
If you want to apply for a bad credit mortgage refinance, but the paper work is intimidating, this article should help. We’ll talk about the types of information you need to gather in advance, how to use the information and a few tips and tricks to make the whole process easier. After reading this article you should be able to sit down and get that refinance mortgage with bad credit application completed.
Step 1: Gather the Documents
You will need to gather quite a bit of information, but once the information is all together it will make the rest of the process much easier. Gather this information for each person who will be listed on the loan paperwork.
A. Employment Records
- W2’s
- Your most recent paystubs for the past 2 months
- Employment history for your last 3 positions, including dates, addresses and phone numbers and salary information
B. Tax & Bank Documents
- Past 2 years tax documents
- Past years bank statements (some lenders require more)
C. Credit Card and Loan Documents
- Recent Mortgage statements
- Most recent credit card statements listing how much you owe and monthly payment
- Most recent car loan statement listing how much you owe and monthly payment
- Any other loan or debt information – what will be needed is total current balance and the monthly payment amount
D. Asset Information
- Statements of any stock, investment, IRA, 401k accounts
- Valuation of any cars, boats or other major assets you own
- Bank statements of any other investment accounts
- Property tax documents for the home you are refinancing
- Title information on the home you are refinancing
E. Personal Information
- Residence history for the past 7 years
- Social security number
Step 2: Fill Out the Application
Using the information you gathered, fill out each line of the application using the relevant information. If it asks you for the type of mortgage loan and terms, leave that section blank as you do not know yet which loan you will accept. The more complete you can be on your bad credit mortgage refinance loan application, the better the chances of having it approved right away without delay.
- Property Information Section
Since this is a refinance, fill in your current property information. You will likely be asked how the title is currently held, how you would like the title to be held on the new loan, and the current value of the property. You can leave current value blank if you do not yet have an appraisal. - Borrower Information
Here you want to list all of your personal information – name, SSN, residence history, etc. Be as complete as possible, missing information can cause delays. - Employment Information
Fill in complete information on current and previous employers. Check with your employer on how they like to handle income and employment verification requests and be sure to list the correct information on how the lender can contact your employer. - Income and Expense Information
Use your paystubs to fill in the information on income. - Assets and Liabilities
Take a look at your credit card and loan statements to fill out the liabilities section. Use the asset information you gathered to fill out the asset section. - Signatures
Depending on the form, you may need to sign the document in multiple locations.
Tips & Tricks
- If you get stuck at any point, ask for help from your bad credit mortgage lender or broker. They are familiar with the forms they use and can help explain exactly what the form is asking for.
- Try to think of all your sources of income. Do you have a small part-time business where you earn an extra $100/month? Don’t forget to list it. Pensions, annuities and other regular sources of income can really help with the income portion of the application.
- If you have a long history in the same field, ask the lender how they would like you to list it. Let’s say you’ve been an electrical engineer for 25 years but recently have switched jobs 3 times in the last 5 years, letting them know your long history can help.
- Personal Letter –I have found that it can help to write a personal letter explaining your situation, why you are applying for the loan and how the loan will help you and your family. If you can provide character references (not family members) who the lender can contact, that can be a help too. This letter can help the lender put a face on your application and become more vested in helping you get your loan approved.
- Keep a copy of your application and use it for future loan applications. Next time all you will need to do is update a few areas and it will make the whole process much faster.
Conclusion
Filling out a mortgage application isn’t hard, it’s just time consuming. The tips and tricks above should help you have success in your application. Remember to talk with your lender if you have any questions. With the information provided above, you should be able to gather the necessary documents quickly and get your application filled out so you can qualify for a great bad credit home mortgage refinance.
photo credit: Casey Serin
Bad Credit Car Loans – Frequently Asked Questions
Posted by Owen in Bad Credit Auto Loans on September 23, 2009
If you are thinking about getting a bad credit car loan but have questions, you’ve come to the right place. This article will cover the 5 most common questions when it comes to car loans with bad credit. After reading this article you should be much more prepared to start shopping for the right car – and loan – to meet your needs.
Q: What does my credit score need to be to qualify for a car loan for bad credit?
A: Fortunately, your credit score will not keep you from getting a loan as long as you have a good job history, are over 18 years old and make over $1500 per month. Your credit score will determine your interest rate however, so if your score is very low you may be looking at a pretty high rate. Decide in advance how much you are willing to pay per month so you can stick to your guns at the financing table.
Q: Can I get turned down for car loans for people with bad credit?
A: The primary things that keep people from getting approved are a lack of a current job, under the age of 18 or a recent repossession that was not part of a bankruptcy. Some of these things you can get around with the help of a co-signer. A co-signer will help you qualify by using their credit. Make sure you can make the payments if you are getting the help of a co-signer because if you make a mistake, it will negatively impact their credit as well.
Q: Where is a good place to get a bad credit car loan?
A: Start with your bank and see what kinds of programs they offer. Often you can pre-qualify for a loan which takes some of the pressure off when you begin to negotiate for a good price at the dealership. If you are prequalified you can also shop from local classifieds and for-sale-by-owner listings where you may get a better deal. You can also look for pre-qualification loans at a Credit Union. If those two options don’t work out, apply for financing at a reputable car dealership.
Q: Am I limited in the kind of car I choose?
A: Yes. Most banks will not grant a car loan on a car over 7 years old.
Q: Can I refinance an existing car loan with bad credit?
A: Yes – there are refinance car loan bad credit programs out there – call the financing company who you currently pay your payments to and ask them if they have a refinancing option available. You can also check banks and credit unions about refinancing your loan. Often you can extend the term of your loan and/or lower the interest rate which can put much needed dollars back into your pocket each month.
Summary
As you can see, if you have a good job history, make at least $1500 per month and are over 18, you will likely qualify for car loans with bad credit. Be sure to stick with a reputable lender and choose a car that is no older than 7 years. With the information in this article you should be prepared to start your search for the right bad credit car loan for you.
5 Benefits of Bad Credit Auto Loans
Posted by Owen in Bad Credit Auto Loans on September 22, 2009
If you think that a bad credit auto loan is a negative thing, then this article is for you. I’ll be discussing the five biggest benefits of auto loans for people with bad credit – maybe I will even surprise you with one or two. After reading this article you should be able to see why auto loans for bad credit can help many people improve their financial situation.
One – A Low Credit Score will Not Prevent You from Getting a New(er) Car
Fortunately, most auto loans for bad credit do not require a particular credit score. The main criteria for qualifying are: reliable, stable employment, be over 18 years of age, be a US Citizen (usually) and make at least $1500 per month. Your credit score will be checked, and will be used to determine your interest rate – but by itself will not disqualify you from a loan.
Two – Reliable Transportation Can Help You Improve Your Credit
One of the reasons many of us get behind on our payments is because of job problems. Sometimes it’s getting to work on time, or at all. If you don’t have reliable transportation, it really can impact your job performance and attendance. If you have reliable transportation, getting to work will no longer be a problem. Having reliable income to count on to pay your bills is an important step in repairing your credit. Car loans for people with bad credit can help people get reliable transportation to meet their goals.
Three – A History of Regular Car Payments will Improve Your Credit
Your credit score is calculated in a number of ways, and one of those factors is the variety in the types of loans you have on your credit report. Adding a car loan to your credit report will add variety – and if you are careful to always pay on time, this loan can improve your credit rating.
Four – Having a Car You Are Proud of Will Help You Stay Motivated
Most of us Americans love our cars. They are practically members of the family. Owning a car you love, that provides you reliable transportation and that you spend a good deal of time in each day can really be a motivator.” How’s that?” you might be thinking. If you have a car you love, you’re more likely to make sure you make the payments – and make them on time – to ensure that your car will not be repossessed and that you can look into a bad credit auto loan refinance down the road once your credit improves. Having something you value always helps you stay motivated to meet your goals.
Five – A Bad Credit Auto Loan Refinance Can Improve Your Budget
If you took out a car loan, made your payments for awhile, but now find that your financial situation has changed – don’t stress. You may be able to find a bad credit auto loan refinance. If you have had your car long enough and have paid down the principle, many banks or credit unions will refinance your car for a longer term, or even a lower interest rate. Refinancing your car can shave much needed dollars off your monthly payment. Although not as dramatic as a mortgage refinance, a car refinance can still put an extra $50 or so back into your wallet.
Summary
Thought a bad credit loan was all bad news? Not at all. Hopefully you can see that qualifying for an auto loan for bad credit has many advantages – not having to have a high credit score for one thing. Hopefully this article has given you some insight into how a bad credit auto loan can help you on your path to improving your finances.
Auto Loans for Bad Credit
Posted by Owen in Bad Credit Auto Loans on September 22, 2009
If you want to learn about auto loans for bad credit, then you’ll want to read this article. Specifically, we’ll discuss how to qualify for an auto loan for bad credit, what will make you less likely to qualify for a bad credit auto loan and where to find an auto loan for people with bad credit. After reading this article, you should be able to know enough to start your search for the right auto loan for you.
How to Qualify for an Auto Loan for Bad Credit
The most important factors in qualifying for this type of loan are: proof of employment, be over the age of 18, be a US Citizen (not always required), and have a minimum monthly income – generally around $1500 per month. It will also benefit you if you have lived at the same address for more than 3 years. You will be asked to prove your income with paystubs and possibly tax documents. You may also be required to show proof of residency – usually utility bills.
Your credit score will be checked, but will probably not exclude you from receiving the loan as long as you meet the criteria above. The credit score will be a factor however in determining your interest rate. The lower the score, the higher the interest you will be likely to pay.
What May Keep you From an Auto Loan for Bad Credit
If you are a temporary worker or a seasonal worker, you may not be able to qualify since you cannot prove stable employment. If you have had a recent repossession that was not part of a bankruptcy, that will also likely exclude you from qualifying. If you are under 18 you will not be able to obtain a loan without a co-signer. If this is the case for you, consider asking your parents or guardian to act as a co-signer for you. Lenders generally will not loan on cars older than 7 years, so keep that in mind when shopping for your car.
Where to find Auto Loans for People with Bad Credit
Depending on your credit and your relationship with your bank, you may be able to be pre-qualified for an auto loan at your banking institution. Talk with your local banker to find out what kinds of programs they offer. Another option is to look at Credit Unions to see if you can pre-qualify with them. If these two methods do not work, work with the car dealership. Generally they have special relationships with numerous financial institutions and they have a vested interest in helping you find a loan – if they can’t help you, you won’t buy from them. Be careful about “Buy Here/Pay Here” car lots however, those loans may not be serviced by the more reputable financial institutions and you will likely pay far more in interest than you need to.
Summary
If you have less than perfect credit, consider a bad credit auto loan. Although the interest rates may be a bit higher, it can get you into reliable transportation. Remember that you have to have a stable job, be over 18 and be a US Citizen. Also, be sure to shop for a car that is less than 7 years old in order to qualify for most loans. Banks and Credit Unions are a good place to start when looking for auto loans for bad credit, followed by a reputable car dealership.
With this information you should be able to start your search for a bad credit auto loan and find the right program that will fit your needs and your budget.
A Guide to Finding a Mortgage for Bad Credit
Posted by Owen in Bad Credit Mortgages on September 22, 2009
Even if you have a bad credit score, you can still qualify for a mortgage for bad credit. Sure, the financial requirements may be different for any of the mortgage loans for people with bad credit but you still have the opportunity to prove yourself once again creditworthy by taking this course of action to improve your past financial history.
Primary Considerations for Approving Mortgage Loans for People with Bad Credit
Mortgage lenders for bad credit are typically referred to as sub-prime lenders. These lenders are non-traditional lenders whose main responsibility is to help you, the sub-prime borrower, obtain a mortgage for bad credit loan. Normally, there are two criteria they use to establish whether you’re a viable candidate for any of the mortgages for bad credit that are available. One criterion used to determine a candidate’s suitability for any of the mortgage loans for people with bad credit is one’s debt-to-income ratio. In other words, your income should exceed your expenses with respect to gaining approval for a bad credit mortgage loan.
The other criterion used is the loan-to-value ratio. The lender uses this calculation to qualify you based on the requested amount of the loan as compared with the property’s value or worth of the collateral you’re trying to purchase.
Other Considerations for Approval
Once the sub-prime lender has determined you meet the above calculations, he looks at your credit score. Before applying for any of the mortgages for people with bad credit, it’s good to obtain a copy of your FICO score for your review. That way, you’ll be better able to work with your lender in order to prove your reliability for repaying this “second chance” higher interest loan. Explain to him, if feasible, reasons for defaults or late payments. Lenders tend to be more understanding if such delinquencies were due, in part, to being laid off or because of a divorce settlement.
Your loan will be considered as well on your net income or income after taxes. Also, if you can apply for the loan offering some kind of down payment, your chances will be improved. Typically, a home should not be purchased that is more than two and one-half times your income per annum. Therefore, trying to apply for a mortgage for more than this amount may prove to be a hardship down the road which is especially important to keep in mind if you’re applying for a bad credit mortgage loan.
Types of Bad Credit Mortgage Loans
The two basic types of mortgage loans for bad credit are a fixed rate type mortgage and the adjustable rate mortgage, normally referred to as an ARM.
The fixed rate mortgage is a long-term secured loan whose interest rate, as the name implies, remains fixed through the life of the loan. On the other hand, an ARM is a secured loan whose interest rate can vary depending on the current market conditions.
Sometimes an ARM is a good mortgage for bad credit loan as the interest for the first year of the loan is substantially lower than other rates prevailing at the time. Thereafter, the rate is typically adjusted and the payment is determined on the amount of interest based on the market index to which it’s tied.
Final Suggestions
Whatever type of bad credit mortgage loan you choose, make sure you secure the lowest “high interest” rate you can. Be assured if you prove your ability to meet your payments on a regular basis that you have the opportunity to refinance at a lower interest rate at a later time.
When you secure your loan, get into the habit of paying bills on time and carrying credit card balances that are approximately within 25% of the limits on the cards. That way you can start on a progressive track to a better credit score and a happier financial future.
photo credit: Ryan Stanton
Bad Credit Loans | Part Five: Bad Credit Refinance
Posted by Owen in Bad Credit Auto Loans, Bad Credit Mortgages, Bad Credit Refinance on September 8, 2009
These days, just getting a home or auto loan is not the end of the credit journey. Most of us need to refinance our homes or cars at some point. What to do when you need to refinance but you have credit issues? This article will discuss the various things you need to keep in mind when shopping for a bad credit mortgage refinance loan or a bad credit car refinance.
Overview
A refinance loan is different than an origination loan in a couple of respects. First, there is already a loan in place which is generally a good thing. If you’ve made your payments on time, hopefully your credit has improved some since you first acquired the loan. Second, there may now be equity in the property to draw on when refinancing. With the housing market today however, not all home owners are finding that they have equity. There are a few programs that will loan more than 100% of a home’s value.
Get prepared, know the facts and then start shopping for the right bad credit home refinance armed with the right information that can save you thousands of dollars.
Credit Worthiness
Just like when you first purchased your home or your car, your credit score will be an important factor in the kinds of refinance options you have available. Know your score, know what blemishes are on your credit reports and if possible have a written statement explaining the reason for any late payments or other derogatory information. Depending on your credit score, you may not even need a bad credit mortgage refinance.
Equity
Before you start looking for a particular program, it’s a good idea to know how much your home or car is worth. For homes, get a ballpark appraisal from a local real estate agent. You want to know if your house is worth more or less than what you owe on it. Find your most recent mortgage statement – that will be needed to verify your balance.
For a car, check out values on Kelly Blue Book to see what the current value of your car is and compare it to your car loan statement.
A refinance with bad credit is much easier to accomplish if you have some equity built up.
Types of Bad Credit Refinance Loans
- Bad Credit Mortgage Refinance – There are many refinance programs available for homeowners just as there are many programs available for home origination loans. In a way, you are shopping for a new mortgage altogether when you refinance. Refer to our articles on bad credit mortgages to get a broad background on the types of mortgages available.
- Bad Credit Auto Refinance – Most people refinance their car loans in order to lower the monthly payment. When you do refinance, consider the amount of time you want to be repaying your loan. You can lower your payment by either reducing the interest rate or by lengthening the term of the loan. If you have improved your credit since you originally purchased the vehicle, you may be able to negotiate a lower interest rate but keep your initial term which means you won’t be extending the life of the loan. Generally speaking, refinancing an auto loan is fairly straightforward. If your current lender does not have any available programs, make sure you shop around.
Summary
Refinancing is a major undertaking, particularly for bad credit home loan refinance. It is just like shopping for a new mortgage. Refinancing your auto loan is a bit simpler. With either kind of refinance make sure you know your score, know what you can afford and take the time to comparison shop.
I hope you have enjoyed this series of articles on Bad Credit Loans. If you have I would love to hear from you.
The entire series of articles is listed below for reference.
Bad Credit Loans | Part One: Loans for People with Bad Credit
Bad Credit Loans | Part Two: Mortgage Loans for People with Bad Credit
Bad Credit Loans | Part Three: Car Loans for People with Bad Credit
Bad Credit Loans| Part Four: Personal Loans for People with Bad Credit
Bad Credit Loans| Part Five: Bad Credit Refinance
photo credit: woodleywonderworks
Bad Credit Loans | Part Four: Personal Loans for People with Bad Credit
Posted by Owen in Bad Credit Personal Loans on September 8, 2009
Have an unexpected expense? Need cash for living expenses, medical bills or other reasons not related to the purchase of a home or car? Most likely, you need to apply for a personal loan. In this article we will discuss the types of personal loans specifically as they relate to people with bad credit.
Overview
Before shopping for any loan it is wise to know the answers to the following questions:
- What is my credit score?
- What kind of loan do I need?
- How much per month can I reasonably afford?
Knowing your credit score in advance will help you be prepared for the types of loans you can qualify for. You may be able to repair your credit before applying for a loan for a better rate.
Knowing how much you need to borrow can help you narrow down your loan choices and also help you keep to your budget by not taking on a larger loan than you really need.
Finally, knowing how much per month you can afford will help you stick to your budget and in the long term, will help you improve your credit by allowing you to pay your bills on time without being overextended.
Types of Loans
- Secured Loans – Secured loans are loans that are backed by some kind of collateral. Collateral can be in the form of any easily-sold asset such as a car, house, land, etc. By using collateral you are giving the lender the right to the asset in the event that you default on the loan. Rates for these types of loans are generally lower but application times can be longer as there is a little more paperwork to fill out.
- Unsecured Loans – Unsecured loans are loans that do not require collateral and are generally based solely on your credit score. These kinds of loans usually have a higher interest rate as the lender is taking a greater risk since they do not have any collateral.
Short-term vs. Long-term loans
Short term loans are typically loans with a repayment date of 1 year or less. Most often these loans are much shorter term, like 90 days. Interest rates on these kinds of loans can be high – but it will depend on the program. Be wary of payday loans – they can become a trap for some people and with the fees they charge, the total amount you pay for these kinds of loans can be astronomical.
Long-term loans generally are a year or longer and typically offer a better interest rate than a short term loan. Personal loans are typically 3 years or less, although if you have collateral you can often find a loan for a longer term.
Funding Sources
- Banks – Most banks offer loans or personal lines of credit. If you have had your checking and savings account with the same bank for awhile, you may want to consider applying for a personal loan for people with bad credit from a bank. Rates tend to be a little lower than with financing companies and they can be a good way of rebuilding your credit. Application processes can vary, but typically take a number of days so may not be a good option if you are facing a financial emergency and need cash fast.
- Financing Companies – Companies like Beneficial or American General Finance will grant personal loans. In most cases they do require collateral such as a vehicle or other personal property. If you need personal loans for people with really bad credit, and you have some collateral, this may be a good option for you. Interest rates tend to be higher. These kind of companies do report to the credit bureaus so it is a good way to rebuild your credit if you can make your payments on time.
- Private Lenders – Recently there has been an increase in the number of groups who lend money from private sources. Most do require a credit check, but if you have borderline credit this is an area worth looking into. Most of these loans are unsecured loans and can be up to $25,000.
- Pawn Shops – Pawn shops offer a form of a secured loan. You bring in an item with some value, they give you an agreed-upon amount and if you don’t return with the repayment within a certain period of time, they sell the item in question to repay the loan. This can be a good way to raise quick cash, but don’t expect to get what the item is worth and if it means a lot to you be sure to repay the loan on time.
Summary
Personal loans for people with bad credit are available from a variety of sources. Know the length of loan you need and try a variety of funding sources to find the best rates.
In our next article we will be looking in detail at bad credit refinance.
Bad Credit Loans| Part Five: Bad Credit Refinance
For reference, the entire series of articles is listed below.
Bad Credit Loans | Part One: Loans for People with Bad Credit
Bad Credit Loans | Part Two: Mortgage Loans for People with Bad Credit
Bad Credit Loans | Part Three: Car Loans for People with Bad Credit
Bad Credit Loans| Part Four: Personal Loans for People with Bad Credit
Bad Credit Loans| Part Five: Bad Credit Refinance
photo credit: Jay Santiago
Bad Credit Loans | Part Three: Car Loans for People with Bad Credit
Posted by Owen in Bad Credit Auto Loans on September 8, 2009
Overview
Buying a car with less than perfect credit is similar to qualifying for other bad credit loans – with the added wrinkle that often dealerships make their money at the financing table. It is important to separate the negotiation of price from the discussion of how you’re going to pay for your new set of wheels.
Be Prepared
Know what you can afford in terms of total cost and monthly payment before you go car shopping. When shopping for a new car it can be so easy to fall in love with your perfect vehicle and get seduced by promises of low monthly payments – only to find out you’ve signed up for a seven year car loan with a balloon payment at the end. If you do your research and go prepared, you are much more likely to keep a clear head and know when to walk away from a bad deal. It’s a good idea to also know your credit score and what your credit score means. That way, you will be prepared for the types of loans offered to you.
Types of Bad Credit Car Loans
- Secured vs. Unsecured loans – Nearly every kind of car loan is secured by the vehicle you are purchasing. However, sometimes lenders ask for an added layer of security such as the equity in your home or in another vehicle that you own free and clear. Be very clear when you sign your loan paperwork what is being listed as security for the loan.
- Pre-Approved bad credit car loans – It can be a good idea to try for a pre-approval with a bank or credit union before shopping for a car. Often banks and credit unions can help you even if you have less than perfect credit. If you are pre-approved, you can shop for your car and focus on price rather than worrying about whether or not you can get qualified for a loan.
- Dealership bad credit auto loans – Dealerships almost always have bad credit loan programs. Be wary of the financing table at a car dealership however – it is generally where they make the most money. Try to keep the negotiation of the car separate from that of the loan. Do not be afraid to walk away from a bad loan.
Car Buying Tips
- Negotiate the price and the terms separately – When you arrive at the dealership, act as though you will be paying cash for the car. Negotiate the very best price possible before mentioning anything about financing. If you are pre-approved, you can mention you will need to finance the car but don’t say you are pre-approved as the salesperson may give you a great deal on the price of the car expecting to make his profit in financing. Once you’ve locked the price of the car and have it in writing, then inform them that you have a loan lined up.
- Don’t be afraid to walk away – The dealer needs your money more than you need his car. You have a lot of options to choose from when it comes to car buying. Don’t be afraid to take a break and walk away. Many people return to the same dealer three or four times over a month to continue to negotiate the price of the car – all the while reminding the salesperson that the car in question is still on the lot costing them money.
- Trade-Ins – If you have a car you plan on trading in, do not let the dealership know until you’ve negotiated the lowest price possible on your new vehicle. If you don’t often the dealership will not give you the proper value for your trade in. Also make sure you know the value of your trade by checking what it is worth on Kelly Blue Book.
- Look at the total cost, not the payment – Dealership salespeople are professionals. Don’t let them lure you into a car because they can offer you a low payment. Look at the total cost of the loan before signing anything. A low payment per month does not mean a good deal.
Summary
It is to your advantage to negotiate the price of the car separately from the terms of a car loan for people with bad credit. If you can, try to get pre-approved through a bank or credit union or if that is not possible, only discuss financing with a dealership once you are certain you have obtained the best pricing available on the car in question. Having bad credit should not keep you from owning the vehicle you’ve been thinking about – but if you plan a little more and do a little research you can end up paying thousands less by getting the best loan possible.
In our next article, we will be discussing personal loans for people with bad credit.
Bad Credit Loans| Part Four: Personal Loans for People with Bad Credit
For reference, the entire series of articles is listed below.
Bad Credit Loans | Part One: Loans for People with Bad Credit
Bad Credit Loans | Part Two: Mortgage Loans for People with Bad Credit
Bad Credit Loans | Part Three: Car Loans for People with Bad Credit
Bad Credit Loans| Part Four: Personal Loans for People with Bad Credit
Bad Credit Loans| Part Five: Bad Credit Refinance
photo credit: Ian Muttoo
Bad Credit Loans | Part Two: Mortgage Loans for People with Bad Credit
Posted by Owen in Bad Credit Mortgages on September 8, 2009
The purchase of a home is often the largest financial transaction any of us will make. Whether you have good credit or bad credit, it makes sense that you should approach this kind of purchase ready to do a lot of research and spend some time understanding all the details to get the best home at the best price and with the best terms.
Overview
To find a mortgage loan for people with bad credit, you may need to be a bit more dedicated in your search. There are a large variety of programs out there – and that is part of the problem. There are varying degrees of bad credit. You want to get the best possible deal you can qualify for – not just any bad credit mortgage. You may even discover that you don’t need a bad credit mortgage. You want to go into the process prepared. That way you can ask the right questions, find the right loan product and hopefully get an interest rate you can live with.
Types of Loans
With the recent crackdown on subprime mortgages, it will take a little more digging to find a good loan product. It will be important to research as much as you can on the types of bad credit mortgages.
- ARM Bad Credit Mortgages – Most of the mortgage loans for people with bad credit are adjustable rate mortgages. These can be helpful to get into a loan at a lower payment in the first few years. However you must be careful to know before you sign your paperwork how much the mortgage can adjust. You don’t want your payment to double after the first few years of your loan. Look for 2/28 and 3/27 loans when researching this type of loan.
- Longer term fixed mortgages – There are some programs that offer a fixed rate loan but at a longer term like 40 or 50 years. These loans have the added security of knowing that your payment will not increase. However, because the term is longer you will end up paying well over an extra $100,000 over the life of the loan on an average mortgage amount.
- Low document mortgages – If you do not have a lengthy credit history or if you have other documentation issues, you may be able to find a “stated income” or “low doc” loan. These will typically have higher interest rates but can get you into a house and help you begin earning equity.
Mortgage Lenders for People with Bad Credit
Once you have a fairly good idea of the kind of loan that you think will fit your needs, it’s time to look for a lender or broker to help you find the best terms. Since your lender or broker will be your advocate, make sure you can find someone you feel comfortable working with and someone who will keep in contact with you throughout the process. Rely on referrals from friends and family or your real estate agent. You can also shop for a loan online if you feel very confident in the kind of loan you need and a good estimate of the kind of interest rates you should be getting for your credit score.
Regardless of how you find your broker, make sure you get a 2nd and 3rd opinion. Always shop around.
Preparing for the Application
Have all your documentation together ahead of time – bank statements, pay stubs, income tax returns and W2’s. Make sure to document any credit history issues so the lender can understand the reason for the late payments or other issues. Be as honest and straightforward as you can. You may also wish to provide a list of any credit references not on your credit report. For example, if you rented an apartment for a long time and always paid on time and that does not appear on the report, have your landlord write a letter of reference that you can include in your application.
Summary
Knowing your credit score and the kind of loan that will fit you the best is half the battle. When you know in advance what kind of product will work best for you, you will be able to comparison shop more easily and not be swayed by a quick pre-approval.
In the next article, we will be discussing car loans for people with bad credit.
Bad Credit Loans | Part Three: Car Loans for People with Bad Credit
For reference, the entire series of articles is listed below.
Bad Credit Loans | Part One: Loans for People with Bad Credit
Bad Credit Loans | Part Two: Mortgage Loans for People with Bad Credit
Bad Credit Loans | Part Three: Car Loans for People with Bad Credit
Bad Credit Loans| Part Four: Personal Loans for People with Bad Credit
Bad Credit Loans| Part Five: Bad Credit Refinance
Bad Credit Loans | Part One: Loans for People with Bad Credit
Posted by Owen in Bad Credit Auto Loans, Bad Credit Mortgages, Bad Credit Personal Loans, Bad Credit Refinance, Credit Repair on September 8, 2009
In this series of articles, I will be giving an overview of different types of loans for people with bad credit. Many of these loans have features in common. Feel free to jump to the article that applies most to the subject you’re interested in. Each article has a table of contents at the end, as well as a link to the next article in the series.
Overview
Most of us have had financial hardships at least one in our lives. It doesn’t take much to upset the normal flow of finances – a loss of a job, unexpected medical expenses, auto accident – in my case, it was the unexpected closure of my small business. Regardless of the cause, bad credit is one of those things that many of us have to deal with. Just because you’ve got bad credit doesn’t mean that you don’t have the same financial needs everyone else does when it comes to borrowing. It just means that in order to get a good rate, you have to work a little harder and a little smarter. You may also have to look at bad credit loans as more of an opportunity to meet your financial needs while rebuilding your credit.
What is your situation?
Before you start your search, know what kind of loan you need. Are you looking for personal loans for people with bad credit, or a bad credit refinance? Knowing the type of loan you need will speed up the process of finding the right financial solution for you.
Know your Score
Regardless of the type of loan you need, the first thing you should do is know your credit score. Order your credit reports from all three reporting agencies – Equifax, TransUnion and Experian. You can usually find a way to get these reports for free, especially if you have been turned down for credit in the last 30-90 days. Once you’ve got your credit report, look at it for errors and be sure to write to each credit agency to report the errors right away. Know the meaning of credit scores and use that knowledge to improve your credit. Your credit score will be a factor with almost any loan you apply for, but will be most critical for home loans for people with bad credit.
Have a Plan
When you start shopping for a bad credit loan, have a rough idea of what you’re looking for. If you need student loans for people with bad credit for example, know when you expect to be able to start making payments. You probably don’t want to sign up for a loan that requires you to begin making payments when you’re still attending classes. If you are looking for car loans for people with bad credit, have in mind the price range of the car you’re thinking about buying. With all loans know the upper limit of what you can afford in monthly payments.
Shop Around
Most financial needs are immediate. You have pressing bills or expenses that need to be paid now. It is very tempting to take the first loan that you qualify for. It can make a huge difference though to shop around – especially for mortgage loans for people with bad credit. Small differences in interest rates or closing costs can cost you thousands of dollars over the life of a loan. Auto loans for people with bad credit can be costly as well – know in advance the total cost of financing your new car and the total monthly payments. Don’t forget to factor in insurance on a new vehicle – newer cars generally cost more to insure and can come as a surprise later on.
Summary
Bad credit doesn’t have to be the end to borrowing. You just have to know your situation and be prepared to look for the right product to suit your needs. Once you find the right loan for people with bad credit, think about how you can restructure your finances to improve your credit to eventually get better rates.
In the next article, we will be going into more detail on a particular type of bad credit loan – mortgage loans for people with bad credit.
Bad Credit Loans | Part Two: Mortgage Loans for People with Bad Credit
For reference, the entire series of articles is listed below.
Bad Credit Loans | Part One: Loans for People with Bad Credit
Bad Credit Loans | Part Two: Mortgage Loans for People with Bad Credit
Bad Credit Loans | Part Three: Car Loans for People with Bad Credit
Bad Credit Loans| Part Four: Personal Loans for People with Bad Credit
Bad Credit Loans| Part Five: Bad Credit Refinance
Ins and Outs of a Bad Credit Mortgage | Part Six: Getting the Most out of Mortgages for Bad Credit
Posted by Owen in Bad Credit Mortgages on September 4, 2009
In order to get the most out of your mortgage for bad credit, be sure to follow the guidelines in the earlier 5 articles. In summary:
- Know your credit score – the more prepared you can be going in, the better you will be able to negotiate and find the right loan.
- Before you start shopping for a house, know how much you can afford. That way you won’t fall in love with a property that is more expensive than your pocketbook will allow.
- Investigate the types of mortgage loans for bad credit that are out there – and determine the right type of loan. If you can do this before you talk to your mortgage broker it may be easier to keep from getting swayed by another loan product.
- Find a good mortgage lenders for bad credit by talking with friends and family, and also check with your real estate agent. Build up a good rapport with the broker – they will become your advocate.
Once you have your mortgage – there are some things you can do to get the most out of it.
Start working on repairing your credit. Refer to article two about credit scores where we discuss what kinds of things impact your credit and how. Make sure to correct any credit report errors, start paying down existing credit cards or lines of credit.- Make sure to always pay your bills on time. Many people find it helpful to set up automatic bill payments for the minimum amount so that payments are made without having to think about it.
- Put in some elbow grease and improve the value of your home. It will be easier to get refinanced with better terms if you have built up equity in your home. Keep on top of routine maintenance, make some cosmetic improvements and keep records of everything you do to improve the property.
Mortgage loans for people with bad credit have received a lot of negative attention in the media recently. Don’t let anyone make you feel bad about your situation. We all have gone through rough financial times.
Remember, there is nothing wrong with mortgages for people with bad credit – they are stepping stones to get you into a home of your own, help you start building equity, and give you an opportunity to rebuild your credit and eventually qualify for a mortgage with better terms.
I hope you’ve found this series on bad credit mortgages to be helpful – if you have, I would love to hear from you.
Here is the list of all the articles in this series:
Ins and Outs of a Bad Credit Mortgage | Part One: What are Bad Credit Mortgages?
Ins and Outs of a Bad Credit Mortgage | Part Two: Should I Repair my Credit?
Ins and Outs of a Bad Credit Mortgage | Part One: How Much of a Bad Credit Mortgage Loan can you Qualify For?
Ins and Outs of a Bad Credit Mortgage | Part Four: Types of Mortgages for People with Bad Credit
Ins and Outs of a Bad Credit Mortgage | Part Five: Finding the Best Bad Credit Mortgage Lenders
Ins and Outs of a Bad Credit Mortgage | Part Six: Getting the Most out of Mortgages for Bad Credit
Ins and Outs of a Bad Credit Mortgage | Part Five: Finding the Best Bad Credit Mortgage Lenders
Posted by Owen in Bad Credit Mortgages on September 4, 2009
Finding the right lender or broker for your bad credit mortgage is of the upmost importance. This person will be your best chance at getting a good deal – and if you find the right person, they can also be your advocate with the bank or lender.
When you shop – ultimately you’re shopping for the best loan, but you also want to find a bad credit mortgage lender that you can work with. This process can take 30-60 days or sometimes longer, so be sure you are working with someone who will follow through, and who you can get along with.
Online Mortgage Lenders for Bad Credit
There are some plusses and negatives in shopping for a bad credit mortgage online. The drawbacks are that it’s much harder to build up a personal relationship with the person on the other side of the internet. If you can, try to make some kind of personal contact via phone. If that isn’t possible, try to build a rapport over email. Ask them if they like their job and how long they’ve been doing this type of work. Ask them to share with you their funniest story relating to finding someone a bad credit mortgage. If you can build a personal relationship, then shopping for a bad credit mortgage lender over the internet can be a great way to go.
The plusses are that you can quickly compare a lot of different loans, apply online and get feedback instantly. You can use their online tools to determine how much you can qualify for and what kind of interest rates you can expect to get. You can also track your application’s progress online and in most cases, the response time is fairly short.
Brick and Mortar Mortgage Lenders for People with Bad Credit
Applying for bad credit mortgages can be a time consuming process, and often there are a few times when you have to meet with your broker. Having someone local that you can work with can be an asset – if you can find someone you enjoy working with. It’s particularly nice to be able to pick up the phone and make a call if you have a question – and to know you are dealing with a real human being instead of an automated system.
Make sure you ask what kinds of loans they handle. Some brokers specialize in subprime loans, while others are FHA and Fannie Mae approved brokers. The more types of loans your broker or lender can offer, the better chance you will have of finding a loan that meets your needs.
Finding a Mortgage Lender for People with Bad Credit
Ask your friends and family members for referrals – who did they go through when they purchased their home? Ask co-workers and other people you see on a semi-regular basis, like at your child’s school or little league. Often your real estate agent will have a long list of people they can refer you to.
You can also do a search online and compare rates and information from various companies. Be sure to find out exactly what kinds of loans they are authorized to present and always read the fine print. If you need an added layer of security, never hesitate to take your paperwork to your attorney to have him review it before you sign anything. Mortgages will cost you hundreds of thousands of dollars – spending a few hundred to make sure you aren’t missing any important details can be well worth it.
In the last article of this series, we will be discussing how to get the most out of mortgages for bad credit.
Ins and Outs of a Bad Credit Mortgage | Part Six: Getting the Most out of Mortgages for Bad Credit
Here is the list of all the articles in this series:
Ins and Outs of a Bad Credit Mortgage | Part One: What are Bad Credit Mortgages?
Ins and Outs of a Bad Credit Mortgage | Part Two: Should I Repair my Credit?
Ins and Outs of a Bad Credit Mortgage | Part One: How Much of a Bad Credit Mortgage Loan can you Qualify For?
Ins and Outs of a Bad Credit Mortgage | Part Four: Types of Mortgages for People with Bad Credit
Ins and Outs of a Bad Credit Mortgage | Part Five: Finding the Best Bad Credit Mortgage Lenders
Ins and Outs of a Bad Credit Mortgage | Part Six: Getting the Most out of Mortgages for Bad Credit
photo credit: woodleywonderworks
Ins and Outs of a Bad Credit Mortgage | Part Four: Types of Mortgages for People with Bad Credit
Posted by Owen in Bad Credit Mortgages on September 4, 2009
There is a large variety of mortgages for people with bad credit history. The more you know about your options, the better prepared you can be when you start actively shopping for a mortgage. Remember that bad credit mortgages have some drawbacks – but generally, being able to purchase a home outweighs this.
2/28 Loan and Variations
The 2/28 loan is a loan that has a lower rate for the first two years and then increases at the beginning of the 3rd year. There is also a 3/27 and 5/25 loan which function in a similar way – with a 3 year low rate then adjusting over the next 27 years, or a 5 year low rate adjusting over the next 25 years.
With these 2/28 type loans, the rate can increase as much as 6 percent. The idea behind this loan is to have borrowers improve their credit during the first two years and then refinance before the rate adjustment. With this type of loan, be careful to read the fine print. Often there are hefty pre-payment penalties for refinancing too soon. Also, carefully consider whether or not you will be able to repair your credit within 2 years. There are also additional costs in refinancing – make sure you are prepared for those if you choose a 2/28 loan.
Interest Only Loans
The idea behind an interest only home mortgage for people with bad credit, is that your payment amount covers only the amount of interest due each month, postponing principle payments. This kind of loan will keep your monthly mortgage payments smaller, allow you to qualify for a more expensive house and lets you repay your principle based on your own schedule.
However, there are big drawbacks to this type of loan. Because you are not paying down the principle, you are not building any equity. If the real estate market takes a downturn, which it has in many places, and your house loses value, you may have to pay to sell your home. The biggest drawback is that you do have to pay the principle eventually – and many people have a difficult time making payments over and above the required interest-only payments. Only consider this kind of loan if you can set up a regular principle payment (automated payments work well for this) or if you are expecting a large windfall – inheritance, regular bonuses at work, etc. with which you can make the principle payments.
Longer-term Fixed Rate Loans
Traditional fixed rate loans are over a period of 30 years. Newer loan programs offer a fixed rate mortgage for people with bad credit for a longer period of time, such as 40 or 50 years. The good thing about these loans is that the rate is fixed – there will be no surprises about your payment. The drawback is that by amortizing your loan over such a long period of time, you will be paying a substantially larger amount of interest. As a comparison, a 250k loan at 7 percent will cost you $146,399 more over the course of the loan at 40 years instead of 30 but would cost you about $100 less per month. This kind of loan can be a good option if you expect to be able to pay more toward the principle on a regular basis thereby cutting down the loan term.
80/20 Mortgage Loans
If you don’t have much, or any down payment, you may be able to qualify for a first and second mortgage combination. The first mortgage is 80 percent of the home’s value and the 2nd mortgage is 20 percent. This type of loan generally helps you avoid mortgage insurance since the first mortgage is 80 percent or less. Rates on these types of loans are generally higher because there is zero down payment. This kind of loan can be a good option if you don’t have the money for a down payment but you can afford a higher monthly payment.
No Documentation or Stated Income Loans
These kinds of loans require far less documentation and are easier for people who do not have the traditional documentation required for loan applications. These kinds of loans have some of the highest interest rates, sometimes several percentage points above traditional mortgages.
Summary
Each of these loan types have their purpose. Consider your particular situation and know which of the above subprime / bad credit mortgages would work best for you and let your mortgage broker know. Be careful not to get talked into a program that won’t fit your needs or that will make your finances difficult to manage. The best way to go about a bad credit mortgage is to work to improve your credit as you build equity in your home, so that ultimately you have some equity in the bank and an improved credit score. That won’t happen if you take on a loan that is a bad fit for your situation.
In the next article, we will discuss finding mortgage lenders for people with bad credit.
Ins and Outs of a Bad Credit Mortgage | Part Five: Finding the Best Bad Credit Mortgage Lenders
Here is a list of all the articles in this series:
Ins and Outs of a Bad Credit Mortgage | Part One: What are Bad Credit Mortgages?
Ins and Outs of a Bad Credit Mortgage | Part Two: Should I Repair my Credit?
Ins and Outs of a Bad Credit Mortgage | Part Three: How Much of a Bad Credit Mortgage Loan can you Qualify For?
Ins and Outs of a Bad Credit Mortgage | Part Four: Types of Mortgages for People with Bad Credit
Ins and Outs of a Bad Credit Mortgage | Part Five: Finding the Best Bad Credit Mortgage Lenders
Ins and Outs of a Bad Credit Mortgage | Part Six: Getting the Most out of Mortgages for Bad Credit
Ins and Outs of a Bad Credit Mortgage | Part Three: How Much of a Bad Credit Mortgage Loan Can You Qualify For?
Posted by Owen in Bad Credit Mortgages on September 4, 2009
Most bad credit mortgage loans require a debt-to-income ratio of no more than 36 percent. What this means is that you can’t spend more than 36 percent of your monthly income on your mortgage payment. These ratios will vary. Some will require a ratio of 28 percent and most require a debt-to-income ratio of 33 percent.
To determine how much you can qualify for, you will need to know the following things:
- Gross monthly income
- Monthly debt – how much do you owe on credit cards, car payments, student loans, other debt
Take your gross monthly income and multiply it by .36. For example, if my monthly income is $5000, I’d multiply that by .36 to get $1800. Next, subtract your monthly debt payments. So if your total monthly debt is $600, subtract that to get a total of $1200. This is roughly how much of a monthly payment you can afford. Other factors will need to be included as well such as the property taxes, any homeowners dues and other fees related to the property.
To determine the total cost of the house you can afford, at 6%, it is roughly $6 per thousand. So a $200,000 would be $1200/mo. This does not include any closing costs or points rolled into the total amount of the loan.
Mortgage loans for people with bad credit may have looser requirements for income. You may be required to provide proof of income, or you may be able to do what is called “stated income”. It all depends on the kind of bad credit mortgage loan program you can qualify for. Some mortgage loans with bad credit require a larger downpayment in exchange for lower debt to income ratio. Others have relaxed standards on downpayments in exchange for strict proof of income reporting.
In general however, mortgage loans for bad credit still have the same 28 to 36% debt-to-income ratio requirements that other traditional lenders have. When applying for a loan, don’t make any changes that can impact the level of your income.
In the next article, we’ll discuss specific types of mortgages for people with bad credit.
Ins and Outs of a Bad Credit Mortgage | Part Four: Types of Mortgages for People with Bad Credit
Here is a list of all the articles in this series:
Ins and Outs of a Bad Credit Mortgage | Part One: What are Bad Credit Mortgages?
Ins and Outs of a Bad Credit Mortgage | Part Two: Should I Repair my Credit?
Ins and Outs of a Bad Credit Mortgage | Part Three: How Much of a Bad Credit Mortgage Loan can you Qualify For?
Ins and Outs of a Bad Credit Mortgage | Part Four: Types of Mortgages for People with Bad Credit
Ins and Outs of a Bad Credit Mortgage | Part Five: Finding the Best Bad Credit Mortgage Lenders
Ins and Outs of a Bad Credit Mortgage | Part Six: Getting the Most out of Mortgages for Bad Credit
photo credit: Photos8.com
Ins and Outs of a Bad Credit Mortgage | Part Two: Should I Repair my Credit?
Posted by Owen in Bad Credit Mortgages, Credit Repair on September 4, 2009
The decision of whether or not to repair your credit before applying for a mortgage or a mortgage refinance is a difficult one. Obviously, the better your credit, the better deal you will be able to qualify for. However, sometimes there is only so much repair that can be done and it can be quite time consuming. If you need to get into a house right away, or you have a deadline to refinance, you may need to compromise.
Get your Credit Report
You have to be informed. The first thing to do is to pull your credit report. You can do this through one of the major credit reporting bureaus, such as Equifax, Experian or TransUnion. If you have been denied credit recently, you may be able to qualify for a free credit report. There are also other agencies out there who specialize in free credit reports. When you do get your credit, be sure to select the type that comes with your credit scores – and if you can get scores from all 3 credit agencies so much the better.
Know your Credit Score
Some bad credit mortgage lenders go with your high credit score, others go with a blended rate. That is why it is important to know what your scores are.
What do credit scores mean?
720 and above: Excellent credit. You will probably be able to get the best rates available – and you should certainly shop around to get the best deal. You will most likely be able to borrow more and you may not have to purchase mortgage insurance.
675 – 719: This range of scores is considered to be an Average-Good credit rating. You may not be able to get the best rates, but you should have little trouble qualifying for a good loan. You will most likely have an interest rate about half a percent above that of someone with excellent credit.
620 – 674: This range of scores is considered to be below average. Expect to pay about two percent more on your loan than if you had excellent credit. You will likely need to provide more documentation and you will
Under 620: This is considered bad credit and you will most likely need to shop for subprime or bad credit mortgages.
How are credit score calculated?
- Payment history – 35% or so is made up of how well you pay your bills on time
- How much you owe – 30% of the score is determined by what % of your credit limits you owe on
- Length of your credit history – 15% or so of the score is dependent on how long you’ve been using credit.
- New Credit – 10% of your score will be based on your new credit. New credit applications and approved credit can lower your score. If you know you are going to be borrowing, try to do all your applications in a short period of time to avoid lowering your credit score.
- Other – 10% of the score will be made up of other factors, like variety of credit sources for example. The more different types of credit you have – mortgages, car loans, credit cards, student loans – the better your score will be.
Before you meet with a mortgage broker, document any reasons for late payments, overlimit issues and so forth. The more prepared you are before your meeting with the lender, the better. They may be able to negotiate with the bank on your behalf to get you a better rate.
Now that you have all this information, you may be thinking, “Yes, but tell me how to repair my credit.” When I had credit issues, the first thing I did to repair my credit report was to look for inaccuracies on all 3 reports. If you find mistakes, write to the credit bureau explaining the error. They have only 30 days to reply – if they don’t respond with proof of the problem, they must remove the item from your credit report. Repairing my credit wasn’t easy, part of it was writing to the agencies, but part of it was understanding how the score is calculated and starting to change my spending habits. Over time I was able to repair my credit rating and I am now able to qualify for much better loans. But I started out with credit well below 600 – and my first mortgage was a bad credit mortgage. However, I was able to buy a house and build equity as I was fixing my credit.
In the next article, we will discuss determining how much you can afford.
Here is a list of all the articles in this series:
Ins and Outs of a Bad Credit Mortgage | Part One: What are Bad Credit Mortgages?
Ins and Outs of a Bad Credit Mortgage | Part Two: Should I Repair my Credit?
Ins and Outs of a Bad Credit Mortgage | Part Three: How Much of a Bad Credit Mortgage Loan can you Qualify For?
Ins and Outs of a Bad Credit Mortgage | Part Four: Types of Mortgages for People with Bad Credit
Ins and Outs of a Bad Credit Mortgage | Part Five: Finding the Best Bad Credit Mortgage Lenders
Ins and Outs of a Bad Credit Mortgage | Part Six: Getting the Most out of Mortgages for Bad Credit
photo credit: Casey Serin
Ins and Outs of a Bad Credit Mortgage | Part One: What are Bad Credit Mortgages?
Posted by Owen in Bad Credit Mortgages on September 4, 2009
In this series of articles, we will take you through the ins and outs of bad credit mortgages. Each article will discuss a particular topic having to do with mortgage loans for bad credit. We will cover shopping around for the right loan, understanding your credit, organizing your paperwork, submitting the application, getting the best deal and how to get the most out of a bad credit mortgage loan. These articles are geared toward purchasing a home but will also be helpful if you’re investigating a bad credit mortgage refinance.
Links at the bottom of each article will take you to the next section, or refer back to the beginning for the table of contents.
What are Bad Credit Mortgage Loans?
There are two main categories of mortgage loans available today. One is a Traditional mortgage; the other is a non-conforming or subprime mortgage, also known as a mortgage for bad credit.
Traditional Mortgages
- FHA – One of the more widely used mortgage programs, FHA loans provide a wide range of options but require a minimum credit score of 620.
- VHA – If you are, or have been a member of the armed forces, there are special mortgage programs available for you. Regardless of your credit situation they are worth looking into.
- Fannie Mae – These are what are commonly known as conventional mortgages. There are specific requirements , including a minimum of 2 years employment history and a credit score of 580 although most programs require 600 or more.
Subprime or Bad Credit Mortgages
There are a wide variety of bad credit loan mortgage programs available that do not meet the criteria of a traditional mortgage. They typically have higher closing costs, interest rates and fees, but they allow for a lower credit score. Some programs are available with low down payments.
Before shopping for bad credit mortgage lenders, be sure to investigate your credit score and know if you need a bad credit mortgage or if you can possibly qualify for a traditional mortgage.
Bad credit mortgage lenders may not be FHA or Fannie Mae approved lenders, so they may not be able to offer you those programs. Be sure to talk to a number of mortgage lenders before you make your final decision. Different lenders or brokers generally specialize in one type of loan or another. Remember to talk to a broker or lender who specializes in mortgages for bad credit if that is the type of loan you decide to go with.
In our next article, we will discuss finding your credit score, what the score means, and how to make the most of what you learn when you meet with a mortgage broker.
Ins and Outs of a Bad Credit Mortgage | Part Two: Should I Repair my Credit?
Here is a list of all the articles in this series:
Ins and Outs of a Bad Credit Mortgage | Part One: What are Bad Credit Mortgages?
Ins and Outs of a Bad Credit Mortgage | Part Two: Should I Repair my Credit?
Ins and Outs of a Bad Credit Mortgage | Part Three: How Much of a Bad Credit Mortgage Loan can you Qualify For?
Ins and Outs of a Bad Credit Mortgage | Part Four: Types of Mortgages for People with Bad Credit
Ins and Outs of a Bad Credit Mortgage | Part Five: Finding the Best Bad Credit Mortgage Lenders
Ins and Outs of a Bad Credit Mortgage | Part Six: Getting the Most out of Mortgages for Bad Credit
photo credit: kate.28