Category: Home Loans

Buying Your First Home with Bad Credit

These days low interest rates mean more and more people will be eligible to purchase their first residence. This is great news, because a country of devoted home owners means the population is stable and responsible. That’s really great information for all of us to hear in times of economic upheaval.

Setting out to purchase your first place can be a huge adventure. That’s why you see shows on HGTV about people becoming unglued during the search process. With a few helpful hints, though, you will be on your way to home ownership. Here is how:

- One year out. At the point where your first place is just a twinkle in your eye, that’s the time to start preparing your financials, especially if you’re trying to buy your first home with bad credit. You want your credit score as high as possible, so pay particular attention that you do not pay any bills late. Also, make sure there are not any unfounded details on your credit statement that are not correct. If there are, take steps according to the credit agency’s procedures to have them removed by disputing them.

- Save. Having a down payment can reduce the size of your monthly payments (especially if you’re trying to get a home loan for self employed people). Cash on hand also proves to your bank or mortgage company that you are serious, and also that you can afford the monthly payment a home requires.

- Search. You may not be ready to buy yet, but that’s fine because you want to identify some areas that might be appropriate for you in your town. Knowing the neighborhoods that suit you is important.

- Ask your buddies who they use for a realtor. Find someone who like and whose professional skills you respect.

- Mortgage lender. These days you do not want to wait til the last minute to find a bank loan. It takes longer nowadays than it used to, to secure home loan financing. Start with your existing bank or with one of the resources identified by your real estate professional.

- Pre approval. After you have completed preliminary financial statements and applications, you will get a bank letter, which is basically like a letter of authorization that says you are a person of substance with the resources to finance a home up to such and such an amount (and it will list the maximum financial amount of a home you might qualify for).

- Now start looking for banks that lend to people with bad credit. Only when you have all your ducks in a row should you actually start home shopping. How long it will take is anyone’s guess. The supply of homes on the market at any give time varies, and it may not include your dream home initially.

It can be a journey to purchase a home. Just keep your faith that it will all work out, and it will.With the help of your banking and real estate team members, you will be able purchase well, taking advantage of the latest information in the market.

A Quick Guide to Refinancing Your Mortgage

People refinance their mortgages for different reasons. The main reason why you would want to refinance your mortgage may be a low rate of interest. The low rate makes for low monthly payments and that means more available money in your pocket.

Some people decide to refinance their mortgage in order to switch from a variable interest rate to a fixed interest rate. Variable rates, being dynamic, can quickly adjust to a high rate that produces a high monthly payment. This can create problems if your cash flow is tight. A fixed rate of interest is predictable, month-in and month-out; and a much safer way to go.

Regardless of the reasons for refinancing, you must know at least the basic steps of the refinancing process to protect yourself. It’s not difficult but it involves a lot of paperwork and most people have little experience or knowledge in this area. And so here’s a short guide to help.

First of all, you should work with a reputable mortgage broker. Mortgage brokers help you save money in various ways and also they can save you valuable time. The mortgage broker understands the inner workings, offers, and terms of various lenders and knows which lenders have loans that may suit your needs at affordable rates. Try to find a broker through a referral from someone you trust if you can.

Next, you need to start putting all of your financial paperwork in order before meeting the broker. This includes your paycheck stubs, bank records, tax returns (for the past two years), and every creditor record you have. Organize this paperwork so that you can easily answer any questions the broker may have.

Now it’s time to meet with the broker. This is where you can find out what you can afford and what you can’t. After filling out a short application form, the broker will know what types of refinancing deals you might qualify for. Now, it’s up to the broker to find you the best deal according to your requirements.
Once you’re given some actual deals to consider, you should evaluate them side-by-side. Besides comparing the monthly payments and rates of interest, you must also look at the out-of-pocket expenses that you’d have to pay for the loan itself. It’s also advisable to consider mortgage insurance with your refinance. In today’s economic climate it doesn’t hurt to have some extra protection against a financial setback or the loss of a job. Compare the mortgage insurance rate of various insurers and choose the one which is economical and offers the best comprehensive coverage. And don’t forget that through all of this you’re free to bargain over mortgage details and have the broker take back your requests to the lender.

If you plan your refinance in this way, you can save time as well as money. You have to be patient though because the mortgage process can take weeks. But in the end it’s worth it if you get the deal you’re looking for.

About Home Loans for Self Employed Individuals

Gone are the days when loans are only for people with regular jobs. Due to the rising number of people who prefer to be self-employed and work online or put up their own small businesses, more and more financial institutions are offering options for loans for self employed individuals. And among the popular choices include the home loans for the self employed.

A home loan is a type of loan you will apply for if you wish to buy a house and pay for it on a monthly basis within a certain period time. This simply means that you have to repay the loan within the specified number of months or years that you agreed and the lender agreed upon. The monthly rate will depend on the terms of the lender from where you borrowed the money,  along with the duration of the loan. This type of loan is perfect if you do not have the enough cash on hand to pay for the house you want to purchase. Obtaining a home loan will basically make buying the house much easier.

In general, there are two types of home loans for self employed individuals: fixed rate mortgages and variable rate mortgages (and a fixed rate loan is really the way to go if you’re buying your first home with bad credit).

The fixed rate mortgage loan is the one that is mostly chosen by many borrowers. This is considered as one of the best home loans for self employed individuals. With this type of home loan, the interest rate does not change throughout the duration of the loan, regardless of the state of the economy. The monthly amortization payment is also the same throughout the loan period, so this type of loan will allow you to set aside the same amount of money every month for your home payment, just like the payday loans for self employed individuals.

The variable rate mortgages, on the other hand, is considered a risky type of home loan and is for those thinking of applying for home loans for self employed. This loan has an adjustable interest rate that will depend on the economy’s movement. The monthly amortization payment may increase or decrease depending on the stability of the economy and, therefore will not allow the borrower to predict or set aside a fixed amount of money for his or her home payment.

For Mortage Refinance Leads Try the Web

As a person in the mortgage industry, the time inevitably arrives when you need to increase business through the use of leads. When you reach this point, you better have a solid plan in place to take advantage of the potential prospects.

Contrary to popular belief, it is definitely possible to generate leads for no cost. You just have to be proactive and look in the right places.

A forum is a hub online where like minded individuals meet and communicate with one another. There are literally thousands of online forums on many topics including mortgage. Your job is to find forums where individuals who are looking to buy a home spend time.

A great way to find a forum is to Google: mortgage refinance forum. Implementing this search will yield the forums of mortgage refinance leads. After you’ve found one you like, create an account and begin interacting with the members.

The key here is to NOT push your products on members. At least not right away. Doing so will turn off members and may get you kicked out. What you need to do is provide value and establish yourself as an expert.

Look through the threads (topic titles) and look for people asking questions or running into problems. Answer their questions and genuinely help. After a while, you will be seen as an authority.

While you shouldn’t tout your business overtime you get, you should include a mention of your business in your bio line which appears at the bottom of your forum messages.

By providing unique value, leads will come to you. You will have gained credibility and most importantly trust. Once that trust is established you can take the tep of converting those leads into customers. Taking this approach is a long term strategy, but it will pay for itself in time.

Understanding Your Online Mortgage Application Form

I’ve been through the mortgage approval process several times now, and each time my mind is boggled at the amount and complexity of the paperwork one has to fill out before the bank will turn over the funds so the seller will turn over the keys. In particular I think there are a few aspects of the typical online mortgage loan application that all but guarantee you won’t be qualified for the loan, so I wanted to take some time to make them a little more clear to you. In now particular order, here are some of the terms on your application that may make it a poor use of your time to fill out the form at all:

On page 3 of the application you have the following questions:

a. Are there any outstanding judgments against you?

Judgments, of course, mean that you’ve been party to some kind of litigation and lost. Or, that you’ve been found liable in some kind of accident (or some kind of non-accident if you know what I mean) where the courts have ordered you to pay a certain amount of money as a penalty for something you did. Having judgments on its own might not knock you out of the running for a home loan, but it’s definitely not going to make the process easier.

b. Have you been declared bankrupt within the last 7 years?

I suppose if this one applies to you then you already know that you’re going to have an uphill battle when applying for a loan. Again, if you’ve had a bankruptcy within the last seven years it’s not necessarily impossible to get approved, but it’s certainly a big black smudge on your mortgage loan application. Most people who’ve filed bankruptcy will already have researched their options when it comes to getting a new home loan or refinance after a bankruptcy.

c. Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?

Boy, that’s being blunt isn’t it? What they’re asking here is “have you been a good boy or girl with your previous home loans?” And notice that they don’t just ask if you’ve had a foreclosure. They also want to know if you’ve given title or deed in lieu of foreclosure, which is to say they want to know if you all but got foreclosed on and managed to dodge it at the last second. If you have to answer yes to this question, qualifying for a decent loan is going to be tough.

d. Are you a party to a lawsuit?

Why do they care? Well, it’s a funny about lawsuits…when one person wins and the other loses, money is going to change hands. And if the loser doesn’t have the money, they’re looking at liquidating assets and/or filing for bankruptcy. So, with this part of the online mortgage application they’re trying to say “Okay, under your current circumstances you qualify for this loan. But if you’re being sued and you lose – which means you have to file bankruptcy within the next few months – we want no part of you.” So if you’re in the middle of a lawsuit the typical mortgage underwriter is going to turn tail and run from you. Sorry.

So those are some of the ‘red flag’ questions you’ll have to answer as part of your mortgage application online process. If you have to answer yes to any of them, work with your loan officer to see how you might be able to still get your loan.

Getting a Mortgage Refinance With Bad Credit is Easy

Having bad credit does not have to stop you from getting a mortgage refinance. What seemed nearly impossible to some, is now fairly easy to accomplish. In fact, many online lenders are fighting to get your business. Even though people with bad credit are risky borrowers, many lenders will offer them a mortgage refinance because they can simply combat these high risk borrowers by a slapping them with a higher interest rate. Since rates are at record lows for people with good credit, the rates you can receive with bad credit may still be low.

While getting a mortgage refinance with bad credit can be simple, be sure to shop around for the best interest rate. Also, each lender may have different types of loans they offer, so find the best loan that works for you. For instance, some loans allow you to purchase points. Mortgage points allow you to pay more up front, but you will receive a lower interest rate for the life of the mortgage. You can also choose between a fixed or variable interest rate loan. If you choose a variable rate mortgage, also known as an ARM, understand how often the rate will change and at what percentage it can increase or decrease. With rates so low now, it is more advantageous to refinance with a fixed interest rate.

Be sure to check for any fees and how much the lender will charge you to complete the refinance. Some lenders are cheaper than others. If the purpose of the refinance is to lower your monthly payment, make sure you can afford the new monthly payment before you sign the loan papers. Also, make sure the new mortgage does not contain a pre-payment penalty, or you could be penalized for refinancing or paying the mortgage in full early.

To get a mortgage refinance with bad credit, apply online by filling out an application form. An agent will usually contact you to discuss your options. Look for lenders who specialize in mortgage refinances for people with bad credit. Agents from these lenders can help you choose the loan that best fits your needs. The purpose of the refinance will determine what type of loan will best fit your needs and how it will benefit you. If you have a Fannie Mae or Feddie Mac loan, ask the lender about Obama’s national mortgage refinancing program.

A Low Interest Home Equity Loan is the Way to Go

In today’s cash strapped economy, many homeowners are looking for alternate ways of generating some cash for household needs, debts and emergencies. With credit card rates soaring and retro-activating against previous purchases, many people are looking to lower their interest burdens by paying off high interest debt. Personal loans are high in demand, but often require borrowers to come up with collateral in exchange for rates that are similarly high to credit cards. Peer to peer lending is another solution, but it usually requires exceptional credit and funding is not guaranteed. In the light of this, many are turning to home equity loans for their debt solutions.

Home equity loans are simply loans taken out against your home. There are many benefits to borrowing against a home, as many home owners enjoy a nice cushion of equity early on their mortgages through down payments and expedient payoff schedules. Because a home equity loan is viewed as a second mortgage, the interest on the loan is very low, usually hovering around the same rates as a thirty year fixed loan. The interest is usually tax deductible and borrowers tend to have low payments that are hardly noticed as they are stretched out over a long period of time.

Though home equity loans are beneficial to many who find themselves slave to their debts and obligations, one should be careful before hastily borrowing against their home. Once a loan is taken out against a home, it is no longer protected against bank repossession, which is dangerous ground for those struggling to make end’s meet. Once a home equity loan has been defaulted on, the home acts as collateral to recover the debts.

Overall, home equity loans prove to be wise decisions for many people, regardless of the needs of the borrower. A financial adviser can often provide a third party outsider’s view and help guide your decision in taking out a low interest home equity loan. There are many companies, banks, and financing institutions that are more than willing to help their customers with their banking and loan needs. For those that find themselves sinking farther into a debt sinkhole, maybe you should consider taking a cue from your house. That equity is sitting dormant and can be used to save money both in the present, and long term as well.

How to Find a Bad Credit Refinance Loan for Your Home

If you’re looking for a bad credit refinance loan, there are two things we probably know about you. One, you’ve most likely kept up on your mortgage payments. Two, other debt obligations have been either neglected (meaning you’ve missed  a payment here and there), or ignored completely (meaning you gave up on trying to repay the debt – could have been a car repo or something along those lines). Now you’d like to refinance, and who knows why. Could be a variety of reasons that you want to refinance your home loan even though you have bad credit. Here are a few I can think of:

1. You want to get some of the equity out of the house to pay off some bad debts.

2. You’re just trying to take advantage of low rates and get your monthly payment down.

3. You’ve realized you’re not going to have much luck selling your home, so you’re thinking about improving and/or adding onto it.

Whatever the reason you’re trying to refi your house, you better go in with your eyes wide open, because when you start the refinance process – especially with bad credit – you’re basically starting the mortgage qualification process over again from scratch.

You need to have a few things in place before you even think about a refi.

First of all, do you really have enough equity to keep your ratios inline? You’re going to need to have 20% equity left over – after you complete the refinance process. If your home is worth $250,000, and you want to borrow $20,000 to fix up the house, then your current indebtedness can’t be more than about $175,000. I know those numbers don’t quite add up; more on that in a minute.

Second, your debt to income ratio can’t go up to much with the new loan (obviously this only applies if you’re trying to borrow money out of the house to fix it up or pay off other debt). If you’re borrowing the money just to fix up the house, you’re probably looking at about $6-$9 added onto your monthly payment per $1,000 borrowed. Let’s say it’s $9.  A $20,000 loan will increase your monthly payment by $180, give or take. Take that into consideration.

On the other hand, pulling out some cash to pay off credit card debt could improve your debt to income ratio. Your credit card payment usually comes in at about $25 per $1,000 borrowed, so trading that in for $9 per $1,000 borrowed would help a lot. Not to mention the fact that sometimes the interest on that new mortgage debt will be tax deductible, whereas credit card debt is never going to be.

If you happen to be refinancing just to lower your payment, make sure you fully understand the costs associated with the refi, because it will take at least a few years at the new lower payment to recoup the cost of refinancing with bad credit. Let’s say your new mortgage is $150 lower, and the total closing costs on the house were $5,000 (I think that’s pretty conservative). It would take you almost three years before you realize the benefit of the refi. If you think about the fact that lowering your interest rate hurts your tax deductions, it actually takes you longer to really enjoy the benefits of refinancing your house.

Keep all these issues in mind if you have bad credit and want to refinance your home loan. There are a lot of ways it can benefit you, but if you don’t factor in all the real costs, you might not be getting ahead at all.

A Poor Credit Mortgage Loan to Put You in Your Own Home

There are quite few myths surrounding whether a person with bad credit can get a mortgage loan – myths on both sides of the table. You have people who say think there’s basically no such thing as a poor credit mortgage loan; and you have people who think that a person with awful credit – if they look hard enough – will find a loan that requires nothing more than their signature, a firm handshake, and a winning smile.

Both groups are misinformed, to say the least, and we can address them both at the same time.

There are plenty of poor credit mortgage loans out there. There is an entire subset of the lending market dedicated entirely to the bad credit, or ‘subprime,’ borrower. The terms of these loans take into account the subpar credit standing of the borrower. They’ll carry higher interest rates, and probably require higher up front fees (if the borrower chooses to buy down their rate with ‘points’).

Bad credit borrowers will almost certainly have to prove their income beyond all doubt – I doubt people with bad credit would have a very easy time getting a ‘stated-income’ mortgage. The lender is going to want to see a couple of years’ worth of tax forms, pay stubs, or both.

Here’s the big kicker – if you don’t have a 20% down payment or more, I’d say you’re a couple of years away from qualifying for a home loan. I can’t really say I think that’s a bad thing though. Think about it. Let’s say you want to buy a $200,000 house. You need to come up with a $40,000 down payment. If you can set aside $800 per month, you’ll have your down payment in a little over four years.  Now, that may seem like an eternity to you, but you can get a lot done in your financial life in four years.

You can significantly improve your credit – maybe to the point that a mortgage loan with poor credit isn’t something you even need to worry about. You can consistently increase your income – which will make it easier for you to furnish and landscape this big new home you’re buying. Most importantly, you can enjoy the benefits of waiting and working for a goal that means a lot to you. I really believe our society would be much better off if everyone who wanted to buy a home had to spend five years or so getting ready for it. Not only would you have much more savvy home buyers, you’d have happier, less stressed people out there who could actually afford their home.

Seems to me that working a few years to prepare for a commitment that will last at least 30 years isn’t a lot to ask.

Low Interest Mortgage Loans

Mortgage interest rates are mostly determined by two things: the free market and the Fed. That’s pretty common knowledge, but people seeking low interest mortgage loans should be educated about how interest rates can fluctuate in order to time their home closing or their refinance as well as possible. Getting this right could make a difference of tens of thousands of dollars in interest payments over a 30 year period.

So how does the Fed push rates around? It can get pretty complicated, but the Fed is in charge of the federal funds rate. Now, the federal funds rate is the interest rate banks can charge each other if they’re lending money to each other overnight to stay within their federally required cash reserves. The Fed determines that rate, and the banks use it to set rates on the money they lend you and me for things like mortgages, cars, and credit cards. Basically, when the Fed lowers the Federal Funds rate by, say, .75%, there will be an equal drop in things like the Prime interest rate, around which many loan rates is built.

So why does the Fed lower the Federal Funds rate. There are a lot of reasons, but the one mostly commonly seen lately is that the economy is slow, and the government tries to stimulate it so banks will start lending to each other, to prospective home owners, business owners, etc. The idea being that more money will start moving through the economy, which improves the attitude of the public and gets things going in the right direction.

So for those of you looking  to get a mortgage loan with a low interest rate, you should keep track of the financial news – when people start to get scared about the economy, and the Fed wants to improve the outlook, low rates are probably on their way.

Now just because rates are low doesn’t mean you’ll get a low rate yourself. Everything I just talked about takes for granted the fact that you’ll have to be a well-qualified applicant to land a low interest mortgage loan. That means a credit score creeping over 700, having your other debt payments as low as possible (so as not to tip your debt to income ratio past allowed limits), verifiable income, and last but not least – a nice big down payment.

Getting the lowest possible interest rate mortgage loan is a matter of good preparation and good timing. You can’t do much to control the market, but you can control yourself. I heard a great quote once: “Opportunity meets you at the level of your own preparation.” If you’re prepared, you’ll be ready to capitalize.

How to Get Home Equity Loans with Bad Credit

Bad credit puts you in a hole in any lending situation, and it’s tough because no matter how you try to explain away your low Fico score with circumstances and events beyond your control, the hard fact is you didn’t make your payments on time (or maybe at all), and now the credit bureaus are telling lenders to steer clear of you. If you happen to be a home owner, and you need to get some cash out of your house, home equity loans for people with bad credit are going to be nearly your only option.

And I’m sure you can understand why. If you take a step back and look at things from the bank’s perspective, giving you a home equity loan in spite of your bad credit probably doesn’t seem like a very good idea. After all, by taking on this new credit line, you’re not really changing anything about your financial situation except creating another opportunity to increase your monthly debt load and increase the risk of you starting to miss payments again.

That might not always be true. You might be opening the home equity line because you’re going to use it to pay off some credit card debt or medical bills or something along those lines. If that’s the case a lender might look at the situation more favorably because you’ll be getting rid of those brutal interest rates and payments on your cards by transferring the balances over to a lower interest credit line.

Just how much lower that interest rate will be is up in the air. Good credit borrowers might get something near the prime rate on their equity loan, but home equity loans for bad credit could run in the prime+5% ballpark. So, yes, that’s much better than the 20% to 30% you’re going to deal with on credit cards, but it’s not really a low rate loan.

The question is, how can you make yourself look better to the banks. In my mind there are only two ways that’s going to happen.

You could a) wait a couple years while you clear out some debt and watch your credit score improve as you zero out balances and make consistent payments (and maybe even write some dispute letters about blemishes on your score, or b) get someone with shiny undamaged credit to co-sign with you.

That could be a very tricky situation. It’s likely that a nobody will want to co-sign with you unless you’re fairly close, but having someone close put their name by yours on a loan – after what you’ve done to your credit in the past – creates some potential risk to the relationship that you should think long and hard about. If you know – and I mean know that you’re going to make your payments, that your employment is stable, and that everything will work out….getting a co-signer is probably the best option. It might make it so you don’t need home equity loans with bad credit at all – you could get the ‘good credit’ kind instead.

No Credit Check Home Loans

No credit check home loans, huh? I guess it’s worth a shot; you’re thinking “somebody out there on the worldwide web must offer a home loan that doesn’t require a credit check at all.” Well, I’m not going to say that there is definitely no such thing, but it’s going to be a lot tougher to get than a $5000 loan no credit check. Let’s talk about it.

If a lender doesn’t check your credit before giving you a home loan, on what criteria could they possibly qualify you?

Okay, that’s actually a fair question. Let’s put ourselves in the shoes of the lender, and pretend that we are trying to decide whether to give a person a home loan without looking at any kind of credit history. What criteria could we use?

1. The down payment. Not only will the down payment reduce the risk to the lender, it says something significant about the prospective borrower. It means they’ve saved money over a period of time, and probably a substantial amount of money. If possible, I’d like to get records of deposits going back several years to see how much they’d be setting aside each month, and how consistently they did it. That way, if I couldn’t see a record of payments they’d made to creditors, I could at least see a record of unforced payments made to themselves. That would be a good indicator of their credit worthiness.

2. The income statement. I’d have to know that they’re monthly income could more than support the monthly payment on the loan I’m giving them, even if I had the record of their excellent savings habits.

3. The debt statement. This is close to a credit history, but I’m not even wanting to see a track record of payments. I need to know what their monthly debt service is so I can do the simple math and decide whether the new loan payment is going to overload them.

4. Serious personal references. I’d have a loan processor call at least 5 to 10 people that are both impartial and know the person well enough to say whether the applicant is credit worthy. I’d be looking to hear that the applicant is one of the most disciplined, responsible people they’ve known.

With those four criteria in place, I suppose you could theoretically give somebody a home loan with no credit check. But I’m afraid you’re still dreaming. It’s never going to happen. The best thing you can do is apply for a bad credit home loan. Those really do exist, but guess what? The first three criteria I mentioned above will be a major factor in that process as well, so you’d better make sure you have them in line if you want to buy a home and you have no credit or bad credit.

Home Loans with Poor Credit

Recently I was talking with a friend who’s living with his parents right now, along with his wife and three kids. He’s 34, and he ended up living with his parents after going through a rough patch with his employment and missing some payments on his other debts. His wife’s credit went in the tank too, because her name was on the loans with the missed payments. It’s a bit of a mess, but a couple of years have passed since he went through all that, and he and his wife are looking to buy a new home now. Obviously they’re going to have to look into home loans with poor credit.

What people don’t realize is that getting a poor credit home loan isn’t a completely impersonal process. Yes, lenders have to consider your credit score as part of the qualification process, but that doesn’t mean they have to completely neglect the human element. The first and biggest piece of advice I’d give a  credit challenged home loan applicant is to contact every bank and credit union in your city or county.  Local lenders are much more likely to actually sit with you and have a sincere conversation about the factors in your application that don’t show up in a credit score.

You really want to explain to them, being completely truthful, what circumstances led to your bad credit status. Think of this like a job interview, and imagine you’re telling your new prospective boss why you got fired from your last job. It’s actually a very similar situation. One thing you don’t want to do is lie or make excuses. You’re trying to make it clear that the past is the past, and although you’re responsible for what happened, you’re never going to let it happen again. Make sure you can paint a very clear picture about what’s different in your circumstances now compared to when you wrecked your credit. They’ll appreciate a sincere explanation much more than a laundry list of hard luck excuses and stories about how “it’s not your fault.”

The next best piece of advice I can give isn’t something you can complete in a day, a week, a month, or probably even a year. You need to a) minimize your personal debt, b) increase your income, and c) save up a nice down payment. Remember, you’re trying dealing with home loans for people with poor credit. Nothing strengthens the message that you’ve changed more than being able to show them a credit report that, although it shows  a low score, doesn’t show any consumer debts on it.

There’s a psychological benefit as well as a tangible benefit to having almost no other debt when you’re trying to get your home loan. The tangible benefit is that your debt to income ratios will look great (especially if you followed the advice about finding ways to increase your income). The psychological benefit is that the underwriter will be able to look at your report and say “this person has obviously made some big changes in his/her personal finances.”

If you make the effort to go through these steps I feel confident you’ll be able to qualify for the home loan you want and need sometime in the next year or two.

Bad Credit Mortgage Refinance Solutions

I suppose I could think of a few reasons a person would be trying to refinance their mortgage after they have bad credit, but I’d guess the biggest reason would generally be that they’re in over their heads and they’re trying to lower their payments.

If this is you – the seeker of the bad credit mortgage refinance – you need to have a few things clear before you start this process. You also need to have very realistic expectations about what the outcome could be.

If you’re looking to refinance because your payments are just too big and you’re starting to fall behind, working with your current lender seems like the wisest choice, but they’re often surprisingly stubborn or just plain unwilling to talk about restructuring your loan so you can keep your credit intact and also keep up on your payments. I knew of a family whose house payment was overwhelming them. When they contacted the bank to see if there were options that would help them avoid foreclosure, the bank said “just make whatever payments you can and we’ll get in touch with you.” They realized the bank wasn’t going to work with them, so they went ahead and just quit making their payments altogether. Sure, they get to skip a few mortgage payments while the bank is processing the foreclosure paperwork, but their credit is ruined.

I’d say it’s much wiser to walk away from that bank if they don’t want to work with you and do whatever you can to save what’s left of your fico score through a refinance mortgage with bad credit.

I’ve heard from people in this situation that it’s usually a good idea to try to work with a local lender when you want this kind of refi. They have a vested interest in the strength of the local real estate market, and they know you’re going to talk with your friends about whether they were willing to help you out or not. Having that kind of leverage will help you when it gets down to the nuts and bolts of whether you’ll qualify.

The first question they ask is going to be “why aren’t you working with your current lender to refinance the house?” I’d just be completely honest with them and say “We’re trying to save our credit and they don’t want to work with us. We need to find a lender who can figure something out with us so we can keep the house and still make our payments.” That kind of honest will actually go a long way.

Yes, you’re going to have to go through the standard underwriting and qualification process from there, and your missed payments are going to hurt you. But if you have some equity and enough income to handle the new payment, you just might be able to pull a bad credit refinance off.

Bad Credit New Home Loans

Buying my own home for the first time was one of the most exciting experiences of my life; I had rented for years with my wife, and now we were ready to buy our first home. Our credit was relatively good, but I realize that’s not the case for many people out there who are hoping to live the dream of home ownership in spite of their damaged credit. They’re looking for bad credit new home loans.

Now, there are certain aspects of new home loans with bad credit that are universally part of home financing.

First of all, you have the typical facts relating to the home itself and the purchase price. Whether you’re a good credit or a bad credit borrower right now, the loan to value ratio (LTV) is going to be a major factor in whether you successfully finance the home. Banks are going to run screaming from almost anything but an 80% or lower LTV right now (yeah – they’d really prefer to see 70% or 75%).

Then you have the down payment. Even if you happen to be buying a home where the LTV is low due to the purchase price being low relative to the appraised value, most lenders are going to want you to have some ‘skin in the game’ in the form of a down payment. This will be especially true if you’re trying to get a new home loan with bad credit. Personally, I think it’s important for you to put a down payment on your home. During the few years there where the lending industry went completely insane, way too many people were able to buy expensive homes without ever sinking a single penny of their own money into the deal.

When you don’t have to put any money down I don’t think you’re fully prepared to make the mortgage payment when it arrives. It’s as though you got a ‘free house’ and I think that’s the wrong frame of mind to be in when you’re taking on such a major expense.

If your LTV and down payment are squared away, the final major consideration for the lender will be your income relative to your total monthly debt payments, factoring in your new mortgage. Lenders these days are going to be very stingy about letting that number go above 28%, and they’ll be very leery of any borrower with lots of unsecured debt, namely credit cards.

Getting a bad credit new home loan can work out for you, but you may have to spend a couple of years making yourself look better on paper so you can qualify, but do it with the best possible terms. The preparation process will actually be one of the most valuable experiences you go through in your financial life.

Home Equity Loans for People with Bad Credit

It’s often said that your home is your biggest investment and that it represents the largest part of your wealth. If that’s true, why is it so hard to get to the money? In fact the only way to access the ‘wealth’ in your home is to borrow it out through some kind of refinance. If you happen not to have the best credit, the only way you’re getting to that money is through a home equity loan for people with bad credit.

The question is going to be whether you qualify for such a loan. In other words, just how bad is your credit? The nice thing about bad credit home equity loans is your low FICO is less likely to affect you on this application than it would on something like a credit card. At least in this case your home collateralizes the debt, protecting the lender to an extent.

Still, your credit can only be so bad before lenders aren’t going to want to take the chance on you. I’d say if your credit score is below around 600 you’re going to find it very tough to find anyone willing to give one of these lines of credit.

But if you’re not in that situation you have a chance, and there will be two major factors in getting the HELOC you want. Number 1, they’re going to see if you have enough equity to keep your loan to value ratio (LTV) at acceptable levels. These days hardly any bank is going to want to lend past 80% LTV (which means if my home is worth $250,000 I can’t have a total loan balance of more than $200,000 – including my new equity line). And what your home is ‘worth’ can be very fuzzy. I don’t know about most homeowners, but I got a letter from the tax assessor this year saying that my home value has taken a big dive. You’ll have to go through a standard appraisal process, and if the equity line amount you want doesn’t fit inside your appraised value, too bad.

If you do happen to have enough equity in the house, the only other obstacle between you and a home equity loan for bad credit will be your income and your other debts. Stricter lending standards aren’t going to let you go past about 28% on your monthly payments to income ratio. So, take out a calculator and add it all up: your current mortgage payment, your credit card payments, car payment, student loan payments, and any other monthly debt service you might have. Then add the amount of the payment you’ll have if you add a bad credit home equity loan to the mix. If it gets past 28% I’m afraid you’re out of luck.

Home equity lines of credit aren’t something to be taken lightly. You have to ask yourself what you’re going to use the money for. Even if it’s a somewhat worth use, such as updating the house so it will sell more easily, I would advise caution. The home may still not sell, but that monthly payment will come due regardless.

How to Get a Home Loan with Bad Credit

Here’s the scenario: you’ve messed up your credit. A couple years back, after an on the job injury, you couldn’t work for six months and things piled up on you fast. Before you knew it you’d had a car repossessed, you missed three mortgage payments, and just like that your credit was basically trashed. In a stroke of luck, you were able to sell the house to avoid further missed payments, but you were stuck with the bad credit score. Now that some time has passed and you’re working steadily again, you’re ready to buy a new home.

The question is how to get a home loan with bad credit. Well, I have some good news and I have some bad news. The good news is that home loans with bad credit absolutely do exist. The bad news is that you, as a ‘credit-challenged’ borrower are going to have an entirely different application and qualification process than people with unblemished credit. You are likely to be able to buy a house again, but it’s going to take some patience and work.

As usual, you need to go through your own preparation process before ever going to talk to a mortgage broker or bank representative. Before you walk through their office door you need to already be clear on a) your credit grade (A through D), your FICO score, the LTV (loan to value ratio) of the home you’re trying to buy, and your real affordability range. As a person with credit that’s already somewhat damaged you really have no business pushing the envelope at all when it comes to your ability to stay way ahead of your payments.

Once you’re clear on the fact that you have everything in place that you possibly can in terms of your own self prequalification process, it’s time to go to the lender and see what your options are.

The biggest way you’re going to feel your bad credit score is in the fees and the interest rates you’ll be charged on your mortgage. Usually, the loan origination fees paid during the mortgage application process are called ‘points,’ and a prospective borrower can pay anywhere from one to five points as an origination fee. People with great credit very often pay zero points, while those that are trying to get a home loan with bad credit often pay up to four or five. That can get very expensive if you think about the fact that a single point on a $200,000 mortgage is $2,000.

I realize you’ll be very frustrated having to pay such steep fees thanks to your poor credit score, but there’s a certain courtesy you should extend to the loan originator working on your mortgage. It won’t do you any good to make ridiculous demands as far as lowering fees or interest rates. You have to keep in mind that anyone working on your loan will be paid completely on commission, and if you turn into a big headache they’re going to cut you loose and go work with a client that is a lot less hassle for the money. Get the best terms you can, but don’t alienate the people working to help you out.

If you’re persistent and you do your homework, you’ll able to land the home loan you want. After a few years of on-time payments you’re likely to see your credit score jump way up, and you’ll be able to investigate a refinance that will make your interest rate much more attractive.

Low Interest Rate Loans

Every tenth of a percentage point on a loan makes a big difference on the amount of interest you pay over the life of the loan. It’s worth the extra time and effort to dig until you can push that rate down as low as possible. Finding low interest rate loans can be hard work, but it’s work that pays pretty darn well. You have to stop thinking about just the avoidance of interest payments, and start thinking about the purchasing power and investing power of the money that stays in your pocket when you manage to find that lower rate. Here’s an illustration:

Let’s say I’m looking for a low interest rate mortgage loan. I need to borrow $250,000 on a 30 year fixed rate loan. My first opportunity is to get the loan at 6.5%. Those terms give me a mortgage payment of $1,580.17. By the time I pay the house off I will have sent the lender right around $319,000 in interest payments. We’ve all seen those numbers a hundred times, but it never ceases to amaze me.

Anyway, let’s say that instead of a 6.5% interest rate I manage to get a 6.25% rate. Now my payment is $1,529.39. So it saves me about $40 per month (lets my husband and I go out to dinner one extra time per month – not bad), but the big payoff is in the interest saved over the life of the loan. By the end of the term I will have paid around $304,000 in interest. $15,000 is a healthy chunk of money, and that’s why it always pays to look for a lower interest rate.

Okay, since we’re on the subject, we might as well talk about how to save even more money on interest on your home loan or any other loan you borrow. Add $100 per month to your payment. You’ll save $70,000 in interest and pay the house off in 25 years instead of 30. I know that’s not completely related to this article, but it’s always worth mentioning that a true ‘low interest loan’ is one that gets paid off early by a disciplined borrower. ;)

Bad Credit Mobile Home Loans

You know, some people would say that you’re just about as low as you can get if you’re looking for bad credit mobile home loans – but they’d be wrong. My husband and I went through a period early in our marriage where we were both unemployed, and we got a couple of payments behind on our single family home. Soon we realized that we were in over our heads with that house, so we sold it (luckily real estate was still in good shape at the time).

Unfortunately, our credit was now fairly severely damaged, so renting was our only option for the time being. For the next two years we went to work on two things: saving money for a down payment on another home, and repairing our credit as best we could. We were a little discouraged, but we knew if we persevered we’d be able to get back into our own place at some time in the future.

After two years we had done a pretty good job improving our credit (both of us were around 600 Fico scores), and we’d saved about $20,000 for a down payment on a new home). Only one problem – $20,000 wasn’t going to be a big enough down payment on most homes, and 600 Fico scores still made most lenders wary of us. We soon realized that looking for a mobile home might be the answer, and we hoped to find a mobile home loan for bad credit that would let us get back into the world of home ownership.

As a sidenote, you should realize that mobile home doesn’t always mean ‘trailer.’ There really are some beautiful mobile homes out there – I should know…I live in one :) – and it’s just a question of finding the right community to put your home in.

So my husband and I started to shop for the right mobile home and the right place to put it, and we found one that was just $74,000, in a brand new mobile home community in a nice part of our town. We were thrilled.

As we began the loan application process, we got even more excited. We found out that the combination of our moderately improved credit scores along with our down payment was going to make it fairly simple to get the loan we needed. The interest rate would end up being around 10%, which is pretty high, but we didn’t mind because we knew that we were going to be buying our own place.

We also knew that the credit agencies really love to see regular payments made on a mortgage of any sort – nothing will boost your credit faster.

So for us, a mobile home was the solution to some real challenges in our financial life, and we couldn’t have bought it without a mobile home loan for bad credit.

Low Interest Home Loans

Fractions of a percentage point on your mortgage rate can mean saving tens of thousands of dollars in interest ove rthe life of your loan, so it’s definitely worthwhile to hunt for low interest home loans. Of course, lots of factors go into whether the loan you’re looking for exists, and whether you qualify for it.

There are two types of loan we’re talking about here. First, you have the homeowner who already has a mortgage and is looking to refinance into something with a lower interest rate. What are the factors to consider here?

Above all else, this is a matter of timing. If you want a low interest home loan you need to be watching the rates like a hawk. Working with a savvy mortgage broker will help with this part of the process – once you have all your qualifying paperwork taken care of and it’s been through underwriting, you really just need to work with someone who has a good sense of the direction rates are heading. This is one part of the mortgage process determined by the Fed and the free market – no amount of down payment, proof of income, or Fico score will make a shread of difference beyond  a certain point. So keep your eye on the rates, and lock it in when the day’s rate sets you up with the lowest possible monthly payment.

But what about that qualification process? If you’re trying to refinance, the underwriters are going to be almost completely hung up on two questions:

How much equity do you have in your home?

What’s your credit rating?

They’re not as concerned with your income (although they will verify it). The thing about income with a refi is you wouldn’t be doing it if your payment wasn’t going to go down, and they’re assuming you can afford your currrent payment.

Equity is a funny thing. Whether you’re looking to refi your entire loan or just open a low interest home equity loan, the amount of equity you get credit for is somewhat subjective. The standard way of valuing your home will be to look at the sale prices of comparable homes in your area sold during the previous weeks and months. They’ll tell you how much your house is worth, subtract the amount you owe, and there’s your ‘equity.’  You better hope it’s a positive number. :)

If a bank is going to let you refi they’ll want you to have at least 20% equity compared to your loan amount. I’d strong encourage you not to take new cash out, even if you have ‘extra equity.’ Talk about the perfect way to stay in debt till the day you die.

So that covers people looking to refinance with a low interest home loan.

What about new home buyers?

It’s really not too different. Bring a 20% down payment and a 700+ Fico score to the table, and you’ll be in good shape. Happy house hunting.