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    • Getting the best mortgage loan with a bad credit

      Date: 2010.04.11 | Category: Mortgage | Response: 2

      For most people, applying for a mortgage loan to buy a house is one of the biggest and the toughest lifetime financial exercise. It gets even more difficult for those who have had a bad credit history. Even though people with bad credit are at a disadvantage, lenders do recognize their financial problems and needs and offer them mortgage deals that might not be the best but which at least provide them with an opportunity to own a home.

      In order to get the best possible mortgage options, a borrower has to impress upon a lender that in spite of a bad past, he is financially responsible. To convince the lender of your credibility, the foremost thing to do before applying for a mortgage loan is to start clearing the red flags that mark your credit report. Begin by reducing your credit card debts as much as possible. Similarly pay off other debts like car loans or auto debts, particularly if they have more than 9 monthly installments left, since auto debts with less than 9 payments are generally excluded from debt calculations.

      The next best thing to do is start saving big for a good size down payment on your home. Since you fall in the bad risk category for a lender, the bigger the down payment, the more it assures the lender of being able to recover his cash in the event of a future default. Do remember to include closing costs when saving for your down payment as they can add as much as 3% to the purchase price. Overall, saving more than 20% of the total purchase price should improve your credibility.

      The borrower should target and reduce his monthly liabilities to less than 50% of his total income in order to give confidence to the lender about his ability to repay his mortgage loan without any defaults. It is never to late to get into better financial habits, like reducing the use of credit cards and postponing large purchases. At this point of time, it is wise to hold on to your present job and not make any unnecessary jumps. A steady employment of over two years adds to your image as a consistent and stable person.

      Lenders will go through your bank statements to figure out your expenses and incomes. Any unusual entry may raise question marks. If a friend or family member gifts you money to help you purchase your house, make sure the lender know it is a gift and not another loan. Reveal all your liquid and cash reserves that you own since lenders judge your paying capacity from them and generally prefer that they have at least two months reserve of the monthly mortgage payments.

      Last but not the least, even factors like prompt payment of house rents, phone bills, insurance premiums and other financial bills add to your credit worthiness. Finally, even after you have spruced up your credit image, make sure to approach more than one lender and compare their lending terms and conditions in order to get the best mortgage loan.

    • Get a Mortgage With Bad Credit

      Date: 2010.03.21 | Category: Mortgage | Response: 0

      In the old days if your credit history was less than perfect, the only mortgage you would be offered would be one with extortionate interest rates from a shady broker.

      Nowadays, there are more sympathetic lenders who will offer you a bad credit mortgage without charging you sky-high interest charges. And because there are more lenders out there now offering these non-standard mortgages, it has driven the interest rates on them down which is good news!

      The term Bad credit can be anything from County Court Judgements (CCJs) on your credit file to something like having missed a mobile phone payment or made a few mortgage payments late.

      More and more people now have a bad credit file. Rising inflation and credit companies making it easier for people to borrow means that just because you have a bad credit file, you are not rubbish with money!

      So, what can you do to get a mortgage, without being ripped off by greedy lenders?

      First of all, if you are considering using a mortgage for debt consolidation, do bear in mind that it will probably cost you more in interest in the long run. And also the debt will be secured against your home, so you must really ensure that it is affordable to you.

      And when it comes to choosing a mortgage, do not apply for the first mortgage that you see. TV adverts saying that they can help people with bad credit are all very well but many of them charge as much as a 3% fee to arrange a sub-prime mortgage. So, on a 150,000 mortgage, they get 4,500!

      Get independent advice from an independent mortgage specialist as well as doing your own research. Bad credit no longer has the financial stigma it used to, so hold out for the right deal for you.

      How the web can help you if you are looking for a bad credit mortgage

      If you have a poor credit history, finding a mortgage specifically for people with bad credit can be difficult. And even if you do find a mortgage, how do you know that it is the right one for you?

      Using the internet can help. There is tons of information on there relating to bad credit mortgages such as free guides, as well as access to providers of bad credit mortgages.

      Going online also allows you to compare multiple providers so that you can look at all the product features and benefits to decide whether it is right for you.

      There are also websites that accept online mortgage applications and there are hundreds that offer free and immediate online quotes. This means that you can see how much you can really afford to pay out for a mortgage.

      Steps to improve your credit rating

      If you have recently applied for credit and have been turned down or you have been offered credit but at higher interest rate than advertised, then this is probably because of your credit rating.

      Even if you never miss payments or do not have any debts such as a loan or credit card, you could still have a low credit rating.

      This is because you can be penalised if your credit record is empty. Prospective creditors like to see positive entries on your credit fie and if you have no financial history, they are unable to judge how well you manage your credit.

      The solution is to develop your credit file by adding positive entries on your record. Running bank and savings accounts as well as paying your mobile phone bills on time are a good start as are well managed credit card and store card accounts.

      If you do not have any credit accounts, then gradually apply for them. Dont apply for lots of credit all one go as this will look like you are in financial distress. Instead, get one card at a time with a low credit limit and pay the balance off in full every month. Open up a bank and savings account. And pay your bills on time even the small ones!

      Start building a financial history gradually and over time you will find it easier to get credit, and at a better interest rate too.