How You Can Get A Mortgage With Bad Credit

credit approvedIf you current credit score is in the fair, poor, or bad range you may think that your dreams of qualifying for a mortgage are over.  While that may be true for the majority of potential home buyers with low credit, there are some options for home buyers with less than a perfect credit score.  Dean Graziosi explains some of the ways in which you can still obtain a mortgage with poor credit.

Lenders base their decision to approve a loan on the strength of your credit score.  They use this number to determine how you have managed your credit in the past and how well you can handle the addition of a mortgage.  If you’re unsure of what your credit score is, you can request a free copy of your credit report from the credit reporting agencies.  When you receive your credit report, you should look over it carefully and take note of any errors that the report may contain.  If your report contains any errors, you should contact the credit reporting agency at once and have them taken care of.  It’s recommended that you take care of this before you apply for a mortgage.  If your score is still too low for a lender to approve you, they may offer you some quick steps which can help you improve your credit score.

Prior to the housing crisis borrowers were approved for mortgages with having to provide proof of their income and assets.  During this time subprime lenders often approved loans for borrowers with low scores, which cost them more in higher interest rates.  Since the housing crisis, a lot of subprime lenders have gone out of business, but you may still be able to qualify for a mortgage.

The most common way for borrowers to get approved for a loan with a low credit score is through the Federal Housing Administration’s program.  The FHA insures lenders against default and requires that borrowers have a credit score of 580 or higher and a down payment of 3.5%.  However, the majority of lenders still require that borrowers have a credit score of 620 and higher to approve their FHA loan.  Borrowers will also need to provide lenders with documentation of their income and assets.  Dean Graziosi states that they will also need to meet the debt-to-income ratio set by lenders.

While FHA loans are a lifeline for borrowers with poor credit, there is also a downside to these loans in that they typically require higher mortgage insurance requirements than a conventional loan.  Borrowers must make these insurance payments for the entire length of their loan unless a larger down payment can be made.  While obtaining a home loan with poor credit may be more difficult, it is not impossible.

Buying a Home after Bankruptcy

bankruptcyWhen you file either Chapter 7 or Chapter 13 bankruptcy, you are not only devastated, but you may believe that your dreams of purchasing a home are over.  When you enter into bankruptcy, your ability to obtain a loan or get a credit card is drastically impacted because of the effect that the bankruptcy had on your credit score, states Dean Graziosi.  It will take some time to rebuild your credit and get it to a point where you can apply for new credit, but it is not impossible.  If you properly prepared and carefully planned your finances you may be able to purchase a home sooner than you imagined.

The first thing that you should be aware of when filing bankruptcy is that it must be discharged before you even consider contacting a lender.  Once your bankruptcy has been properly discharged, your first step should be to carefully examine your credit report.  If you notice that there are any debts that you have paid still listed, you need to contact the credit reporting agency and have them removed.  Each year you can request a copy of your credit reports from the three major reporting agencies, take advantage of that and dispute any errors you may notice.

The next thing you should do is begin rebuilding your credit.  The fastest way to do this is to demonstrate to creditors and other lenders that you can successfully pay back any money you owe them.  The two most effective ways to do this is to obtain a secured credit card or an installment loan.  When you obtain a secured credit card, you are limited to the amount that you have on deposit with the issuing bank.  An installment loan is a loan that you obtain where you are required to repay either a personal loan, student loan, or car loan through installment payments each month.  When you obtain an installment loan, your only worry is that you can make these payments on time each month.

You should be prepared to wait at least two years after your bankruptcy has been discharged before you apply for a mortgage.  You may be able to qualify for a mortgage sooner, but know that the interest rates and terms may not be as appealing compared to those you can get if you wait.  To ensure that you receive the best possible rates and terms, Dean Graziosi recommends waiting a minimum of two years.

After you have waited two years, you should ensure that you are fully prepared to apply for a mortgage.  You will likely have to meet certain criteria from your lender before they agree to approve your loan.  Your debt-to-income ratio will be scrutinized; your time and stability at your current job and a current savings and checking account will also be looked at carefully.  Purchasing a home after bankruptcy is not impossible; it may just require some additional work on your part.

Buying a Home With No Credit

credit scoreIt’s difficult to buy a home these days, but when you have no credit, it gets even harder to be approved for a loan. As Dean Graziosi points out in a post on a similar topic, while some people have been building a credit score for years, others haven’t been able to do this. If you fall into the second category, you’ll be happy to know it will still be possible for you to buy a home.

 

A high credit score enables you to purchase larger items such as homes and cars at lower monthly payments. This serves as a disadvantage to those who have either chosen not to have a credit card or who haven’t been able to sufficiently build up enough credit to be privy to these perks. The end result is paying more each month and not getting the best possible loan. Even so, one of the best ways to build up your credit is to purchase a big item such as a house. The key is to prepare yourself for the larger payments and higher interest rates by saving money. The more you are able to place on a down payment, the better off you’ll be in the long run. This also shows the mortgage companies you will be good for the loan because you’ve taken the time to save up enough to get started.

 

Saving money will give you something to use on payments each month so you can stay ahead. You’ll also have something to fall back on in hard times.

 

Typically, a minimum credit score of between 620 and 640 is required before you can even be eligible for a loan. There are, however, some other methods you can use if you don’t have a score that falls into this range. As Dean Graziosi explains, this is how lenders will determine your current credit standing.

 

Rental history does count for something. If you pay on time, lenders who are looking into your credit will be able to use this information to determine you are in good standing with your landlord. If you’ve never been late in paying rent, this will serve you very well. The same will apply to all your other bills.

 

Some lenders will require a co-signer on a loan before approving someone without credit. Many people are very hesitant to co-sign for good reasons, but finding someone who trusts you enough to do this could actually help you obtain the loan you are seeking.

 

If you have bad credit, straighten it out by paying off all debt and re-establishing credit before even attempting to request a home loan. If you have filed bankruptcy, you will be given a certain amount of time before it will be possible for you to begin re-establishing credit.

 

Purchasing a home will be harder without a credit score, but by following a few general suggestions, it can become possible. According to an article posted on MSN Real Estate “it’s exceedingly difficult to obtain a mortgage without a credit score.” Nevertheless, it can be well worth it in the end. You can learn more about this and other topics by visiting Dean Graziosi’s website.

Three Things You Should Know About Homebuyer Budgeting

If you have decided that you are ready to become a homeowner, there are some things that you should know about preparing your homebuyers budget.  If you are currently living from paycheck to paycheck, in order for you to become a homeowner, you are going to need to make some financial changes.  Once you make the decision to purchase a home, it should become your number one priority.  To be able to purchase a home that you can call your own; you may have to begin making financial sacrifices in order to make your dream come true.  To financially prepare yourself for the purchase of a home, you should begin planning at least one to two years before you ever make an offer.

The first thing you should be doing during this time is building a strong credit rating.  The better your credit rating is, the easier it will be for you to be approved for a home loan.  If you have some problem areas in your credit history, now is the time to take care of those problems.  Experts suggest that buyers clear any unpaid accounts as soon as possible.  You should also request and carefully look over your credit report.  If you find any errors it is important that you contact the reporting agencies and get it fixed as soon as possible.  If you are like many of us and have balances on your credit cards and outstanding car loans or student loans, it is important that you keep all of these accounts current and do your best to avoid missing any payments.

The next thing all prospective home buyers should do during this time is start saving cash.  This can easily be done by placing so much every month into your savings account.  The cash that you save during this time can later be used for a down payment.  The amount needed for a down payment can vary depending on the type of loan you will be applying for.  This is also where buyers will need to start making sacrifices.  During this time you should avoid making any unnecessary purchases that can take away from your savings.  Weigh your needs against your wants and make practical spending decisions.

During this time you should also be working to reduce the amount of outstanding debts that you may have.  If you have a lot of debt, experts suggest that you pay it off before starting to save.  By keeping your debt at a level that you can financially handle, lenders will feel that you are a good risk.  If your debt is out of control but you have accumulated a large amount of savings, they may feel that your priorities were not in the right order.  It is important that you do everything possible to pay off or manage your debt responsibly during this time.

Deal of the Month #8 – Ugly House Pretty Profits

This is the house that everybody passed up. It was in foresclosure and nobody snapped it up because it was so ugly, and in such terrible shape. That’s too bad for everyone who missed out, but very good for me. By the time I found it, the foreclosure process had already been completed. This was sad in a way, because I couldn’t deal with the owner. If I would have found the house sooner, I would have been able to help the owner prevent the foreclosure from going on their credit. (Just as I teach using the techniques in my AFF program, (www.automatedforeclosurefinder.com).

However, by the tme I found it, the bank owned it, (REO). Now here’s the kicker…I paid $60K for this “ugly duckling” put $30,000 into it to make it pretty – AND put $100,000 cash in my pocket. Oh, and I didn’t sell it to do that! So, how did I do it? You’ll have to watch the video and find out…

See the other Deal of the Month Videos and more Real Estate Investing Videos at DeansMedia.com