A checkered financial past isn't the death of your home-owning dreams that it
once was. Many sub-prime lenders can offer you a
credit mortgage loan and get you back on track to a better tomorrow.
The odds look stacked against you. You want to buy a new home or maybe
refinance the one you've got. But your credit score is in - or below - the 500
range, and you can't imagine any bank taking a chance on you. Enter the bad
credit mortgage market. Plenty of lenders will take you on despite the rough
spots you've gone through, and there are a few tricks you can pull out of your
sleeve to help close the deal.
Sub-prime Lending 101
First of all, get a credit report and make sure to clean up any errors that it
may contain. Every FICO point helps when you're looking for a mortgage. Then,
consider saving up for a substantial down payment. The lenders are more likely
to approve your application when you reduce the amount you borrow and show that
you can accumulate cash.
Money talks louder than credit scores. If you simply can't scrape together a
down payment at all, don’t despair. Some banks have options like a 103 percent
loan, which allows for borrowed funds to cover even the closing costs. But that
should be a last resort - especially for a bad credit mortgage - as interest
rates will be steeper than a black diamond ski slope.
Make sure to shop around. There are many lenders that handle bad credit loans,
and these so-called sub-prime lenders are often specialists in the bad credit
market. They know how to make a mortgage work for you and for them. Even if your
credit rating is very low, you're likely to have several lenders and products to
choose from with a wide range of terms and interest rates.
Some sub-prime lenders are honest and reputable; but a few may try to take
advantage of your unfortunate position and ask you for unnecessary fees. Compare
the loan options in detail to make sure that you're not missing some fine print.
Your Ace In the Hole
Finally, anyone who’s ever bought a used car knows that it never hurts to
negotiate. It may feel like huge banks or mortgage specialists have the upper
hand; but they want your business and may be willing to play ball. A good
explanation of your current situation and a solid plan for the future may be the
difference between getting approved or turned down, and even may affect your
final mortgage interest rate. Never forget that loan officers are humans, too.
It may look like the house always wins; but some games have two winners. Getting
that bad credit loan can be a first step on the road back to financial health.
Your cards may be better than you think!
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