It is heart-breaking to try to buy a house but the lender denies you because of bad credit. Don’t give up. There are some things you can do.
Financiers are in the business of advancing funds to other people. They expect to get their money back with the extra payment of interest. That is how they make a profit plus still have money to lend to people other than you.
Before they let loose of funds, they want to be relatively sure that you are a good risk. That is why they check credit scores and order histories from companies like Equifax or Experian. By looking at things like work history, missed payments, and amount of credit still available from cards, they make a decision about whether or not you get the money for your mortgage.
Start by examining your credit record to see if there are any errors. It happens more frequently than you might expect. Double-check to see that the errors are corrected. Next, pay off as much as you can on your credit cards. That will improve the credit ratio that the lender is looking for. After that try some of the following.
There are actually things you can do to improve your chances of securing a mortgage and fulfilling your dream as a homeowner.
Saving – I know that sounds easier than it is. Start by looking at your budget. See if there is any discretionary spending that can be at least reduced. Invest $30 in a good set of hair clippers and give all the males in your household haircuts rather than spending $15 a month. Avoid eating out. Explain to the children why you won’t be going anywhere for spring break or buying that extra toy. It can help them learn about money management in the process. Use any extra cash divided between saving for the down payment and paying down credit cards.
If you are able to put down a larger down payment, that translates into less financing necessary. By offering a 20% down payment, the lender will need to cover a smaller amount. It usually means that you can also avoid the necessity for private mortgage insurance, which means lower monthly payments. All of this translates into a better loan-to-value ratio, or how much the lender needs to provide compared to the value of the property and the amount of monthly mortgage payments.
Co-Signer – Frequently this is a member of the family. It will take a person who has a great deal of faith in you because if you default on the payments, the co-signer is then obligated for the balance. This is best in cases where you have a thriving business with continued potential, but you don’t have two years of tax returns to back up your request to a conventional lender.
Someone with good credit to co-sign means the lender will look at the co-signer’s credit and include that in their consideration. Having a co-signer does not mean the lender will ignore any of your bad credit. You should continue to improve that aspect of your finances.
Mortgage Type – Look into an FHA (Federal Housing Administration) loan. This is offered by the federal government to help new home buyers. The basic requirements are a credit score of at least 580 and a minimum down payment of 3.5%. If the house is valued at $100,000, you need to have at least $3,500 to place as a down payment. FHA loans are also more lenient about employment. The two-year minimum can be waived especially if they can be convinced of your job security over the next several years.
The downside to this one is that you will be required to have Mortgage Insurance Premiums. This is additional insurance and will continue for the entire time you have the loan. This factors into the amount of monthly mortgage payment you will need to cover.
Less Conventional Options
Borrow from relatives – Sometimes your parents will be able to help you financially. If they understand that they will be receiving more money per month on the interest you are paying than they would earn in savings or a CD, it might be to their benefit. It could also be their way of giving you an inheritance while they are still around to see you enjoy the money.
Second Job – This is not always a good option, especially if you have children. First, it will take time away from the kids, and you need to be sure you will not be spending more in child care services than you earn toward saving and paying off creditors. There are some creative second jobs, though. Doing babysitting services in your home for someone who works nights like fire fighters, police, or hospital staff. There are also online freelancing services. If you are bi- or multi-lingual you could get some translation work that would let you sit alongside your children as they complete their homework and you earn a few extra dollars.
Mobile home – A mobile home on a piece of real estate will be a quick and easy way to build equity. It will also give you the extra time to work on improving your credit score while actually owning a place.
Shop for other lenders – Just search the net and you will find a number of sites that are offering more flexible qualifications.
With that in mind, check out Lending Arch. They offer a very convenient application with prompt results. They have access to a wide range of lenders and opportunities. They will be more than happy to act as an intermediary for you to find the best opportunities for your home mortgage. They have professionals who are also able to provide advice and suggestions to help with your financial decisions. Log on today and see how easy it is. They not only offer convenience but safe and confidential results.