There are lenders out there who give what are referred to as bad credit mortgage loans, if you are experiencing financial problems, a situation that is common to many people everywhere. Possibly you recently just got divorced, lost your business, had large medical bills, or maybe you have had too many credit cards and now the balances are out of control. In all likelihood, things like this may have caused your credit rating and FICO score to drop. Sometimes setbacks happen in life, but there is hope if you still must get a mortgage to buy a home or for other reasons.
There are a number of reasons which contribute to poor credit, damaged credit or bad credit, all of them with almost the same effect as having no credit at all. When a credit check reveals a low score or a questionable credit history, it is more likely that lenders will reject your home mortgage application. So, if you cannot qualify for a regular home mortgage, bad credit mortgage loans come into play to rescue you.
There are many lenders and brokers willing to help people who want to refinance or apply for a home mortgage but do not qualify because of a poor credit history. These loans are usually more costly than regular home mortgages but you can switch to a better option when your credit and finances improve.
Buying a home involves a large disbursement so before you apply try to repair your credit first as much as you can. Although, there are companies which specialize in helping you out in this matter, never trust in organizations that promise to erase your bad credit, or create a new credit identity for you. Self help is your best aid for fixing your finances and your credit history and it is not that hard to achieve.
Bad credit mortgage loans are available for those people whose credit (FICO) score is less than 650, although most banks or financial institutions will let you know that you need a sub-prime loan. Due to the nature of their offer, most lenders are open to work with borrowers with challenged credit, to find the right mortgage and terms for them.
It is a good idea to begin to repair your credit by paying your bills on time, and reduce the number of credit cards that you carry. Remember that late payments are as bad as not paying, and have the same negative effects on your credit score so paying your credit bill is highly important.
Try at all costs to avoid bankruptcy, and do no expect to receive better bad credit mortgage loans after declaring your bankruptcy. For lenders it is a somewhat risky situation in their eyes to loan out money to someone with damaged credit due to the high risk of default. Obviously, what they are worried about is whether they will get their money back in case you cannot make the monthly payments. This is one of the reasons why you will have to pay a higher interest rate and possibly abide by other rules. But, if you have a recent track record of paying debts back on time to credit cards companies or other lenders, that will certainly help with future loans.
There are a large number of resources online for both learning more about credit repair, and finding the right type of loans, according to the borrowed amount and your capability to repay your debt. Also remember that in addition to higher interest rates, some creditors may require collateral or a co-signer to secure the deal.
After doing your research for bad credit mortgage loans, either online, in the newspaper, or yellow pages, contact at least five lenders to compare their offers and get the best option within the limitations of your financial condition. Take the time to evaluate all the different loan offers to see what is most suitable for your situation. Read the loan fine print and do not rush in to the first deal that sounds great, if a loan seems to good to be true it normally is and can result in more bad debt.
Tips for Credit Repair
Repair clinics and attorneys charge up to $3,500 to clear up credit reports professionally. However you don’t need to spend all that much because you can do it on your own. Here are tips and tricks to remove negative records from your credit report – it will surely make you look credit worthy before the lender’s eyes when obtaining a loan. So read on.
STEP 1: Check your credit report. A credit reporting agency pulls together a credit report electronically. Their report includes information from where you live to details about your paying habits, bankruptcy and arrest information. This information compiled by them will be used to verify whether you would be a good borrower or not. It may also be used by a business to decide whether you would be a good employee.
Contact the credit bureau that has your file. You are entitled to one free credit report per year and you are also entitled to a free credit report if you have been denied credit within the past 60 days which is useful information not many people are aware of.
Review it carefully for inaccurate information, especially offensive info that will significantly affect your credit rating and the possibility to qualify for credit or a loan. At times the creditor does not re-verify in time or the credit bureau is busy and does not handle your dispute properly. You can delete this credit record from your credit report later (Step 3).
Be meticulous in checking that all information is correctly reported. If you see negative information on your report, verify them as soon as possible, you cannot afford to have errors and off putting remarks in your report.
STEP 2: The law says that the credit bureau should investigate the matter within the allotted time. Remember that every negative credit record on your credit report can be negated by you at any time. The credit bureau must re-investigate and if that item cannot be verified within a reasonable amount of time, that credit record must be removed from the credit file. They must provide you with a free copy of your corrected credit report. Send your dispute letter to the credit bureau via certified mail, return receipt requested. If the credit bureau completes its investigation and decides that the negative information should remain in your file, you can add a letter of explanation to refute the claim.
STEP 3: After erasing nonconstructive items from your report, your next task is to rebuild your credit. Add positive credit items to your report by taking out a small secured loan or obtaining a secured credit card. You can also build good credit by having someone with a good credit record cosign on your application for a small loan.
Remember that your credit score is essential in your quest to obtain credit. Your credit score will determine whether you need a new credit card, an auto loan, or a mortgage. Lenders use your credit scores to decide whether you are a good credit risk. With these tips and a high credit score, you are on the way to get the best rates for your credit.
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