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Bad Credit Home Loan Refinancing Can Save You From Drowning in Your Current Mortgage

The major housing bust of the last decade has left a lasting impression on many home owners’ credit reports. Due to the nasty increases in adjustable rate mortgages, housing payments have gotten out of control and home loans are falling into default. If you are in such a situation and are watching your bad credit become worse, the option of refinancing your home loan could be the last available in order to avoid foreclosure.

What Is a Home Loan Refinance?

When you opt to refinance your current home loan, you essentially take the old loan and its immense burden out of the equation and off of your credit report through repayment with a new loan. This will help you to save your home because the process of home loan refinancing will decrease your monthly payment to make it more manageable given your current income and associated financial condition.

Even with bad credit, home loan refinancing can be an option since many lenders have seen an increase in defaults and cannot handle one more empty home on their books. As a borrower in trouble, you should take advantage of these special offers to both save your home and salvage your bad credit.

Home Loan Prep Work

Before you start the process of finding a refinance loan for your mortgage, there are certain steps you can take to improve your chances of getting a good deal. First, order a copy of your credit report from one of the three major credit reporting agencies: Equifax, Trans Union, or Experian. Look over this report thoroughly and double check that there are not accounts or statements on there that are false. Having inaccuracies on your credit report can needlessly lower your overall score.

Next, make sure that you review all of the paperwork that will be required to apply for refinance loans. Generally, this will include current information on your existing mortgage, income information, and other documents that prove your identity, residence, etc. By having all of this information together beforehand, you eliminate needless waiting periods once the loans application process has begun.

Finding a Bad Credit Lender

Though looking towards a traditional financial institution such as a local bank or credit union is a great option in some cases, for bad credit home loan refinancing, you really need to stick with a lender who specializes in loans to those with less-than-perfect FICO scores. Generally speaking, these lenders operate online and can be accessed easily through either web-based applications or telephone.

One important tip to keep in mind is to be sure to do a background check on any lender you are considering. Though many of the lenders you speak to will be legitimate, the internet is still rife with scam artists who will use your bad credit as an excuse to take advantage of you.

You Can Get Relief with Refinancing

If you feel like you are treading water with your home mortgage and there is little hope of relief, finding the right opportunity to refinance could be your lifesaver. Bad credit can certainly be a problem, but with the right preparation, it can be overcome and the home loan refinancing process can save you from drowning.

Credit Scores For Home Loans

Credit rating plays a very important role in getting a good home loan with favorable rates. There are official and unofficial guidelines for determining how credit scores will affect an applicant’s eligibility. Lenders use your FICO credit score to determine the minimum down payment percentage you have to make in order to get a home loan. This makes your credit report the most important factor to consider when seeking a home loan.

It is however very important to understand the different kinds of loans available so you can have a better idea of which one will suit your needs better. The most common type of home loan, is the fixed rate mortgage. As the name suggests, with the fixed rate mortgage, you are fairly certain of the amount you will be paying every month because the interest rates stay the same for the life of the loan. The disadvantage that you are likely to experience with this type of mortgage is that you may pay more interest than other home owners during a low interest period. In my opinion though stick with the fixed rate mortgage so you’re not surprised down the road.

How your credit score affects your mortgage:

To qualify for a mortgage, you will need to produce documents that show proof of income, credit history, a summary of monthly expenses and assets and liabilities. All of these documents are important to the lender so that they can determine whether or not you are a good candidate for the loan you want. In addition to these documents, lenders will look at your credit report to determine your eligibility for a home loan.

For government backed mortgages, the VA and USDA require lenders to review the entire loan profile of an applicant before making an underwriting determination. There are no minimum credit score requirements but several factors can make an applicant ineligible.

For example, an applicant typically with more than one 30 day late payment in 12 month period or has filed for bankruptcy within the last 36 months is ineligible for a government backed mortgage. Other factors include late rent payments, having accounts that have been converted into collections in the past year and having outstanding collection accounts with no payment arrangements.

Credit scores for home loans:

So, the question you probably have on your mind right now is: What are the minimum credit scores for home loans?

Your FICO score will not only affect the type of loan you can get but also the down payment you have to make in order to be eligible for the home loan. Before you look at the official FHA loan requirements, you need to understand the credit report that lenders use when determining your eligibility. Most people often just use one of the three biggest credit bureaus to get their credit report. Lenders on the other hand use a tri-merge report that they get from all of the three bureaus. If there are 3 credit scores, the middle one will be the representative score and hence what the lender will use to determine your eligibility and down payment.

There are official FHA loan requirements that are set by federal law. They outline how your credit score affects your home loan. Applicants with a FICO score of at least 500 are eligible for a home loan. An applicant with a credit score of 500-579 is required to make a down payment of at least 10% and those with scores higher than 579 will only be required to make a down payment of 3.5%.

Make your Credit Rating better:

Based on the information we’ve covered so far it makes a lot of sense to clean up your credit history before you apply for a home loan. The following steps should help you do just that.

· Check all the information to make sure that everything on the credit report is accurate.

· Eliminate any discrepancies you find as they could hurt your chances of having a favorable credit score.

· Pay off all the existing balances on any loans you may currently have. These one-off payments can be very effective in raising your credit score.

· Try to keep your debt below 30% of your credit limit. This is a good way to keep your credit score up.

Depending on who you talk to or the mortgage product you’re referring to, credit scores for home loans can vary. I know a lot of this information is quite redundant for a lot of you out there. But remember this; we have a lot of young up and comers that sooner or later will be looking at buying a home. If we can teach and educate young people on the proper and most productive way to buy a home then that will hopefully make for a stronger economy. More importantly maybe that will assist in helping our children and our children’s children to never have to go through a housing crisis as we did just a few years ago.

Please go to https://www.HomeLoansForAll.com for more information on FHA loan requirements and to get Pre-Approved today.

The Basics of a Home Loan

What is a home loan?

A Home Loan is a loan, or financing, that you take for the purpose of buying or renovating your home. The facility of Home Loan makes it easier, and more affordable, to make or buy your dream home. Most banks and many different kinds of financial institutions offer home loans to the public at fairly low interest rates. Whether it is for the purpose of buying a house or apartment, or constructing one, a home loan can be the simplest route towards achieving your dream.

How much can I get?

The actual amount of the loan you are eligible for, or can get, varies, and depends upon many factors such as your capacity to repay it, your age, your family income, the number of dependents you are responsible for, and so on. The amount of the loan will also depend upon the tenure of the loan and the current interest rate. Tenure is the total amount of time that you are given for the repayment of the loan. Most institutions and banks will extend home loans for the purpose of buying a house or even a flat, for renovation of an existing property, or for extensions or repairs to be made to your existing home. However, in the case of buying a second property, when you already have one house or flat, most banks will have a different policy and set of rules, so be sure to ask some relevant questions and get clarifications about the specifics from your bank before you sign.

Home loan process

There is a process for seeking a home loan, which partly depends on your need for information ad clarification, and partly on the internal bank processes. The first step is to apply to a few banks and financial institutions, and begin the process of comparing rates and tenures. (Or you can compare rates on our sites). Once you have decided on the bank, the steps are as follows.

· Filling out the relevant applications and submitting the necessary documents.
· The sanction of the loan from the bank or financial institution depending on their criteria for age, repayment capacity, and property value.
· The disbursement of the loan, transferring the home loan amount to you via check.

There will be some documents which are required before the bank will sanction or disburse your home loan. The information in these documents will decide whether or not you are given the loan, as well as the interest rate you will be charged, and the tenure that will be allowed.

These documents include:
· The application form, filled out correctly and truthfully
· Passport size photographs of the applicant and co-applicant (if any)
· The record of your repayment record for any existing loans
· photo ID
· Proof of age
· Proof of residence
· Signature verification
· A copy of the sanctioned plan for the house/flat
· Loan sanction letter
· A check for the processing fee amount
· Additional documents that are required may include
· Bank Statement for the salary account for 6 months (personal/current account in case of business owners)
· Income Tax return for up to three years
· TDS Certificate (for employed)
· Copy of company issued Identity card
· Salary slip and Form 16 for three months (for employed)

Home loan tips

· Do some homework before you apply for a Home Loan.
· Figure out how much of your income you can afford to pay as EMI.
· Check out bank rates to get a rough idea of how much your total loan can come to and look for properties in that price bracket.
· Different banks and financial institutions offer different interest rates for home loans, so compare rates and processing fees before you decide on a particular bank.
· Take your time, don’t be in a hurry. Discuss all aspects of thee loan with the bank, and get complete information about terms, conditions, waivers and so on.
· When you get the form, and the loan document, be sure to read through the fine print and ask for clarifications on any point you don’t understand.