There are many people who seem to think that the credit crunch has made bad credit loans completely unavailable, however this is not the case. There is plenty of money available but you need to know the criteria that you must go through, and what to expect. There are some tips that you can put into practice which have been recommended by experts. If you are looking for a good deal on a bad credit home loan, then this article will give you tips for doing so.
The qualifying criteria for bad credit loans does not vary much from the qualifying criteria for good credit loans. The chief point of difference is that a history of arrears, defaults or bankruptcy does not prevent people from qualifying for a home loan. As someone with bad credit, the applicant should be able to demonstrate steady employment and disclose sufficient income to afford the loan repayments.
The first step is to always find a good deal on the home you want to buy. If you find a good deal, or a house that is below market value, then you will find it much easier to get a mortgage on that property. The reason for this is that your lender will see this in a very positive light, and some see it as good as providing a down payment on the home. Most lenders will consider the loan to value ratio before they provide a home loan, but as you have a bad credit rating, the lender will usually offer you a home loan if the loan to value ratio is 90% or less.
As yo have bad credit, you should think about creative ways to finance your home. One way is to ask the seller to offer a second mortgage on the home. This will only work for certain sellers who are motivated. Once approved, you can set up a contract or agreement with the seller where you will agree to pay monthly payments on the house. Most experts recommend that you set up an end date with the seller to make them feel more comfortable and agree to the second mortgage. An average time is 2 years.
The next important step to take is to make a down payment if you want to get a home loan. In Australia, you may be able to qualify for up to 95% of a home loan even if you have bad credit. The great news is that if you are able to put a down payment of ten percent or more, your interest payments will be much lower. As such, you should try to save as much as possible when you are looking for a mortgage when you have bad credit. Many people would be much better off by waiting a few months in order to build up some savings. If you are unable to afford a down payment, you may refinance your loan later for a lower interest rate.
Always shop among different loan providers and lenders if you had bad credit, as you will find very wide variations in the interest rates. It is worth noting that you should always work to improve your credit rating. You can find out about your own credit rating by requesting a free report from any of the credit bureaus such as Baycorp. You are also advised to report any inaccuracies on your credit report if you are able to identify them. Remember that owning too many credit cards will negatively effect your credit rating, and is something to consider for people with bad credit ratings.
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It is slowly becoming easier to find bad credit home loans after the financial crisis of the last few years. Though a big growth area has been a debt consolidation home loan to eliminate credit card debt.
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