Following the collapse of financial giants like Washington Mutual and Lehman Brothers, many in the world of finance have tightened the purse strings dramatically. It’s nearly impossible to locate a bank in this country that will lend a person money without significant proof that they will be able to repay it. But, even if you have poor credit, you can still find help. It is still possible to obtain bad credit home loans.
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Banks have tightened the reigns on handing out loans by making the restrictions even tougher, but the fact is, they don’t just look at your credit history to qualify anyone for a loan. One reason is they realize that poor banking practices in recent years have led to many people having bad credit due to unrealistic expectations at the time loans were made in the past.
Customers seeking a bad credit home loan can still find many lenders willing to work with them. Other factors such as employment, salary, and other bills will be taken into consideration when determining your eligibility on top of what kind of collateral you’ll use to secure the loan. Just know that you might not qualify for a low interest-rate loan if your credit is less than perfect.
You’ll also need to have a substantial down payment ready when looking to buy a new home; a lender is more willing to loan money to someone with poor credit if he or she has an investment in the property. The worse one’s credit score is, the more of a down payment will be required by the bank.
You can even get credit counseling services to better your chances of getting a bad credit home loan, as that will look good to your lender. By requiring that the borrower receive instruction on developing a budget that will meet all of their financial obligations and still leave them sufficient cash flow to deal with their needs, lenders reduce the risk associated with the loans.
Credit counselors will advise you how to keep yourself ahead of the game so you don’t become overwhelmed and find yourself back in credit trouble again.
Second mortgages are much more difficult to obtain, regardless of your credit score. If you have equity in your home, but still owe a great deal, it is easier to refinance your existing loan rather than attempt to borrow against the equity.
Given the financial climate of the country and the number of people who have lost their jobs in recent months, many more people are finding themselves with less than perfect credit ratings. This situation, along with the stricter criteria that banking institutions are currently using to determine who is and who is not eligible for a loan, can increase the difficulties associated with obtaining a bad credit home loan. Customers should not give up hope, however, because there are still lenders willing to work them, just not as freely as in the past.
John discusses bad credit home loans and mortgage refinancing.