Home Loans for Damaged Credit

Tuesday, July 24, 2012

Home Loans for Damaged Credit

Seeking a home loan in this strained economy is exceedingly difficult. Lenders have tightened requirements, requiring nearly spotless credit for the best rates. However, for those with challenged credit situations, there are answers if they take time to look. When choosing carefully, not only will they obtain a home loan, they can get on the road to recovery to repair their credit situation.

Rent to Own

One direction that is a feasible option is rent to own. In this case, sellers of a property are willing to hold the mortgage and put a certain amount of the rent towards payment of the home. This can eventually go to mortgage company after the rental agreement is over or the seller may decide to hold the mortgage until the home is paid for. These loans can often be paid in a short time and there is more flexibility while dealing with a private owner. However, it is important to have legal papers drawn up for the agreement to protect all parties. Also, this method will not appear on the credit report.

Federal Programs

There are federal programs to assist people in getting home loans, especially those in the lowest income bracket. Some are designed for those with less than perfect credit as well. The Federal Housing Authority insures the loan and there is more flexibility than with other lenders.

Show Lenders You Are Mending Your Ways

Credit can be repaired in several ways. Make sure payments are current on present obligations. Obtain a major credit card and pay it off each month, making sure to stay within your means. Be sure to stick with one job and show that you have a reliable source of income. If you've claimed bankruptcy, wait until four years for better rates. Otherwise, rates will be higher.

Shop Around

Having bad credit doesn't mean accepting the worst deal available. Doing online research can supply a list of lenders. Everyone is competing for consumer business, sparkling credit or no. Get a list of quotes and fees and then start negotiation for the best possible outcome.

Be Careful with the Terms

When choosing a lender, take care not to accept terms that could mean more trouble down the way. The home loan won't be worth it if the buyer can't afford to keep it. One of the major problems is adjustable loan rates as compared to fixed loan rates. Adjustable rates can fluctuate year to year and could spike up to a payment that is intolerable. Balloon payments are another big mistake in which only interest is paid and the entire amount of the loan is due at the end.

When searching a home loan for bad credit, people need to use common sense and avoid pitfalls that led to their trouble in the first place. It may require time and patience but a favourable loan can be found. It may mean renting until prospects improve for potential buyers.

Author’s bio:
Kevin Robes specializes in home loan options and writes for Homeloans.org .

1 comment:

Indianist Online said...

It is true that one can earn huge on tax benefit on home loan if you can understand the procedure properly. This money makes a huge difference in your total income for over years.

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