In this day and age, people get bad credit histories for all sorts of unforeseen reasons, apart from the old standard of living above one’s means. I know several people who have got into difficulties through either redundancy, prolonged illness or a car accident, divorce, or in fact one luckless fellow had all three situations arise.
Is it possible to get a loan even with a bad credit mortgage? In today’s mortgage and loan trends, a bad credit mortgage is absolutely possible.
In the past, applying for a loan involves a thorough check up on your credit history and income background. With the world wide web, it is virtually impossible to hide any defaults. If your history is less than perfect or if your income is not that high or both, then your application for a loan is instantly rejected. This practice limits the number of people who can apply for a loan.
Today’s market has adopted more flexible methods. Bad credit finance makes it possible for people with low credit scores to still apply for a loan and get approved.
It must be remembered, that all lenders will look at the risk, price the risk, probably insure the risk, and then do whatever thy can to lend the money. After all, that’s where they make their money.
When applying for a high risk mortgage loan, no pre-qualification process is involved. Lenders who offer these kind of mortgages among their list of loan programs give their customers a chance to redeem themselves. With a bad credit mortgage, your credit history is nothing more than history and you still get your money’s worth.
There are several lenders who offer this type of facility. When you choose one, make sure that you’ve learned everything that you need to know about the type of mortgage you are after. More often than not, the solution sounds too good to be true. With bad credit mortgages, it’s best if you keep an eye on the ’sting in the tail’ of any offer.
Bad oe Special Credit Mortgages for Higher Interest Rates
This is the most common catch. They are usually characterized by high interest rates. Lenders charge borrowers higher interest rates for their bad credit mortgages as compensation for the risk they take. Like it or not, borrowers who have bad credit records are loan risks and are viewed as such by lending companies.
In exchange for letting these types of customers get a mortgage of any sort, higher interest rates are charged. This helps protect the lender should something happen and he had to foreclose on bad credit mortgaged property. But anyway, in this day and age, property prices inevitable move upwards ion time.
Discount Points in Bad Credit Mortgages
Discount points in these style of mortgages are common. A discount point is comprised of a percentage of the total purchase price. Borrowers are charged higher discount points, usually four to five points. Borrowers with credit may not pay for these points, or they do but only for a very low percentage.
With bad credit mortgages however, points may go as high as ten, although going this high is not a common practice and against federal law. It all boils down to insurance for the lending company. Lending companies want to make sure that they’re getting their money back from their customers bad credit mortgages.
Larger Down Payments for Bad Credit Mortgages
you wont get away with a virtually no-deposit deal here. Forget the 95% loan. The amount of down payment required for borrowers on bad credit mortgages is larger compared to other loan types. In exchange for ignoring the customers credit history, lenders charge larger down payments from the total purchase price. Typically you will be looking at 70 – 75% loan to value. The lenders know they are protected, due to the equity in your property.
Borrowers may not be able to afford the upfront price of these mortgages. If in any case, if you can afford the down payment required, a bad credit mortgage might even prove a good thing for you. Since the down payment you made takes a considerable portion of your purchase price, this means that you pay lower monthly rates on your bad credit mortgage. This in turn means that as an investment property, you would need less rental income for the property to ‘wash its face’ for you.
Even if you want to move your home, or to go for another bargain investment property, all is not lost. Contact a specialist and declare your situation to them, and see what deals they can offer you.
By: Geoff Morris
So what should you expect from car lenders when you have bad credit?
How do you go about getting a car loan when you have bad credit?
Below are highlights of things you can expect while buying a car if you have less than stellar credit.
Consider the Following Prior to Buying a Car with Bad Credit
There is no need to put several thousand dollars down to lease or buy a new car. The most cash you should need for a car loan (even with bad credit) is $500 to $1,000—and that’s if you do everything wrong! Anything more than that and you’re either at the wrong auto dealership or you ‘re looking at the wrong car.
It ’s best to start small and slowly graduate to you dream car. You can make it your goal to ultimately get the car of your dreams. But, for now, you’re going to have to settle for a more economical one.
Research Potential Cars and Auto Dealerships
Start by going to Edmunds.com. Not only can you get information on what rates and rebates are offered from every auto dealer, but Edmunds lists used car prices and certified rate programs. Don ‘t forget that there are a lot of car dealers who want your business. This means that there are a lot of opportunities for you to find a great deal.
Do the leg work and interview as many auto dealerships as you can. Remember to not allow them to look at your credit reports until you’re ready. You want to prevent an unnecessary credit inquiry. Credit inquiries may lower your FICO credit score.
Identify Your FICO Scores
In most cases, a decent interest rate on a new automobile will range from 0% to 12.9%. Credit unions and captive lenders generally have the best interest rates.
It’s critical that you use a creditor that reviews your highest FICO score to make a lending decision. Even though you have 3 FICO credit scores most lenders usually use the score from only one credit bureau. Ask the creditor whether they use the credit score from Equifax, Experian or TransUnion. Make Your Decision Prior to Going to Car Dealership
You should be able to negotiate all specifics about the loan before you step one foot on the dealership ’s showroom floor. Have you noticed that the first thing the salesman wants you to do is jump in the car and take a test drive? He knows how weak you will be when your nostrils get a whiff of that new car smell.
You can talk to car dealers to determine your options before you make a decision to buy. Never give out your Social Security number or driver’s license though. If they get that information, they’ll have all they need to review your FICO credit scores and reports, which cause a credit report inquiry to appear on your credit reports. Remember, credit inquiries may lower your credit scores. Make them understand that you do not want them reviewing your credit scores and credit reports. If they persist on making a copy of your driver’s license for “insurance purposes,” tell them to put in writing that they will not review your credit.
The most important thing is to first talk with the finance director at the dealership. The finance director will be able to tell you what you qualify for. Then ask to talk to a salesperson. Expectations when You Walk into a Car Dealership
Expect the car salesman to sell you a more expensive car than you need. Don’t let them convince you to buy a car you don’t need or can’t afford to pay for. This is why you must talk with the finance manager before the sales person. Don ‘t forget that the finance manager is who directs the salesman the car you can afford.
Expect that if you treat car dealership employees well, they will treat you the same way in return. They want you as a life long customer.
Expect to pay more for your auto insurance if your credit score is low. That’s right, in most states insurance agencies are allowed to use your credit score to determine insurance premiums. Make sure you consider this when deciding what is in your budget.
Financing an Auto Loan with Bad Credit
Financing a new car with bad credit is actually easier than financing a used car. New cars have incentives and/or rebates which can lower or eliminate the down payment necessary for buying a new car. You just use the rebate as the down payment. So, when looking for a new car when you have bad credit, it’s often best to buy the one with the highest rebate possible.
If the deal is structured correctly, it’s possible to buy a new car with a rate as low as 0% with no money down through a mainstream lender—if you go to the right dealership. Just because one auto dealership says, “No,” doesn’t mean you can’t be approved for a car loan at a decent rate from another dealer.
Where to Finance a Car Loan
The worst place to obtain is usually your local bank. They don’t have much incentive to finance you.
The best place is usually the car manufacturer. The car manufacturer has more incentive to offer you a good deal than any other lender. They also always report to all three national credit bureaus.
Some “subprime” lenders (lenders that charge you higher interest rates than mainstream lenders) could be your only option if you’re in a hurry. If you didn’t make your auto payments on time or had a car repossessed, subprime may be your only option. Remember, not all subprime lenders are the same. Some will offer you a fair deal—others will try to rip you off. So make sure you interview lenders and compare what they offer you.
By: Dana Mark Facemyer
Bad credit loan mortgages or non-status mortgages are purposely intended to serve people with a bad credit history. According to a recent survey, one fifth of all adults are not able to qualify for a standard mortgage as a result of a previous or current bad financial situation.
Credit history is based on information retrieved from sources including Public records such as electoral roll information, court judgments and bankruptcies; and Information provided by financial institutions and other lenders such as banks that provide credit accounts and lending facilities.
In order to calculate the potential risk in providing loans to the person, most lenders use independent credit reference agencies to gather and assemble this information since they are permitted by law to review a mortgagee’s credit report before granting approval.
Bad credit rating usually results from failure to pay off outstanding debts or other credit payments on time, due to factors such as outstanding rent or mortgage arrears, county court judgments (CCJ) or bankruptcy. There are also other reasons that can result in a bad credit record which include:
1. Foreclosure
2. Heavy medical bills
3. Settlements arising due to Judgments /divorce
4. Multiple credit cards
5. IRS debt
Bad credit mortgage is designed for people who are unable to take out a mortgage from high-end mortgage providers. However, there are several providers who are willing to take a risk and provide loans for individuals with bad credit ratings, but at a higher rate or lower maximum amount.
Normally, a bad credit mortgage loan has an introductory interest rate that is fixed for 2-3 years, which is substantially higher that the rate pertaining to a conventional 30 year fixed rate loan. This is due to the extra risk the lender has to take, because with a bad credit, the borrower’s probability of default on the home load is higher than someone with good credit. However, after the initial period, the interest rate on a bad credit mortgage will adjust periodically.
There are also a few factors that most lenders of bad credit loan mortgages will look into, before granting the loan mortgage to people with bad credit history. This includes:
1. Employment history and income stability
2. Current monthly debt
3. Value of the property and
4. Down payment
Since loan requests from people with bad credit do not fit under the standard underwriting guidelines, fees charged by lenders on bad credit mortgage loans are also significantly higher than those charged in a conventional or standard home loan. This can range from 1% to 6% of the total loan amount.
Since individuals who get a bad credit mortgage usually do so mainly because they want to put their credit back into good standing, or as an opportunity to clean up credit history, the higher interest rate need not necessarily lasts for 30 years. Additionally, if the monthly loan payments are in time for two consecutive years, the bad credit mortgage can be refinanced with a conventional loan at a much lower interest rate.
By: Andrew Green