Bad credit can happen to anyone in life. It could be related to a bankruptcy. In case you have gone through a bankruptcy there is no cause to despair as millions of Americans are in the same boat with you. Thus though you have bad credit you can still buy a home.
When buying a home with bad credit then you will be subject to certain limitations and conditions. These are inevitable and will have to be accepted. One of these conditions is the acceptance of a higher rate of interest. Just for the record bear in mind that as per the bankruptcy act the period between filings for bankruptcy is seven years but the entry remains in your credit report for 10 years. However to get better rates with a conforming loan, the wait is four years after filing bankruptcy.
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FHA guidelines are more liberal and stipulate that two years after a foreclosure, you could qualify for a loan as little as 3% down.
People in the business of lending money are there to make a profit. They go by their business sense. Thus they will often lend money or give loans as early as six months after filing bankruptcy or a foreclosure, but with a stipulation that you make a 20 to 35% down payment.
This is reasonable and gives a margin of comfort to the lender. In addition to the higher rate of interest the lender may insist on prepayment penalties as well. The idea is to keep the loan in force at the high rate of interest for people buying homes with bad credit, so that the loan generates greater profits. People who lend money are also aware that the home is mortgaged and in case of default the lenders investment will not be wasted.
However if your FICO is at least 580 then you can expect sub prime lenders to sanction you a 100 %loan for your home. Sub prime lenders are not like hard nosed lenders and are more flexible.
The clue to getting a lower interest is by improving your credit. This can be done by a number of methods. Firstly you can obtain a major credit card.It's not difficult to get a credit card after bankruptcy as bankruptcy gives you a fresh start and you have no debts to pay back. This is known to the card issuing companies who will tap you for a card.Secondly have job stability and continue in your job for at least two years. Also make it a point to pay all your bills on time.
Lastly make an effort to fine tune your expenses and try and save as much money as you can. This will help you for your cash down payment. If you play the rules of the game properly there is every chance that getting a loan for buying a home with bad credit will be a reality.
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