Do you need a mortgage? Bad credit seems to be the plague of the century yet it won’t stop you from getting a mortgage. But it is no walk in the park before you get your hands on the money.
Are You Qualified for a Mortgage?
When you heard you can get a debt income mortgage even if you have low credit record rating, it does not mean you can get a mortgage without sweat. Lenders are cautious of borrowers with spotted credit and during these economically shaky times, they are choosy when it comes to approving borrowers. Well, you would do the same if you were in their shoes.
It is no secret that when your mortgage application is approved, you are burdened with higher interest rates compared to a borrower with a good credit record. You also have to present proof of employment, parade you W-2s, tax returns, and your bank statements. This is the lender’s way to get the so called ‘burden of proof” of your capability as creditor.
To sweeten the deal, make a deposit of 20% – 40% of the mortgage amount. The bigger the deposit sitting in your savings account, the better your mortgage deal will be. The money in the bank is your “collateral” and this deposit works both ways. It gives you access to lower interest rates and shortens the loan life and the lender is assured that should you default any time, there’s the “advanced” payment.
Don’t Rush It
If you are a first time home buyer with a bad credit record, don’t rush to get a mortgage because you are willing to risk the higher interest rates. This rashness will backfire and you end up poorer and burdened in debt if an emergency comes your way. Instead, save and stash your money in the bank and let it grow.
In two or three years and with careful budgeting and discipline, you can have the money to dazzle the lenders despite your poor credit rating. But who knows that by then you have gotten out of your credit rut.
But if you are a homeowner burdened with a mortgage and piling debts, refinancing may seem an attractive option. Unfortunately, those poor credit stats of yours may deter you from getting a refinance from your current lender. Shop around. There are other mortgage banks willing to provide you a loan at a lower interest rate in your case.
If you have the money for the deposit, don’t latch on to the first lender that comes along. Lenders will compete for your business because you can show them the money even if your credit is nothing to crow over.
The Importance of that Deposit
You might know some people in their late 60s who are still paying off their mortgage! Here is a tip you might profit from. When these people saw those incredibly low rates purportedly at 2% they grabbed it not knowing that when translated to money, this 2% meant thousands of dollars over the years. Now you wouldn’t want that.
Save money for that deposit and scout for foreclosed sub-prime properties or for your dream house in an upscale neighborhood. That deposit will give you the fastest route to your mortgage money and the best deal ever, never mind your dubious credit rating.
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