Bad credit mortgage

You never know what next you are going to face in life but you always expect only a good stuff - of course. And when some trouble-making situations appear nothing is worse than a lack of information!!!! And this is exactly what I and my husband have been struggling with since we decided to buy a new house. So many questions arose from almost nowhere, for instance, how much was our present house worth, how much we needed to borrow and on what conditions, which bank to choose etc. We’d been searching the information online but still had no luck till we found this FSBO site (http://www.fizber.com/). It is just amazing how quickly all our questions were answered.

First of all we looked through the page Mortgage (http://www.fizber.com/sale-by-owner-home-services/mortgages ) to see how it all worked. And I must admit the information is put in a very easy way – all we had to do is just read. And of course we couldn’t miss Mortgage Calculator (http://www.fizber.com/sale-by-owner-home-services/mortgage-calculators) – something you can’t do without in this business. We didn’t consider ourselves as very good at it so this site was so really helpful and so useful for us. Thanks a lot to all who has created it.

Most of people start panic thinking about bad credit. Certainly I’ll never say that bad credit report is not a problem. It is! But it’s not the end of the world!

The good news is that you still have a right to only to apply but to obtain a mortgage, especially when we are speaking about home equity loans with bad credit. The key word is collateral! And it’s hidden in you prospective home. Most of mortgage lenders or brokers will agree to lend you money when you are going to buy real estate because their money is protected by the equity that you already possess in your home. So their risk is minimal even if your credit rating is very bad.

But remember that in most cases they will charge you more regardless the low risk and good collateral.

Can you protect yourself from a bad credit? I think that it’s almost impossible. Our life is very unpredictable and good or bad things happen independently. I’ve heard a sad joke:

“-How do we call the situation when a person loses his job?

-A bad luck.

-How do we call the situation when a person loses his job for the second time per month?

-A coincidence.

-How do we call the situation when a person loses his job for the third time per month?

-A habit…”

So, if you had a bad luck, or coincidence, or even a habit to be involved in problems you need to know what to do with your bad credit later.

The first thing you have to do is to explain your position. You need to prove that you tried your best to correct and improve the situation. You need to show that your bad credit report is a result and external force-majeure. But I warn you against lie – it will make your credit even worse! Try to correct the things you can correct – misunderstandings or some mistakes. Write a letter to you mortgage lender or broker and explain. I know the people who managed to improve their bad credits because they showed that there was a sudden problem – unpredictable loss of a job, somebody’s death or hard illness or so on. If you can you need to provide documents that prove your position. Don’t underestimate such explanation letters. Remember that credit reporting agencies are required to include them along with any documentation proving such explanation with the credit report.

AFRAID OF REJECTION?
A happy expectation of a new house is sometimes destroyed by the lender who has rejected your application for mortgage financing. At our present state of economy, it is an unpleasant but usual thing. When the economic situation is hard, your credit file is, as a rule, under serious consideration. First of all, a lender carefully studies your credit history. Faulty credit can be one of the reasons for a loan to be rejected. If your request for a loan has been rejected, you have to realize the reasons for it and what you should do to improve the situation in future and decide what measures should be taken to make sure it doesn’t happen again.
Below you’ll find the information that will help you to see the most usual reasons for loan rejections and advise you on the steps you can take. Also it gives you some existing options, especially if your income is low or moderate.
SUPPOSED REASONS FOR DENIAL OF YOUR CLAIMED LOANS AND YOUR OPTIONS

ASSESSED VALUE IS TOO LOW
Among other factor the lender consider the relation between the loan amount and the selling price or assessed value of the housing, whatever is lower. If the estimated cost of the house is considerably lower than the buying price, the ratio between the loan and the value may be higher than the lender can officially approve. If you want to get a maximum loan, for example, from 80 to 95 % of the buying price, a low evaluation can make your claimed loan too large. In such cases your option depends on the reasons for a low appraisal.
If the buying price is higher than the usual prices in this particular area, one of the alternatives for you is to bargain over the price with the vendor and make it lower to fit the range of prices on the market. Your aim is to reach the price which the lender would agree on as an approval for your loan. Otherwise, your only possible way out is taking a lower loan, supposing you have enough money to pay the additional down payment.
Unsatisfactory Funds
After the careful analysis of your financial information and bank deposit, the lender may decide that your cash is not enough for a down payment and for meeting the closing costs. As a rule, it is not necessary for this money to come from borrowing; it can be a present from a cousin or aunt which can be used since you don’t have to repay it. As an alternative, you can make the seller take back a second mortgage. It will level down the requirements for the down payment. Another option is to make your seller pay a part of closing costs, for example, origination fees. After all, you can improve the situation by waiting, so long as you place your money in a saving program.
Low Income
When valuating your ability to pay back the loan you ask for, the lender considers your monthly profit relative to the planned mortgage payments and your installment loan payments and other monthly debts. Actually, the mortgage payment you have to pay monthly shouldn’t exceed 28% of your monthly gross income. At the same time your mortgage payments and other installment payments all together shouldn’t exceed 36%. If we talk about FHA loans, then the percentage ratio is a bit higher. Of course, these percentages are orientation, but if your percentages are, for example, 37% and 45%, they are outside the limits of the industrial standards and it can be the reason for the rejection of your loan.
Occasionally, especially if your credit card record is excellent, and if you can prove that your high expenses are because of the rent or mortgage payments, you may try to persuade the lender to review his decision. It proves that full and exact disclosure on the application does you a favor, although sometimes it may not be so evident.
Advise the loan officer about any change of your personal details after the submission of the application for the loan. Such things like the forthcoming pay rise, bonus, and a new job can improve the financial position stated in the loan application. Certainly you have to prove it in written form and present to the lender for a new review of the loan application.