Get a Loan With Less Than Perfect
Credit
Check your credit. There are three
major credit-reporting agencies and you
are entitled to one free credit check a year. Trans Union at http://www.transunion.com
charge
about $8.00 or http://www.icreditreport.com
has an online for $8.00 or a
combination of Equifax, Experian, and Trans Union for $29.95.
It doesn't matter whether you goofed
around with your credit or had a bad break beyond your control.
Either way you are paying the price with a poor credit history
and higher interest rates on loans you are able to get.
Now you want to change the past
and take on the joys and responsibilities of home ownership. You've
done some growing up, but your credit may still be having growing
pains. What are your options? Give up? Wait for the seven-year
broken mirror to mend? Or take matters into your own hands and
refuse to give up your dream?
Good. I'm glad you decided to fight
for your dream. Because nothing will make you hold your head up
like being the proud owner of your own home. So what if you have
to pay a little more for the privilege? It's worth it in terms
of building equity, not to mention self-esteem, and your higher
mortgage interest is as tax deductible as the most credit worthy
citizen's.
The first thing to recognize is
that you are not alone. Despite being in a record economy, bankruptcies
and defaults on credit cards and other loans are at an all time
high. But there is one debt that most borrowers will move heaven
and earth to preserve and that is the loan on their homes.
Lenders know this and some are becoming
more debtor friendly. They know that it takes two incomes to live
at the standard of the previous generation. They know that credit
is all too easy to get and that it is far too easy to get in over
your head. With the recession of the 90's as a recent lesson,
lenders also know that bad things like downsizing, lay-offs, catastrophic
illness and other problems happen to good people. The recent spate
of El Niño disasters - fires, floods, droughts and earthquakes
have also taken their toll on the nation's borrowers. In other
words, you may be financially better off now, but your credit
may still be recovering from an event that may have happened years
ago.
Until now, mortgage brokers have
been the best people to have in your corner when you are trying
to buy a home with less than perfect credit. With one search fee
to cover the credit report, usually $50 to $75, they are empowered
to scour numerous lenders to find you a loan that works.
According to Dick Lepre, president
of Homeowners.com, a leading mortgage brokerage site, "there
is an entire sub-industry devoted to the 'B paper' market."
"People do not do this out
of any altruistic spirit but because the rates are high and it
had been very profitable," says Lepre.
"About three months ago everything
changed. The ratings of the bonds that back these loans plummeted.
At least half of the retail lenders in this industry disappeared,"
explains Lepre. "The 'story' is that there will still be
a 'B paper' market but it will not be as 'thick' as the previous
market. Fewer people will get loans."
But there are other options for
borrowers as well.
Clean up your credit. If you have
the ability to actively show a lender that you are taking steps
to repair your credit, you won't be given a better rate, but you
might be moved to the head of the line. Contact every person to
whom you owe money and try to work out a settlement plan. Consolidate
your debts under one credit card or bank and try to reduce that
debt as much as possible. Get rid of the clutter on your credit
report. Call or write consumer credit services for advice. Avoid
any company that promises to clean your credit report for a fee.
Don't incur new debt. Sounds simple enough, but sometimes debts
seem to rise to meet your income. Don't let it happen. You may
not be used to having extra money - it's easy to spend, so put
it away. Pay cash whenever possible. Set a new budget to start
saving money and stick to it.
Put reminders of your goal everywhere. Smokers wear "the
patch"; dieters put pictures of elephants on their refrigerators.
Put pictures of your dream home in your wallet, on your desk and
refer to them anytime you are tempted to stray from your goal.
Visit a mortgage broker or direct lender personally. Find out
exactly what kind of loans for which you can qualify. Comparison
shop. A direct lender may not have as many programs from which
to choose as a mortgage broker who can research a number of lenders.
An adjustable rate mortgage may be preferable to a higher interest
fixed rate mortgage. You may also be able to overcome a poor credit
history with a high down payment.
Find a buyers' agent. A Realtor may be willing to work with you
if you are up front about your situation. S/he may know of other
resources who will help you get a loan and the home of your dreams.
Be willing to Pay for Your Search. Every time you apply for a
loan with a lender you will pay a credit report fee whether they
approve your loan or not. If you apply to Countrywide or another
lender, be willing to compare your loan with those a mortgage
broker can find for you. Sometimes the lender will be lower, sometimes
not. It's all in the closing costs.
Compare Your Loan Before You Commit.. Don't let guilt over your
poor credit history propel you to accept the first loan you can
get. Shop for the best rate possible before you say yes. Remember,
you're financially astute now. Contact E-LOAN, one of the Internet's
largest and most successful mortgage brokerage sites. E-LOAN has
a feature called Compare Your Loan that will compare any loan
you are currently considering. Before you sign on the dotted line,
check it out.
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