Before You Apply for a Mortgage: What You Should Know When Shopping for Credit

In light of recent econmic conditions and the unstable financial markets, banks and mortgage lenders have tightened their qualifications for lending money for mortgage loans. Within the last 12 months, the federal government has mandated sweeping changes in the way borrowers can qualify for residential home loans.

What is Your Home WorthOne of the most striking changes is in the relationship between lenders and appraisers. Long gone are the days when you could pick up the phone and call the appraiser down the street to perform an appraisal to develop a value on a piece of property. The “Home Valuation Code” now forbids the lender to have any contact with the appraiser. The appraisal is ordered randomly through a national company that deals exclusively in assigning appraisers to jobs. This has presented quite a problem in the lending industry as appraisals have been assigned to appraisers outside their normal lending area. An appraiser unfamiliar with the area works at a disadvantage with respect to values, amenities, school districts and recreational areas. This may cause a value to be disporportionately high or low.

Know Your Credit ScoreThe single most important factor in being approved for a mortgage is your credit score. Borrower’s qualify for the best rate with a credit score of 740 or higher. If your score is under 640, you will have a hard time trying to find a no credit check payday lender that will grant you credit.

Everyone is entitled to one free credit report every 12 months, so take a look at your report. Lenders put most emphasis on your payment record for prior mortgages and housing payments and student or government loans. If you have claimed bankruptcy in the past; you must be discharged from the bankruptcy for at least two years and more importantly re-establish credit.; at least 3 tradelines with an excellent payment record are required.

Income and Down Payment RequirementsFor a non-government insured loan you must make a down payment of at least 5% of the sale price. Your entire payment which includes principal, interest, taxes, homeowners insurance and private mortgage insurance, if you put less than 5% down, generally cannot exceed 30% of your gross monthly income.. That same payment plus any revolving debt such as charge cards, or term loan debt such as auto payments cannot exceed 40% with a 5% down payment; or about 43% with more of a down payment.

These guidelines are substantially stricter than in previous years.

Sub-Prime LendingSub-prime lending is generally non-existent. Sub-prime mortgages were designed for borrowers with less than perfect credit and these borrowers were charged a higher interest rate or a variable rate that increased over time. When property values began to decline and rates began to escalate these borrowers could not pay their mortgages. Properties were foreclosed on, but the properties were no longer worth the amount of the outstanding loans; therefore the lenders had to take the hit. The federal government was complacent in this as they twisted the arms of banks to lend to people that could not afford to own a home. This was a part of the “Community Re-investment Act” that mandated lenders to lend in low income areas. In light of the recent housing crisis in the United States, most, if not all lenders are steering away from sub-prime lending.

The best way to insure that your mortgage will be approved is to be diligent in paying your obligations, use a limited amount of revolving credit and only borrow within your means. This results in a high credit score.

You must be in the same line of work for at least 2 years with a good probability of continued employment.

The more of a down payment you have, the more favorably your application will be looked upon. Make sure you have at least 3 months of payments in the bank in reserves after closing.Mortgage lenders and brokers are still lending, so if you have the right qualifications, now is a great time to get a good deal. Interest rates are still low and there are lots of properties on the market. So happy house hunting and good luck!

Car Loans with Bad Credit: How to Get Poor Credit Auto Financing

A low FICO credit score will make getting credit more difficult. However, applying for car loans with bad credit is not a bar to successful automobile financing. This includes buying a car after bankruptcy, provided that the applicant is in stable employment and can prove affordability.

Car Loans with Bad Credit

Poor credit auto financing is necessary when someone has failed to comply with the T&C’s of one or more credit agreements. This includes missed and late payments, those in debt relief programs and individuals who have filed for bankruptcy. These indiscretions will show on a credit report for up to 10 years.

FICO Credit Score

The rate of interest on a bad credit auto loan will depend heavily on the applicant’s FICO credit score. The severity of a credit transgression will determine how much a score falls by. The largest falls take place following bankruptcy, foreclosure, account delinquency.

Make Punctual Monthly Repayments

The longer the period that lapses between default and an application for credit, the higher a FICO credit score will be. This means that it is important to maintain timely repayments on other credit agreements, such as the mortgage.

Correct Credit Report Errors

Get hold of a free credit report and check this for any errors. Should there be any inaccuracies, it is imperative that these are corrected through the credit reference agency prior to applying for a poor credit car loan. Corrections can be arranged by the individual or a licensed attorney.

 

Affordable Repayments

Affordability is critical to both the borrower and lender. Before applying for credit, perform a thorough budgetary analysis to determine how much can be contributed to poor credit auto financing each month. A low debt to income ratio is the key to acceptance.

Car Loan Lender

Rather than going directly to a dealership, use the services of a car loan lender. They will trawl the entire market for the most affordable deal. It also provides the borrower with an opportunity to explain why and how any poor credit arose. The service is far more personal and is vastly more likely to lead to approval.

Car loans with bad credit are achievable, provided that the borrower takes practical steps to ensure approval. Once a FICO credit score improves in a couple of years, be sure to refinance as more favorable deals will be available.

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional before proceeding.

Rebuild Credit Ratings for Low Cost Loans: Improve Credit Scores for the Lowest Interest Rate Loans

A low cost loan means that the customer pays less interest over the full borrowing term. In order to get approval for the lowest interest loans, it is necessary to have an excellent credit rating. Each month lenders report to credit reference agencies so failing to make debt repayments punctually will lead to a reduced credit score. Miss payments entirely, default on a loan or declare bankruptcy and a credit score rating will plummet. Fortunately, a report is only a snapshot of that person’s current credit worthiness so it is possible to gradually rebuild credit ratings before applying for a low APR loan.

Rebuild Credit Ratings by Repaying Debt Punctually

Making the repayments for mortgages, loans and charge cards on-time will lead to a better credit score. Rebuilding bad credit won’t happen overnight, but there will be a slight improvement following each timely repayment. Miss a payment and the credit history repair process will need to start again. Should there be no active agreements, it may be possible to get a credit card for poor credit. Although the limit is normally low, making the repayments punctually will lead to a higher credit rating.

Improve Credit Scores by Repairing Credit Report Errors

A surprising number of reports contain data that isn’t accurate. The automated process used by lenders means that they are unable to determine whether it is bad credit or bad data. The onus is firmly on the customer to get hold of a free copy of their report to check for errors before applying for a low interest rate loan. The Fair Credit Reporting Act gives consumers the right to get an erroneous information corrected. The credit history repair process can take several months from start to finish so allow sufficient time before applying for a low APR loan.

Improve Credit Scores by Paying Down Debt

The lowest cost loans will only be granted to applicants with an income-to-debt ratio of under 36%. This is because there is an inextricable link between having too much debt and default. Before applying for a low interest loan, try to pay off debt to increase the likelihood of approval. For example, make sure that cards aren’t maxed out. Perform a balance transfer to spread debt across several cards if no savings are available to reduce the overall amount of money that is owed.

Too Many Applications for the Lowest Interest Loans

Each search will show on a report for a period of 12 months. Whilst searches are perfectly normal, lenders may interpret too many searches as a sign of money problems and likely default. Applying for multiple low APR loans at the same time will normally lead to rejection. It is important to be selective and only apply for low cost loans after making sure that the eligibility criteria have been met. Lenders provide plenty of material to help customers decide whether this is the case.

Secured vs Unsecured Low Cost Loans

A secured low APR loan for homeowners is best suited for people who have ample home equity, don’t plan to move house, need to consolidate debt and/or wish to spread the cost of repayment. Customers who have a history of bad credit may find that providing collateral is the only sure-fire way to get the lowest interest rate loans. This is because the provision of security underwrites the risk of default. Unlike an unsecured personal loans, failure to maintain the repayment schedule will lead to the repossession and sale of the property to recover the lender’s money. This is a very important consideration, especially if consolidating unsecured debt.

Loan Options for Senior Home Owners: Reverse Mortgage Advantages and Disadvantages

A loan option for home owners over the age of 62 is called a reverse mortgage. A reverse mortgage makes the home equity, or real property value, available to seniors that want to remain in their home. Reverse mortgages are used to supplement social security, make home improvements, or to pay for caretakers in the event of injury or illness. Though this type of loan is desirable for some, there are pros and cons to a reverse mortgage that need to be considered and evaluated in order to decide if it is the right option.

Advantages

Reverse mortgages have certain advantages that make them a principal option for some people.

Income

A reverse mortgage does not consider current income and pays an individual regardless of their financial situation. A second mortgage, or bank home equity loan, measures income against debt ratio and still charges a monthly mortgage payment.

Repayment

A home owner who takes out a reverse mortgage will never owe more than the property’s appraised value. According to Home and Communities Department of Housing and Urban Development, as long as at least one of the borrowers lives in the house and pays insurance and taxes responsibly, the loan will not need to be repaid.

Payment Options

A reverse mortgage offers five options of payments. A senior can receive equal monthly payments for the duration of residency in the home or they can set their own fixed monthly payments for a set period of time. Another option is a line of credit to be used when needed and until it is gone. Finally, the last two options are a combination of a line of credit with equal monthly payments or a line of credit with fixed monthly payments for a set duration of time.

Disadvantages

Just as there are pros with reverse mortgages, there are also cons that should be considered before moving forward with the process.

Expenses

Bankrate.com states that a disadvantage of a reverse mortgage is that the interest rates are not tax deductible and if one falls behind in expenses such as taxes, insurances and maintenance the loan could become due.

Fees

A lender chooses how much to change for various fees, and they can be quite costly. Among these charges are origination fees, service fees and high closing costs.

When considering a reverse mortgage, it is important to do additional research and investigating rather than relying on the word of a reveres mortgage sales person who will only paint an ideal picture. A reverse mortgage is not right for everyone or every family. Reverse mortgages should be a group decision that has been thought through and weighed carefully.