Home Mortgage Loans for People With Bad Credit: Tricks of the Trade to Make the Process Easier

Finding a lender willing to approve a mortgage application from someone with a low credit score is not nearly as difficult as is commonly thought. In fact, knowing the state of the economy, and in particular the real estate market, many lenders are opening up to the idea that not everyone with bad credit is untrustworthy. So, home mortgage loans for people with poor credit are widely available.

These loans are not a guaranteed financing option for everyone, with criteria set that applicants are required to meet if they are to hope to get the green light. But home mortgage loans with bad credit do provide an avenue for those with financial difficulties to get the home they need.

There are some tricks of the trade that applicants can follow to greatly increase the chances of getting home loan approval with poor credit. While they do require some pre-planning, they are quite straightforward.

Offer a Larger Down Payment

The significance of a down payment should not be underestimated. In most property sales deals, the down payment is agreed at around 10% the purchase price, but the larger the actual amount, the lower the size of the necessary home mortgage loan for people with bad credit to face.

Lenders recognize the discipline that is required to get even $25,000, so to come up with $50,000 is hugely impressive. It underlines the dedication that the borrower has to the project, so approving a home mortgage loan is not seen as such a risk.

Once the size of the down payment is confirmed, the lender may even adjust their interest rate accordingly. However, it is important to check such conditions out before seeking home loan approval with poor credit.

Creative Financing

Believe it or not, borrowers are not always tied into the normal payment structures usually associated with buying a home. Creative financing is ideal for home mortgage loans for people with bad credit. All this means is finding a more flexible way of paying for the home, which may reduce the overall size of the mortgage.

For example, if the property is worth $200,000, and a down payment of 10% has been made, it means a home mortgage loan of $180,000 is necessary. However, a loan agreement could be struck with the property seller, reducing the required mortgage further. A $20,000 loan could then be repaid over 3 years, at a rate of perhaps $500 or $600 per month.

This might seem like an unnecessary extra expense, but it accomplishes two things. Firstly, because the mortgage sum is reduced it is easier to get home loan approval with poor credit. Secondly, the overall payments of the mortgage are significantly less.

Improve Your Score

Another trick is to improve your credit score before applying for a home mortgage loan for people with poor credit. Even increasing your score by a small amount can result in a lower interest rate, which will save significantly on the cost of a home mortgage loan over time.

The process starts by getting a credit report, which should detail your score and the events that have affected it. By taking out a series of small personal loans, like payday loans, and repaying them back quickly, your score can improve. This way, it is more likely to get home loan approval with poor credit because the actual score is not so bad.

Taking in mind these small tricks of the trade, benefiting from the home mortgage loans for people with bad credit that are available is much more likely.

Loans and County Court Judgements

So what is a County Court Judgements (CCJ)?

They are issued when a person fails to pay a bill or repay money they have borrowed and the party who is owed the money has gone to court to enforce payment. This can happen with a secured loan or even with a mortgage.

If you have had CCJ registered against your name while it will give you a record which will affect your future ability to get credit for at least 6 years.

A CCJ effectively outlines how much you need to pay your creditors based on your previous non-payment history. If you still cannot afford repayments then the court will need to adjust the CCJ to reflect what you can genuinely afford.

It’s important that you keep up with payments under a CCJ as if you default then there is a likelihood that you could end up having the bailiffs at the door demanding a payment of sorts.

Having a CCJ will obviously show up on you credit history so no matter what type of finance you need you will find it very difficult to get a low rate loan. When you pay in full, you can have the CCJ marked as satisfied, but it does not come off your credit file.

Even when you have a CCJ some lenders will still provide you with a loan or remortgage. The main problem with these loans and remortgages is they will incur much higher interest rates than if you had a good credit history. Lenders will view your application as high risk and with every right. As the reason you have a CCJ is normally because of non-payment of previous loans so it’s not likely you will be able to borrow a very large amount of money.

Nowadays some companies provide specialists remortgages, which can be used to pay off the debts relating to a CCJ. This will only be possible if the value of your property has increased since the start of the CCJ. This method of raising money can be extremely helpful as it can also allow you to free up money for other purposes.

How does a CCJ affect my credit rating?

Your CCJ will appear on your credit file for 6 years (if it takes you more than 6 years to repay the CCJ, the creditor will re-register it with the credit reference agencies). However, your credit rating will already be affected by the fact you have not paid the contractual payments, which has resulted in you receiving a CCJ. If you manage to clear the CCJ within 6 years you can write to the credit reference agencies enclosing a “letter of satisfaction” from the issuing County Court to have the entry marked as “satisfied” on your credit file.

Conclusion

Having a CCJ was once a great burden on your ability to get a loan or remortgage. However, given the increase in specialist CCJ lenders it is now easier although you will pay the price for previous financial indiscretions by having to pay higher interest rates on your loan or remortgage.

Small Business Loans and the Bottom of the Ocean

After reviewing the current sorry state of obtaining a small business loan, most would conclude that normally reliable bankers and banks have become non-responsive and ineffective when dealing with commercial borrowers. For small business owners, the current process for obtaining commercial loans and commercial mortgage loans has become confusing and frustrating. It has become so bad in most places that it would be appropriate to update the standard Ronald Reagan quote about government solving problems to something like “Banks are not the solution to our problem, they ARE the problem.” In any case, it is remarkable to see how the public is now viewing the banking industry in a totally different light.

The banks which have already received hundreds of billions of dollars in federal bailout loan guarantees are currently the primary target of public scorn. Even bank employees seem to feel this way. A person who was recently employed at one of these banks lost their job and did not hesitate to describe the relief because they no longer worked for this particular bank.

Bankers might have become the new lawyers in terms of public anger and ridicule. There was a joke making the rounds a few years ago about lawyers that has been modified to include a reference to bankers. What do you call 10 lawyers on the bottom of the ocean? (A good start.) Substituting “bankers” for “lawyers” will readily provide a contemporary cultural reference about how far bankers have fallen in the public eye.

The many good bankers who have done absolutely nothing to deserve this ridicule have their work cut out for them to restore a tarnished image. If the good bankers can be more candid in their public criticism of the bad bankers, this is likely to be an effective strategy for improving their public image. It seems increasingly clear that some banks and bankers have acted irresponsibly for many years. Other bankers are likely to be one of the best sources to correct and evaluate this misbehavior. Seeing the innocent bystanders in the banking community speak out publicly about those who caused the economy to implode will be both helpful and refreshing.

The practical need for commercial borrowers to find reliable sources for working capital financing, small business loans and commercial mortgage loans cannot be overlooked when evaluating the growing public criticism of banks. For several reasons this process could be more difficult than it first appears.

First, many business borrowers could have been working with the same banker and bank for a long time. Some businesses might delay longer than they should in firing their bank because of loyalty and friendship issues.

Second, it will not be an easy matter to find an effective source for business finance services even after a commercial borrower decides that a change is necessary. In most cases, it will be prudent for business owners to look beyond their local area in the search for better providers of commercial finance funding.