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Strategies to Get Around Bad Credit and Get that Home Loan

Despite what many fly-by-night credit repair companies tell you, you need good credit to get a good mortgage interest rate. Good credit means you pay back what you’ve borrowed and you do so on time.

Even just a few late payments can have a negative impact on your mortgage possibilities. Meanwhile, defaulting on payments, a bankruptcy or a past foreclosure can preclude you from almost any kind of financing.

However, not all financing possibilities are eliminated - there are still options for those with bad credit. In this article, we’ll discuss home financing that’s available to consumers with bad credit scores and also how you can start improving your credit to renegotiate for a better mortgage beginning tomorrow.

Mortgages after Bankruptcy or Foreclosure:

If you’ve filed for bankruptcy or lived through a foreclosure, it’s still possible to get a home mortgage. However, in the case of a bankruptcy, you need to wait at least two years before you’re eligible to qualify. Prior to the two years, you’ll need to go through a mortgage broker who specializes in bankruptcy mortgages.

Ideally, the lender is going to want to see a few new and open credit accounts that show you’ve been paying your bills consistently and on time for the last two years. Consistency and reliability over a period of time are critical for the restoration of your good credit.

If you have gone through a bankruptcy, always disclose it to your lender. Remember, a bankruptcy is a public notice, meaning that information is easily accessible. You should also try to get pre-qualified before you begin searching for a home.

How to Build Better Credit for a Better Mortgage:

If your FICO score is too low to get a great interest rate, you can certainly take an additional year or two to improve your score and reapply later. Resist the temptation to jump in prematurely for an interest rate you will later regret. Keep reading to learn how.

1. Always review your past payment history and make any necessary corrections. Payment histories carry the most weight on your credit history, so it’s important that they’re accurate. If you find any inaccuracies, challenge them, especially where you have access to documentation that validates your claim.

2. Get your balances down well below your credit limit. Ideally, you want your debt to be at about or below 30 percent of your overall available consumer credit.

3. Don’t open a lot of new accounts all at once. Taking out multiple new credit cards or loans in a short period can hurt your credit score, especially if you have high balances on these accounts. If you have open a lot of active accounts, transfer the balance of some over to others with lower interest rates, and close the empty ones.

4. Don’t take loans from financing companies or payday loan companies. Not only do they charge high interest rates, but borrowing from them can also lower your credit score. Consider them to be a lender of last resort.

Once you’ve worked at raising your credit score, wait a few weeks before reapplying for your loan. It takes time for creditors to update your file.

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What a Real Estate Mortgage Expert Can Do for You

Buying a new home can be confusing at best. From mortgage negotiations to home inspections, it’s a complicated mess of paperwork that’s difficult to navigate and even harder to understand. That’s where mortgage consultants come in.

A mortgage consultant or broker is essentially an intermediary between you and the mortgage lender. They help you find the best mortgage and earn their money through commissions offered by lenders.

Here’s what to expect from a mortgage consultant when commissioning their services:

1. They’ll help you determine your budget. Before you even step foot in a bank or lending institution, a mortgage consultant will do a full and private assessment of your credit history and income to determine how large of a mortgage you can expect to qualify for.

2. Provide you with references to qualified realtors. Most mortgage brokers have close connections within the realty community, and they are happy to introduce you to qualified and well-recommended realtors in your area.

3. Help you choose the right mortgage for you. By clearly explaining the different types of mortgages and repayment structures, a mortgage broker can walk you through the mortgage selection process to help you find the most financially viable mortgage loan for you and your family.

4. Obtain quotes from a variety of lenders. Instead of pounding the pavement every day applying to multiple lenders, your mortgage consultant will do it for you.

5. Potentially negotiate a better interest rate. Thanks to their connections and understanding of the industry, a mortgage broker is often in a better strategic place to effectively negotiate a lower interest rate for you.

6. Refer home inspectors and attorneys. A mortgage broker can help you with all those tiny legal details associated with finalizing a mortgage, including obtaining an appraisal and securing an attorney.

7. Handling closing details and negotiating lower closing costs. A good mortgage broker will be there with you right to the day of closing and signing. They’ll explain your mortgage contract to you in full and may be able to negotiate lower closing costs associated with your mortgage.

Tips on Dealing with a Professional Mortgage Consultant:

1. Don’t be afraid to ask them what their commission will be on a particular mortgage option. You don’t want to agree to a $400,000 loan with bad terms simply because your mortgage broker was going to earn a higher commission.

2. Don’t be afraid to seek outside advice. Whether it’s consulting a lawyer, accountant or even another bank, you should never be hesitant about reevaluating your mortgage consultant’s recommendations with an outside party.

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