 |
(866)871-5210 |
|
|
 |
| |
| |
|
Applying for
a mortgage with bad credit
One of the major concerns for anyone
applying
for a mortgage is whether or not
they are going to be taken advantage
of and “get ripped off.”
This concern is even more justified
if you have bad credit.
Potential borrowers with bad credit,
especially first time buyers with bad
credit, go about the process
of getting a mortgage with little
confidence because they know they will
not get the best rate. This attitude
and lack of knowledge is what leads
borrowers to being ripped off.
An article posted on affordableconcretecutting.com,
titled, “Getting a Mortgage?-Avoid
Getting taken Advantage of!” explains
that even if you have bad credit, you
should pre-qualify yourself so that
you have the proper knowledge of what
to expect, thus avoiding exploitation.
The first thing you should do is to
examine your credit score. Give yourself
a grade such as an A for great credit
(750 and above) to a D for very poor
credit (under 500).
Next, you should understand your loan-to-value
ratio. This is the ratio between the
amount of money you borrowed on a home
mortgage loan and the real
value of the property being placed
as collateral.
“To know the value of new purchases,
as a borrower, you would have to consider
the lower purchase price of the appraised
value. If a home owner has lived on
the property for about six months or
a year, coupled with refinance, the
appraised value can be used in the loan
to value calculation.”
Another ratio to consider is your debt-to-income
ratio. You can calculate this by adding
your debt payments (the home loan you
are applying for, credit cards, car
loans, etc.) and then dividing this
amount by the net cash available each
month for your living expenses and debt.
“Lenders would not prefer this
figure to exceed 40%.”
With all these calculations handy, you
should be able to estimate your affordability
and where you fall in the credit system
in regards to a home loan.
One of the most important things to
understand
about mortgage loans is the point
system. Lenders charge additional points
to borrowers. One point is equivalent
to paying an additional one percent
of the entire loan amount.
“If a borrower has a history of
bad credit, lenders will charge him
more points and higher rates of interest
since it is a risk for a mortgage lender
to deal with such a person. But borrowers
on home mortgage loans with a good credit
history should not enter into a mortgage
agreement where they are forced to pay
points based on a bad credit loan.”
“So, borrowers with good credit
may often pay as little as nothing while
those with bad credit will usually have
to pay four or five points. Sometimes,
unwary consumers have been asked to
pay up to 10 points-something highly
unwarranted. In fact, if this happens
to you or anyone you know, he should
consider it a red flag that someone
is trying to cheat you.”
The lender would probably justify this
action by saying that he or she can
provide you a loan where no one else
can. Do not believe it. This is where
knowledge gives you power.
Even though you have bad credit, you
can still shop around for the best rates.
Most lenders will offer loan to those
with bad credit, and like with all lenders,
rates will vary.
You are not going to get rates as low
and discounts like someone with great
credit would, but you can also avoid
getting taken advantage of, by having
knowledge and doing a little homework. |
| Back
to Articles |
|
|
|
|
