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Last Updated: Aug 10th, 2010 - 23:16:19 |
Even with bad credit report, you can purchase a home
By Ezilon.com Articles
Jan 24, 2006, 08:15
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Even with bad credit report, you can purchase a home
Unemployment. Illness. Divorce. Bankruptcy. Family problems. Failure to pay bills on time. These problems can lead to unfavorable information on your credit report. Just one or two disparaging remarks, without an adequate explanation, can result in a rejection for a home loan.
But there is no need to let a bad credit history stop you from buying a home.
Here's what you can do:
- Clean up your credit report. If you haven't checked your credit report in the last six months, get a copy to see what the credit bureau has in its files about you. Maybe things aren't so bad as you think.
If you were turned down for credit in the last 30 days, you can get a free copy of your credit report from the credit bureau listed on the rejection letter.
After you have a copy of your written credit report, if you dispute any incorrect items, be sure to contact the credit bureau in writing. The credit bureau will then report the discrepancy to the erring firm, such as a department store or credit card company, for their version.
If no reply is received within 30 days, the credit bureau must remove the disputed item from your credit report. Be sure to follow up to enforce your legal rights.
- Buy a home with an existing assumable loan. There are thousands of homes for sale with existing, assumable VA and FHA mortgages which can be assumed by anyone (except perhaps a bankrupt arsonist). But if the seller is to be released of liability on the loan, then a complete loan application with credit check is required.
- Buy with seller financing. Although seller financing isn't as easy to find as it was a few years ago, many home sellers will carry back a first or second mortgage to help finance your home purchase. Rarely will a seller check your credit since the seller looks to the property as the security.
- Obtain an 'easy qualifier' loan from an equity lender. Many banks and S& Ls offer "easy qualifier" mortgages to home buyers who pay at least a 25 percent down payment. When your down payment equity in the home will be substantial, the lender is well-protected in case you don't make the mortgage payments. At least one or two lenders in each major city usually offer this type of equity loan.
- Get a co-signer. If you can't get the seller to help finance your purchase and you aren't making a 25 percent down payment, a new conventional loan must be obtained. Perhaps a friend or relative will co-sign on the mortgage to help you qualify. Most lenders, however, require the co-signer to also take title to the property.
- Buy with an equity share co-owner. Another alternative is to get a wealthy friend or relative to make all or part of the down payment in return for part ownership of the property. This equity share method is especially good for parents who want to help their adult children get into a first home.
- Keep the seller as a co-owner. When the seller can't or won't help finance the sale, keep the seller as a co-owner to help qualify for a new mortgage.
- Pledge additional assets as security. Although your credit may not be the greatest, some flexible lenders will make mortgage loans if they have more than adequate security.
- Get the seller to guarantee part of the loan. If the seller will be receiving considerable cash from the home sale, he may be willing to deposit that money with the bank or S&L which will make the necessary mortgage if the money is pledged to guarantee part of the loan. For the seller's protection, he should receive a second mortgage on the home which can be foreclosed if the guarantee is enforced by the lender.
- Lease the home with an option to buy. A lease-option gives the prospective home buyer time to try out the home while, at the same time, clearing up any credit problems. Typical one- or two-year lease-options usually provide for an up-front payment to the seller of a "non-refundable consideration for the purchase option" and a locked-in price for the home.
USA Real Estate Listings:
http://search.ezilon.com/united_states/business/real_estate/index.shtml
Europe Real Estate Listings:
http://www.ezilon.com/cgi-bin/estate/realestate.cgi
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