Getting a Loan With Bad Credit is Not Impossible

Even if you've had a bankruptcy or other credit issues, there may still be options for you to get bad credit financing. You wont be able to get low interest rate like those categorized as "highly qualified", but getting a loan is not an impossible task.

Getting a home means not merely finding a place that meets your needs but finding a home finance loan that suits you as well. This could entail contacting several lenders and getting their mortgage loan requirements. The best way to finance or refinance if you have bad credit is to use a mortgage broker. Mortgage brokers work with many different mortgage lenders. These brokers know how to find poor credit lenders to make sub prime loans. They match up your current credit history information with the lenders requirements and locate the perfect loan for you.

A mortgage broker takes your credit information and matches it with the lenders requirements to find you a good match. You will give information about your credit history, including your income and debts, then information about the property, such as the size of loan you are looking for and any equity or downpayment you have. The broker uses that information to match you with a lender or lenders that can help you. The easiest way to find a mortgage broker is to go online. You need to get comfortable with working with someone online. Sometimes an area brokerage service may not have the most up-to-date nationwide info. There may be a company outside of your locale that can help you with your mortgage. You wouldn't want to miss out on some great opportunities. With bad credit, finding a lender willing to give you a decent interest rate will be tough. It's all about how much risk they're willing to take.

Before you start looking for a lender or a broker, you should make sure your credit report is as good as it can be. You're entitled to a free credit report without strings from each on the three main reporting bureaus every year. Check your report carefully to make sure there are no errors which might bring your score down. Pay to enroll in a monitoring service if you want to keep track of whether your report and score are changing. If you have accounts that have a zero balance, don't close them, in most cases it will hurt your score to close them. For most lenders the minimum score is 550 to get any type of loan. If it's below that, lenders will consider you too poor a risk. If your score is above 550, feel free to start looking for brokers. With a low score, keep in mind that your options are few - but there are some.

How Are Mortgage Rates Determined - Who Determines the Rates

Ever say to yourself, "how are mortgage rates determined?" It's not just the big lenders like Freddie Mac and Fannie Mae. It's everyday people like you and I and others who are looking for a mortgage or looking to invest money who has a say in how mortgage rates are determined?

Usually the lender with whom you originally acquired your loan will sell it. Government-type agencies like Freddie Mac, Ginnie Mae and Fannie Mae will bundle your loan and others and create what is known as a mortgage backed security. The rate of return on these securities are based on the promise of mortgage payments and interest paid by borrowers. These securities are offered just like any other investment.

When we're looking for a sound investment and buy these mortgage backed securities through mutual funds or other types of investments, we expect a certain interest rate. In order to sell the securities, the securities must pay a rate of interest that is competitive with other sound investments like Treasury bonds. So if the yield on Treasury bonds go up, so must the yield on mortgage backed securities and therefore so do mortgage interest rates to handle those increases. Rates for 30 year mortgages usually follow right along with Treasury bonds. But since we keep mortgages about 10 years only, the 30 year mortgage rates follow just a little higher than 10 year Treasury bonds.

Good Options For Bad Credit Rating Mortgages

All hope is not lost. Not everyone can qualify for the A loan, with the best rates. Even people with good credit scores may have a reason for not qualifying. So don't feel bad if you have a bad credit rating. The goal is to get into a house of your own. There are many options for people with a bad credit rating. Even if you don't qualify for the A loan, you may still qualify for a B, C, or even D loan. While you're taking the time to build up your credit, you can benefit from a bad credit rating mortgage and get into a house.

What Is A Bad Credit Rating?

A bad credit rating comes from having several negative entries on your credit report such as late payments, high credit balances and judgments or bankruptcies. When getting ready to by a house, you need to get a credit report to see exactly what is in your file. You can get a free report from each of the major credit reporting agencies once a year. Don't get all your free reports at one time. Stagger ordering the reports and you can get a new report every four months. It is not uncommon to have errors on your credit report. Each report comes with the procedure to correct errors that you find.

If you do have legitimate bad credit, you still may be able to get a decent loan. If a health emergency, unemployment or something understandable is the cause of your problems, you can submit a letter that will go along with your credit report explaining your circumstances.

Money talks. Getting a good loan rate is all about credit risk. If you can reduce your credit risk, you may still qualify for an A loan. Having a large down payment may reduce your credit risk and prime lenders may take another look at you. If not, there is nothing wrong with getting a bad credit rating mortgage if it gets you in a house that you want.

Bad credit rating mortgage loans or B, C, and D loans are also based on your credit risk. Credit risk includes several factors such as your credit score, income, and potential down payment. Logically, a B loan will have higher rates than an A loan, but lower rates than a C or D loan. Your overall credit risk will determine what category you will fall in.

Use B, C, or D loans for short term financing. Subprime financing, which includes B, C, and D loans, offers a short term solution until you improve your credit score. If you believe your financial situation will improve and you plan to refinance to get better rates in the future, an adjustable rate mortgage (ARM) may be a better choice than a fixed rate mortgage. You need to fully understand the terms of the loan and when and how the rate will adjust. Get informed about the different types of loans before you decide on either type. Compare the risk levels and interest costs over the long term.

Reverse Mortgage Scams

Reverse mortgages scams are on the rise. Reverse mortgages are becoming more popular with seniors who are looking to supplement their retirement income. With the popularity gaining, more and more people are trying to cash in on the lack of knowledge of seniors and rob them of their money. There are many cases of reverse mortgage scams or frauds. These scams can have a devastating effect on a person's retirement since a house is typically your largest asset. These scams can cost you thousands of dollars in home equity. The biggest way to fight against this rise in reverse mortgage scams is to educate yourself about reverse mortgages.

You don't have to pay for information.

You can get all the information you need about reverse mortgages free from HUD. Some companies are charging thousands of dollars for this information. Typically these companies add on the charge for this information as part of an estate planning program.

Don't use a reverse mortgage to pay for other products.

If a company is trying to sell you a product and suggests that you use a reverse mortgage to finance it - RUN! Many companies selling annuities or other insurance products do this. These companies are getting paid on the reverse mortgage and the insurance products. The reverse mortgage scam is not that it's a bad idea, it's just used in the wrong way. When you add up the fees associated with both products, you are paying way too much.

Beware of high fees.

Some lenders will prey on seniors' lack of knowledge and include high fees and unnecessary terms in the contract. There are some terms included that could cost thousands of dollars in equity with no benefit for the additional cost.

How can you protect yourself from reverse mortgage scams?

1. Take advantage of HUD counseling. Almost all reverse mortgage contracts will require counseling. Beware if you are told you don't need it. HUD counselors will help you determine whether a reverse mortgage is a good option for you.

2. Shop around. Get several offers from different reverse mortgage lenders and compare for your best deal.

3. Make sure you understand your reverse mortgage contract thoroughly. You cannot afford to make a mistake - it could cost you your retirement. Your reverse mortgage counselor is there to help you.

Get information about buying and selling homes, different mortgage types and other real estate information at Real Estate - Get In The Know.

Dangers of Reverse Mortgage - Reverse Mortgages Could Be Costly

As baby boomers get older and start thinking about how to finance their retirement, reverse mortgages are becoming more popular. For people over the age of 62 who have 75% equity in their home, a reverse mortgage can be a good way to get tax-free income that doesn't have to be repaid. But along with every good thing comes some bad and there are some dangers of reverse mortgages that you should be aware of. Although they are a good opportunity for most of those who qualify, you just want to make sure you are fully informed about all the options.

A reverse mortgage allows seniors to use the equity in their home and receive tax-free income without having to give up ownership, or make a monthly payment. The money that is received is paid back when the home is sold, usually after the owners have died or moved into other living arrangements. The amount of money received depends mainly on your age, how much the house is worth, the interest rate, and the current mortgage balance, if any.

You can receive the money basically three different ways: a lump sum payment, fixed monthly payments, or a line of credit that can be accessed whenever needed. There are dangers of reverse mortgages associated with each of these options. Stay away from these reverse mortgage pitfalls.

A lump sum payment
When you receive a lump sum payment you need to be a good steward of your money so that it will not run out.

Fixed monthly payments
Fixed monthly payments are good because you know the exact amount of money you'll be receiving each month. The dangers of fixed monthly payments for reverse mortgages is that inflation is not taken into account. The first payment amount is the same as the last payment amount whether the payments last two years, 10 years or 20 years.

Line of credit
As with the lump sum payment, a line of credit is exhaustible. Once you've reach the limit, there is no more money available unless you refinance.

Another danger of reverse mortgages is in the terms of the contract. Some of these contracts can be very confusing, it is highly recommended to get counseling before entering in to this type of loan.

How Does A Reverse Mortgage Work?

When considering options for using the equity in your home, you may have come across the idea of reverse mortgages and you've been asking, how does a reverse mortgage work? A reverse mortgage works the opposite of a traditional mortgage. Instead of making payments to reduce the loan amount and increase the equity in your home, you are receiving money that will use up some of the equity in your home and increase your debt. Increasing your debt may seem like a bad thing to do but for seniors, this is a good way to get additional money to spend and not worry about repayment.

Basically when you get a reverse mortgage you agree to a certain amount of money paid out either as a lump sum, monthly payments, or a line of credit. In return you agree that when the house is no longer your primary residence, you will sell it and pay the money back along with other fees associated with the loan, such as interest.

Reverse mortgages are available for people 62 years and older. There are many factors that go into the amount of money that you can receive, including your age and how long you may live, the value of your home and if you owe anything on it. With a reverse mortgage you retain ownership of the home, and can have money to make needed home repairs, pay down expenses, or enjoy your quality of life.

There are many things you should consider about how reverse mortgages work when deciding on your options. Reverse mortgage contracts are a little more complicated than traditional mortgages. A lot of times people go into these contracts without knowing the true costs, such as what you'll have to pay back on top of the money that you receive. Understand, that to get out of this mortgage you will probably have to sell the house because normally you can't pay the money back without selling the house. For some people are home equity loan might be safer and easier.