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Bad Credit Home Loans – Don’t Let Bad Credit Come Between You and a New or Refinance Loan

There are many people out there who think that bad credit is the “death knell” for their ability to obtain a loan. While this may be true in the sense of a traditional loan, there are alternatives available – hard money loans or bad credit loans.

There are two general ways to go about finding a bad credit lender – through a mortgage broker or directly with a hard money lender.

If you go the mortgage broker route, be up-front and honest regarding your financial situation. Chances are they have heard your situation before and, rest assured, they have heard of worse situations than yours. The big question is whether your broker knows hard money lenders directly. Also realize that brokers are going to be taking 1-2 points on the deal (they don’t work for free). The hard money lender will be adding this into their fee and point structure – all fees, points, money, etc. HAVE TO BE DISCLOSED to the borrower in the loan documents. On the plus side, a broker can help you find a quality hard money lender and guide you through the basic bad credit loan process.

The other road is to find a hard money lender directly. Be careful here – there are hard money lenders that charge very high rates with strict terms that be difficult to meet. Some bad credit lenders are looking to fund loans so that they may acquire the property down the road. One way to avoid these loan sharks is to ask for a couple of phone references to previous clients or borrowers. Give these people a call and tell them that you were considering a loan and wanted to find out about their experience. You can learn a lot about the way a hard money lender does business from their previous clients.

Even when you find a reputable bad credit loan lender, expect to pay higher rates than you would with a traditional lender. While these rates may seem high, they are probably the best solution to getting back on the road to financial security. Make sure that your loan term is no longer than 18 to 24 months. During this time, you need to work hard to rebuild your credit so that when you go to refinance your loan, you will qualify for a sub prime or alt A loan.

The thing to remember about applying for a bad credit loan is that you have nothing to lose. Even if you do not qualify for a bad credit home loan, you will at least learn what steps you need to take in order to qualify down the road.

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Bad Credit Loans – How to Tell If You Should Apply for Credit When Your Score Is LOW

Q: How can I get a loan if my credit score is low? Are there specialty loans available for those of us who can’t qualify for A paper credit? How much more will I pay for a sub par loan? Is it best to wait until my credit score goes UP… or should I just bite the bullet and apply right now as is?

A: We get TONS of questions from folks who feel stuck between a rock and a hard place when it comes to their credit scores, the prices of homes in their area… and TIMING! After all, when mortgage money is so cheap, as it is now… and home prices are down, as they are now… isn’t it BETTER to suffer paying MORE for less when it comes to a loan, rather than wading into an uncertain future where everything may be radically different?

The truth is, there IS no right or wrong answer. And the KEY is, not to over-complicate things to the point where you suffer paralysis by over analysis. If you are ready to buy a home NOW, and think that rates are favorable and prices where you want to live are ripe, there is nothing wrong with taking MASSIVE action and investing in yourself, your family and your future. (rather than waiting until your credit is perfect is some future circumstances that are completely uncertain)

That said – taking 30 -45 days to work on improving your credit score in advance can be a wonderful investment in your time, energy and income… and when it comes to your FICO score, there are a number of things you can do right NOW to make a major move in the right direction.

For example – paying DOWN your existing balances, as it relates to the total amount of credit you have available to you, can be the absolute FASTEST way to bump UP your credit score there is. (and as far as some lenders go – may be better than having that money for a down payment as well)

So too is reducing the amount of cards and open accounts you have to 4 or less. (but NOT zero – you need to have at least several open accounts when you apply for credit in most circumstances)

Disputing erroneous information, or challenging negative listings on your file IS exceptionally effective and most traditional credit restoration strategies (or professionals) can advice you how to do this in 45 days or less, and quite possibly REMOVE some of the most egregious and harmful information on your file as well.

Remember, TIME is one of the most important elements that is factored into your FICO score.

What most folks don’t realize is, a 30 day late payment LAST month is far more detrimental to your score than a charge off from 3 years ago.

If you are currently behind on your payments, I don’t care how good interest rates are, or how low prices may be in your area, it’s a very bad idea to apply for a loan while you are behind on your bills, simply because the lenders WILL take advantage of that, even if your prior history has been good.

In summation?

All things being equal, wait until your credit score is in the 650 range or ABOVE to consider applying. 700 or more is better… and if you see a steal of a deal and KNOW you can get approved at a risky rate, take 30 days to get your score UP, even if you have to tell the buyer you’ll pay a few dollars MORE for the house if they’ll wait!

Be Informed About Personal Loans for People With Bad Credit

Knowledge is power, so they say. Meaning, you cannot be effective in everything you do if you know nothing about it. Taking out a loan is not an exception. If your brain is confined to the knowledge that only people with good credit rating can take out a loan and so you sulk in the corner about you bad credit rating then it’s time to upgrade your knowledge. Nowadays, personal loans for people with bad credit do exist and the more you know about this loan, the better.

Personal loans are unsecured loans that can be used by the borrower for any purpose. This means that the lender will never ask you about the purpose of your borrowing. Thus, you can use the money in anything; may it be something urgent and would need immediate attention like medications and car repair, something that can wait some time like home renovations and improvements or something that is not really that important like splurging in shopping and a luxurious vacation.

Since these loans are unsecured, the lender will not ask you to make any of your current assets or properties as collateral to the loan. You need not worry about your car or your house at risk of repossession by the lender in case you need to default the loan. But since you have a bad credit rating, the lender will have to ask you for a co-signer – someone whose credit rating is good and whose job and source of income is stable. This co-signer will have to shoulder your financial obligations once you default on the loan.

With so many financial risks that the lender has to cover for bad credit loans guaranteed approval, it is then expected that they “get back” by charging very high interest rates. Not only will this protect the lender’s money but will also ensure a return of investment. Therefore, if your purpose in taking the loan out falls in to the category of “can wait” or “not that important”, you may want to rethink your decision in borrowing money for that purpose. It is highly recommended that you work on restoring your credit rating first. After which, you can then take out a loan, enjoying a regular interest rate.