Obtaining a Mortgage with Bad Credit
Borrowers who have missed loan repayments and defaulted on credit cards often find it a challenge to secure a home loan. While obtaining a mortgage can be hard with bad credit, it is not impossible.
These are some strategies from Message in the Waves that could help a borrower with bad credit secure a suitable home loan.
Refinancing a Mortgage with Bad Credit
Credit histories, home equity and debt-to-income ratios are some of the key criteria for refinancing a mortgage. Those with bad credit or a poor credit history should start by finding out their credit score.
Depending on the lender, borrowers with bad credit could still secure a suitable refinancing deal for their home, reported MSN Real Estate.
Find the Perfect Mortgage Broker
Mortgages or home loans are complicated products, especially for a first-time buyer. An experienced mortgage broker can be an excellent advisor in this respect.
It has been said that finding the right broker means that half the buyer’s work is done. Here are some useful insights for finding the perfect mortgage broker from the Home Loan Experts.
Different Types of Low-Documentation Home Loans
Traditional home loans come with strict requirements in relation to supporting evidence, but low-document home loans are different. Low-doc home loans, as they are known, are non-traditional mortgages that can be accessed by the self-employed, contract workers and others who are not full-time employees.
Advantages
Low-doc loans rely on self-verification and declarations by the borrower. As such, they are suitable for people without sufficient paperwork to apply for a traditional home loan. However, low-doc home loans can attract higher interest rates and fees, according to Small Is Beautiful.
How to Get a Bad Credit Home Loan
Bad credit home loans are an option for those with bad credit histories, as these borrowers usually have trouble securing a standard home loan.
Here are some of the issues to review when considering a bad credit home loan.
Home Loan Repayments
The home loan is often the largest financial commitment that a household will have. Households can save on this expenditure item by good planning and using strategies to pay off their mortgage earlier. In doing so, homeowners can save thousands or more on interest payments.
Offset accounts
Offset accounts are everyday or savings accounts that are linked to the mortgage. The balance held in the offset account helps reduce the amount of interest payments charged on the mortgage.
Lenders Tighten Lending Criteria
The Financial Times recently reported that private lenders in the UK might be tightening up their lending practices, especially in the area of dry lending or lending to borrowers who have no assets for the lender to manage. For example, SG Hambros has stopped dry lending except where borrowers transfer assets under management (AUM).
Some private banks might require borrowers to shift their cash and other assets to the lender when their mortgage is granted. This could be part of an agreement that lets the borrower access cheaper interest rates for a fixed period of time. Others may be able to access relatively cheap rates even if they do not have AUM but have a good prospect of being able to transfer AUM in the medium term, reported Anderson Harris.
The Benefits of Bridging Loans
A bridging loan can be a viable option for those who have found their perfect new home but are unable to sell their existing home as quickly as they would like. The loan can be used to ‘bridge’ the time gap between these two event, so the homeowner can buy the new residence and take time to find the right buyer for their old home.
Bridging loans
Bridging finance became widely used after banking de-regulation. They are similar to other types of loan in that they have an interest and principal component. In a bridging loan, the borrower might be required to pay only the interest component in the time leading up to the sale of their old property.
Bankers Optimistic about Small Business Lending
According to the latest data, lending activity in the US has been steadily improving. The industries experiencing growth include energy and energy-related fields, manufacturing and transportation. Agriculture is also recovering, partly due to the positive forecast for this year’s yields. This has had a flow on effect to the American dollar, which has in turn influenced the global economy rates.
Optimistic bankers
Surveys have revealed that more than 60% of bankers think that lending will continue to improve; only 20% thought that lending would remain at the same levels,.
How Small Business Lending has Changed
Small business lending has declined since the global financial crisis, particularly in the US. This trend has been driving by different factors and has had a big impact on small business, as lack of access to capital can limit expansion for small businesses.
The decline of small business lending
In the fourth quarter of 2012, the value of commercial and industrial loans was at 78.4% of what it was in the second quarter of 2007, after adjustment for inflation. The number of total business loans dropped by 344,000 from 2007 to 2012. By contrast, nearly 100,000 new small businesses entered the economy in the same period.