Many first-time home buyers do not have the standard 20 percent down payment and are faced with paying private mortgage insurance, usually referred to as PMI. You can figure out the amount of private mortgage insurance you will pay if they do not have a loan-to-value (LTV) of 80 percent or better. If you do [...]
How to Dispute Credit Report Problems Caused by Your Student Loan
Having an error on your credit report, especially on account of student loans, is a big problem. In the eyes of a lender, your credit score determines if you are a risk or if you will pay back the loan on time. Damage caused by mistakes on your credit report could leave you in a [...]
How to Get a Mortgage After Bankruptcy & Foreclosure
A bankruptcy and foreclosure are both very damaging to your credit and can make it difficult to get a mortgage. While the hurdles can sometimes seem insurmountable, it is possible to purchase a house after these events. Sometimes, however, a little patience and a lot of financial responsibility are required to do so. Wait as [...]
The Best Banks for Refinancing Home Mortgages
Refinancing a home mortgage is a huge decision. The fallout from the 2008 credit crisis was due in a large part to unsound home loans made to borrowers in precarious financial situations. Mortgage companies and banks have tightened their guidelines as a result. However, a few banks offer superior mortgage refinance products to qualified borrowers. [...]
What Is a Streamline Mortgage?
Streamline mortgages are refinances of existing, insured mortgages — usually through the Federal Housing Administration or the Department of Veterans Affairs. The loans are “streamlined,” meaning they have less paperwork and fewer procedures required to complete the refinancing. Conditions For A Streamline Loan To qualify for a streamline loan a borrower must have held, in [...]
As of 2009, you need a score of at least 660 to qualify for most mortgages, according to mortgage expert Michael Bluejay. Before the housing crash in 2007, you could obtain a loan with a bad score of around 580. Those with poor credit can still get a home loan, but you will have to show that you are turning around your financial situation.
The best way to qualify for a mortgage is to raise your credit score. Start by paying off as many outstanding loans as possible and dedicate yourself to paying your bills on time.
Government-backed loans are one of the best ways to qualify for a mortgage. Federal Housing Administration loans have no minimum score to apply, but your score determines how much of a down payment you need. Military members can get Veterans Administration loans.
If you do get a home loan with bad credit, make sure you have some equity in the property, according to Brandon Cornett of Home Buying Institute. Owning some equity lets you refinance at a later date and reduces your monthly mortgage payments—a few hundred dollars adds up to thousands over the life of a typical 30-year mortgage.
Any amount of money that you loan to an individual and yet do not receive back qualifies for a general write-off because it was once included in your income. When you write off a bad loan, you claim a tax deduction on the amount you did not receive. This allows you to recoup some or all of your loss through the deduction rather than waiting for the debtor to repay what he owes. The IRS then assumes the responsibility of collecting the remainder of the loan from the debtor.
Make a copy of the original loan agreement between yourself and the debtor. You must demonstrate to the IRS that you fully expected the debtor to repay the amount she borrowed.
Make copies of any proof that demonstrates that the debt is worthless. Although proof is not required, it supports your claim that the debt was once valid. An example of proof is a certified copy of a court judgment against the debtor for the unpaid loan balance.
Subtract any funds the debtor has already paid you from the total amount you originally loaned him. The resulting number is the amount of your bad debt deduction.
Enter the amount of your bad debt deduction in Part One of Form 1040 Schedule D, Capital Gains and Losses.
Write a statement to the IRS that includes any details about the loan that were not included in the original loan contract. If you do not have written proof that the loan debt is worthless, you may use the letter to notify the IRS of the reasons why you believe the loan is uncollectible.
Attach your written statement to Form 1040 Schedule D, Capital Gains and Losses. Include these documents with your taxes when you file your return.
Send the debtor a Form 1099-C, Cancellation of Income form, if the loan balance totals $600 or more. Once the debtor receives the Form 1099-C, she must include the unpaid balance of the loan in her annual income when she files her tax return.
A guaranteed unsecured personal loan is a special type of loan that, unlike bank loans, does not require you to have any collateral. They are designed for people who need short-term loans and do not have a home or car that they can use as collateral. This makes them useful if you have poor credit or only need a very short-term loan. When you need to get a guaranteed unsecured personal loan, the process to do so is very easy.
Visit your local payday loan store. In recent years, thousands of these institutions have sprung up all over the country. The primary benefit to getting a guaranteed unsecured personal loan at a brick-and-mortar store is that you will be able to complete the entire process and get your money all in a single visit.
Search for a cash advance loan website. You can find many websites that will provide you with a guaranteed unsecured personal loan. Once you complete the process, the payment will usually appear in your bank account in the next day or so.
Fill out the initial application. This will contain your primary contact information, as well as some basic information regarding your financial situation. In some cases, you may be required to give a secondary contact person that can be reached in the event that they need to contact you and are unable to do so.
Determine a repayment method. Depending on the method you choose, you may be given a few different options. In the case of a payday loan store, you will be required to leave a check behind in the full amount of the loan. When the loan comes due, the check will be cashed. If you go with an online vender, the amount will probably be withdrawn automatically from your bank account. In some cases, you may be given the option of repaying the loan over time.
A co-signer of another person’s auto loan may eventually want to be relieved of that agreement. If you are a co-signer and apply for your own loan, a lender might decline the request based on your high debt-to-income ratio. Removing your status as a co-signer lowers your debt ratio, which can result in a loan approval and increase your purchasing power.
Review the loan agreement for a co-signer release clause; the document may indicate if you are eligible to remove your name. Co-signer release clauses permit co-signers to take their name off the loan once the primary signer makes on-time payments for a set number of months. If you do not have the agreement, contact the lender to see if it will remove your name.
Ask the primary borrower to refinance the loan and, in the process, remove you as co-signer. If the lender does not allow co-signers to take their name off loans, contact the primary signer and express that you want your name taken off the loan as co-signer. The primary borrower must refinance the auto loan to release you from the obligation; this requires him to apply for and be approved for a new auto loan. A lender will check the borrower’s credit score and income before making a decision.
Confirm that you are no longer a co-signer by checking your credit report. If the primary signer qualifies for a loan on his own, the new auto loan supersedes or pays off the original one. Check your credit report after a couple of months to confirm that the original loan — the one for which you co-signed — is paid. Get your report from AnnualCreditReport.com.
When you have served in the military, you can receive several benefits, such as the ability to get a loan through the Veterans Administration. If you have bad credit, you may fear that you will not be able to qualify for a VA loan. However, with this kind of loan, you may be able to qualify even if your credit is not the best.
Credit Score Requirements
If you are interested in qualifying for a VA loan, you do not have to meet any specific credit score requirements. Each lender has its own requirements for the minimum credit score that it will work with. As a general guideline, if you have a credit score of 570 or higher, you could qualify for a VA loan. With most mortgage programs, your credit score must be much higher than this to qualify for a loan. This allows those who have had credit trouble in the past to qualify for a loan.
When you apply for a mortgage, lenders will look at your debt-to-income ratio to determine if you are eligible for a loan. With most traditional loan programs, you must have a debt-to-income ratio that is lower than 36 percent of your pre-tax income. This includes all forms of debt other than your mortgage payment. With the VA loan program, you can have a debt-to-income ratio of 41 percent and still qualify for a loan. This allows those with a little more debt on their record to still qualify for a loan.
If you have filed for bankruptcy, you may think you cannot qualify for a mortgage of any kind. While this may be true with a regular mortgage for several years after filing, the VA allows consumers to apply for a mortgage much sooner. If you filed for Chapter 7 bankruptcy, you have to wait two years before you can qualify for a VA mortgage. If you file for Chapter 13 bankruptcy, you only have to wait one year before you can apply for a loan.
The reason that lenders are willing to lend to individuals in these situations is because of the guarantee that is provided by the Veterans Administration. With these types of loans, the VA stands behind them and guarantees them for the lender. If the homeowner defaults on the loan, the VA will pay back a certain amount of it to the lender. This lowers the amount of risk involved for the lender and makes it a much more attractive deal for them.
Generally you can get an unsecured loan if your credit rating and income are suitable to a prospective lender. Unsecured loans are generally harder to get than loans secured by collateral such as personal property. Unsecured loans pose more risks to lenders since they have no tangible property to secure the loan. Typically, unsecured loans have higher interest rates and less favorable repayment terms as well.
Much of the work necessary to getting an unsecured loan, especially one with a good rate and terms, takes place long before you go about getting one. Since no collateral is in play, lenders are mostly concerned with your credit history and income. Your credit score tells the lender about your reputation and success in paying off other loan commitments. Your income and debt ratio analysis helps the lender determine your practical ability to repay the loan. Financial responsibility is the best way to get an unsecured loan when you need one.
The first thing to do when seeking an unsecured loan is to compare the rates and terms offered by various lenders. You can often do this through lending sites online that allow you to search rates of various lenders at once. You can also go to individual bank and lending websites to learn about their personal loans and rates. Most lenders also tell you what is required to get an unsecured loan.
Once you have identified a lender or a groups of lenders you are considering for a personal loan, complete a loan application. Applications typically ask for your basic contact information including Social Security number for a credit check, total income and bank information. You can often apply online or in a bank or lender’s branch office. Small, short-term loans are often reviewed within a day or two. Higher amount, longer-term loans may take several days or weeks to review.
Once lenders review your loan application, they indicate they are able to offer you financing or reject the loan. An offer for financing would likely include a maximum loan amount, interest rate and possible options for repayment. Even if a lender offers you an unsecured loan, you may not want to accept it if the interest rate and repayment terms are not financially wise. You have to consider your benefits of getting the loan against the short-term and long-term financial consequences of acceptance. If you agree to the loan, you complete paperwork to close on it.
Foreclosure alternatives are plentiful, but each mortgage assistance program comes with a specific set of stipulations. Loan modification helps homeowners afford the cost of their mortgage payments by permanently restructuring the loan. If you want to pursue a mortgage loan modification, research your options before applying for help. Failure to meet the terms of the modification program can result in foreclosure.
Loan modification is a viable option for homeowners with predatory mortgage loans and those experiencing significant financial hardship. Loan modification is a procedure for changing the terms of your mortgage loan so that it creates affordable payments. For example, your lender might agree to extend the life of your mortgage loan or add your past due amount onto your principal to bring your mortgage current. Actions taken by the lender vary based on your situation. However, there are minimum requirements you must meet before submitting a modification proposal.
To qualify for a loan modification, you must have a source of income. Lack of income means you are unable to meet the new terms of your mortgage loan. Changes to your loan do not become permanent until you undergo a trial period. During this trial period, lenders assess your ability to make timely payments. Lenders request documentation of your income in the form of pay stubs unless you are self-employed. If you are self-employed, copies of your recent tax returns and bank statements may be required instead.
Loan modification is not a luxury. You must have documented financial need to qualify for the program. Whether you are already behind on your mortgage payments or in danger of falling behind, lenders use your household budget information to make a determination of your level of need. The goal of your budget is to illustrate how lower payments will help you regain financial stability. If your budget indicates you are unable to make the new payments as a result of overspending or too much debt, you may be denied a loan modification.
If your property is a second residence or investment property, it is not eligible for a loan modification. Loan modifications are reserved for homeowners attempting to save their primary residence from foreclosure. Pursue alternative mortgage assistance options for help with second residences. Fewer resources are available for homes that are not your primary residence, but some options exist. For example, you may qualify for forbearance on your mortgage loan if your financial hardship is temporary. Forbearance occurs when your mortgage payments are temporarily suspended or reduced.
Disabled American citizens are often at the mercy of government programs as they are unable to work and struggle to find affordable housing. While there are many private low cost programs designed to help low-income borrowers, the best place to begin a search for a mortgage grant for a disabled citizens is at the federal level.
Disability.gov is a government website designed specifically for disabled citizens seeking assistance with employment, housing, education, health care and civil rights. (Find a link in the Resources section.) In addition to Social Security and disability payments from the federal government, this arm of the government provides a customized, affordable housing service for those suffering from a physical or mental disabilities.
CHSP, or Congregate Housing Services Program, is a government program that offers financial assistance to elderly and disabled citizens who can no longer sufficiently afford housing. This program, which began in 1978, has provided mortgage and financial assistance to tens of thousands of eligible citizens. This program continues today with at least 51 participating organizations in the private sector. See the Resources section to check eligibility.
The CDBG, or The Community Development Block Grant Program, is a community-oriented government assistance program. The grants awarded by this arm of the Department of Housing and Urban Development are used by local communities to subsidize affordable housing and job creation. See the Resources section for eligibility.
USDA Rural Development
The United States Department of Agriculture offers assistance programs to provide housing and mortgage grants to rural residents with disabilities. Specifically, the USDA offers a direct loan program to qualified residents. These loans are low cost with low interest rates and give residents with disabilities the opportunity to own homes.
The Veterans Affairs office similarly offers mortgage loan programs to disabled veterans. Such programs are government-sponsored, but they are managed and executed by qualified private lenders. The mortgages available through the VA program are low cost and geared toward extending homeownership among low-income communities.
Homeownership allows you to build equity in an asset and re-build credit by making timely payments. If you have a credit score lower than 500, it will be very difficult to secure a mortgage loan. Private investors, credit unions and co-signers, however, make securing a loan a possibility. Since lenders use “risk based lending,” interest rates on these loans will be significantly higher.
Contact a mortgage broker. Ask the broker about private investor loans for high-risk borrowers. Investors pool money to provide loans to people struggling with poor credit.
Apply for a mortgage with credit unions. Credit unions usually make loan decisions at the branch. If you have special circumstances, such as serious medical illness or struggles with job loss, the lender may consider these circumstances. It’s important to focus on what you’ve done to turn your credit around. For example, for the past 12 months you haven’t had a late payment on any debt obligation. Or, after being unemployed for a year, you’ve been working for the past 13 months.
Secure a co-signer. If you’re experiencing a challenge securing a mortgage, ask the lender about using a co-signer. A co-signer is a person with good credit who will also put her name on the loan. If you default on the loan, this person is on the hook for the debt obligation.
Ask about fees. Even with poor credit, some fees are worth negotiating. For example, fees handled in-house, such as application fees or processing costs, are the most negotiable. Ask the lender to reduce or waive these fees to minimize closing costs.
Refinance your loan to a lower interest rate product. After building a positive credit history, check on your credit score. A credit score can be obtained through an annual credit report. Ask the lender to refinance your loan to a lower interest rate product. Some lenders will do this to retain your business.
The first and most important step in buying a home is getting prequalified for a home loan.
Get a referral for a lender or mortgage broker from a friend, relative, co-worker or real estate broker.
Provide the following information: gross monthly income and total monthly payments (car payments, minimum monthly payments on credit cards, child support payments and all payments you have to make every month).
Get your “ratios.” You or your lender can add all your debts together and compare that number to your income to arrive at your total debt-to-income ratio. Your percentage should be under 36 for the best interest rate. The lower the number, the better (see Related eHows).
Give your lender authorization to pull your credit report. The report should include a FICO (Fair, Isaac and Co.) score, which is the credit scoring system most widely used by lenders. (A credit score is a system of calculating the risk of lending to you based on several factors, including how long you’ve been at your present job, your occupation, how long you’ve been at your present address, the ratio of your balances to your available credit lines, whether you are a home owner, the number of recent inquiries into your credit, your age, the number of credit lines you have, the years you have had a credit in the credit bureau database, and such derogatory items as bankruptcy, collections against you, foreclosures and slow pays.) A FICO score of 680 or better is considered “A+” (excellent), and with good ratios and other positive factors should get you the best interest rates available.
Have a lender prepare a letter of prequalification for you. The letter should state that your initial financial and credit information has been reviewed and looks good, though it will also state that the letter is not a guarantee of a loan.