How to get a Home Loan with Bad Credit
This article and video covers when and when not is the right time for getting a mortgage, what to do if you have bad credit and need a mortgage, as well as the alternatives to a mortgage payment that you could consider. Also included is how you could easily repair your bad credit score which may even have occurred without your knowledge!
#1 – When is the right time for getting a mortgage.
If you are planning on living in a certain location for the next five to six years, then this is a good time to purchase a home.
However, if you have just left college and don’t know where you will be working for the long term yet, wait and rent until you have some certainty in your life.
You have to work with a mortgage broker or loan officer that broker out to many different banks and is doing high volume. If you walk into a bank, they will always want to pre-qualify you for some type of loan but the bottom line is, that is just one bank. Not all banks are the same.
#2 – Is it possible to get a loan with bad credit?
A lot of people really want to know the answer to that question because of being a negative credit score situation.
Let’s talk about the Why.
If you go directly to a bank or you walk into the bank that you normally use, they’re always going to want to offer you and pre-qualify you for some type of loan. But the bottom line is that’s just one bank, and not all banks are the same. They weren’t all created equal and they have different rules.
So, I recommend number one, going to a broker that works with 20, 30, 40, 50 different banks.
Now, they’re not going to work with that many unless they’re a serious operation doing high volume.
You may want to ask, how many hundreds of millions of dollars’ worth of real estate do you broker out each year?
If they give you a funny look like “are you crazy that’s a lot of volume,” that’s not your loan officer likely that can find the right option for you. Because there are banks out there that work with people that do have bad report credit.
(After two or three years of paying that mortgage, which may have a higher interest rate than you want to pay initially, you could always change mortgage companies. By this time, you will have build-up a good credit rating and therefore afford to be more selective in the mortgages you will could accept. It’s not an ideal way of getting on the housing ladder but within two years, you will very likely have accumulated collateral as well as improve your credit score.
For more information on Mortgage Brokers UK, Europe, Canada and USA, check the following associations.
UK – Association of Mortgage Intermediaries (AMI)
The Association of Mortgage Intermediaries (AMI) is the trade association that represents the views and interests of UK mortgage brokers
Europe – EMF
Secretary General, Launched in 1967, the European Mortgage Federation is the associations and individual mortgage lenders from the EU Member States.
Canada – CMBA
CMBA provides Canada’s provincial mortgage broker associations with a forum to work cooperatively and better share resources and information.
USA – NAMB – Association of Mortgage Professionals
Represents the mortgage broker industry in the United States. Presents the mission and staff, board of directors, member resources, education and certification.
3 – Credit Fix
Second thing I want to talk about is, what do you do if you have bad credit to actually get it fixed?
How important do you think credit is?
Well, I mean in this day and age, it feels pretty important.
How long do you think it would take to fix your credit?
8 years? But I believe it would probably take at least, maybe a year.
How do you fix bad credit?
By paying your stuff on time.
This strategy really comes down to doing some credit maintenance.
3b – Credit Maintenance
Sometimes we’ve got hiccups, sometimes we’re late on a payment and then all of a sudden we say, “I’ve got to get serious about qualifying for a mortgage.”
Even if you’re using your credit to buy a lot of real estate (purchases, such as electronics, cars, etc) the way I have in the past, you’re going to need to do maintenance; so whether you call it repair or maintenance it’s good to find the company out there that you can trust.
This is not one of those things where less is more. You’re not looking for the cheapest program. You’re looking for a company that has been in business for a really long time, has worked with thousands of clients and the keyword is ‘attorney’ (or solicitor). If an attorney is involved it’s more of a legitimate program and what they’re doing is they’re using a nice little strategy.
There’s a couple of strategies that I want to share with you and #1 is, they’re going to challenge the inquiries.
For example, I remember that one time I was trying to qualify for a mortgage and I found out that my credit had dropped in the last 90 days by 50 points and I was alarmed.
And when I found out why it’s because that last couple of months I had been shopping at the Gap, at JC Penney’s, or wherever and they kept offering me that seductive 10% discount if I’d use the in-store credit card and applied for it. Well I didn’t know that every time I was getting that discount to save a few bucks that I was actually putting out an inquiry and that that would temporally drop my credit.
(What an eye opener for lot of people to discover that fact?)
So, the credit repair company I worked with… they challenged the inquiries. And by law if you send a challenge letter to whatever company did the inquiry, if they don’t report back within a short time-frame with the response and whether the inquiry was legitimate or not, then they have to drop it by law because the credit bureau has to report that.
Now, that’s really GOOD NEWS FOR YOU because most companies are not set up to take those requests seriously so they just kind of fall by the wayside and I actually saw my 50 point drop go back up 80 points and my credit got stronger, okay?
(If you live outside the USA, you could contact the Credit Advice Bureau in your own countries to confirm if this could be the case for your situation. The one thing it does is bring to light is the fact that we never know what is happening to our credit score when we accept one of the store cards! Nearly every store offers one.)
Find a good credit repair company.
But here’s the third thing… if you find a broker that doesn’t have a bank that can give you an option and if credit repair is going to take too long for your needs, then your third resort is to do seller financing.
3 – Seller Financing
(Seller financing! Also called ‘Rent to Own’.)
Seller financing is basically where someone else already has the house that you want and instead of selling it, they’re actually willing to finance you the house. Now, that’s really neat because they’re not a bank and they’ve got different criteria. They might ask for a little bit of a different down payment, they might ask for a higher payment. Seller financing is an amazing strategy for actually walking into the house that you want.
How do you Find Properties for Seller Financing?
What you do is you go through the paper, find the house that you want, typically seller-financed are not presented by realtors. And so, if you have a “for sale by owner” you can call them up and say …
“Hey, I’m not in a position to buy your house but would you rent it to me or would you do a lease option and work with me until I can buy it in a couple years because I’m doing a couple of things with my credit?”
And there’s a lot of people out there that are willing to do that and guess what, you’ve just negotiated yourself right past the bank by using the person that has the mortgage, has the bank, and boom you’re right into your house.
Now, here’s the hidden strategy with this really great deal that if you seller finance yourself into a deal, you want to negotiate it where they’ll actually put you on the title.
Because if you’re represented on the title for at least two years then after two years you can actually refinance onto the house.
Now think about that, you basically back-doored yourself into a super easy program that most banks will do because if they see you’ve been on title for two years then they’re going to say well why wouldn’t we let them refinance it. And qualifying for a refinance is way easier than qualifying for a purchase.
So what’s the big moral of the story?
Listen, if you’ve got bad credit, you’ve got options.
You can get into real estate and you don’t have to wait. If you need to wait or feel like that would be the best option for you, then just focus on doing some credit maintenance and some credit repairs and stick with it. That’s the key. Real estate done correctly is a long-term play, getting into a home, and having that slice of American dream is really key, so stick with it.
(The above text was taken from the video and is excellent information from Kris Krohn of Reinvestortv )
One comment I particularly liked:
“Great advice, Stay away from those card offer rewards!!!!!!
I don’t pay attention to those offers anyway!!!!”
(I would like to thank Kris Krohn, Founder & President of http://www.strongbrookinvestor.com/ for such great info, which I have been able to pass on to my readers with a few of my own view on this particular financial situation.). 🙂
For more information of the Rent to Own, visit https://en.wikipedia.org/wiki/Rent-to-own, where you will find that according to the History of Rent to Own, the concept first emerged in the United Kingdom and continental European countries under the hire purchase model.
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