Business & Finance Credit

Poor Credit Mortgages - Improving Your Record

Despite a low credit score, you can still get a mortgage on your home.
These are what poor credit mortgages are meant for.
There is actually a rather simple process you could follow.
You have to understand how the process works and what lending institutions are right for you.
The very first thing for you to do is to get an updated copy of your credit report.
See if everything on your record is accurate.
If for instance, an old loan that you have already paid for in full is still listed as only partially paid, and for whatever other inaccuracies you can find, you have to clear those up.
Errors like this on your record will bring your credit score down.
You can ask a credit bureau to put in the corrections but it can take some time and could make you miss out on a mortgage.
Ideally, your credit report should be checked at least twice a year in six-month intervals.
When making a request for corrections, you have to do it in writing, even as you present documentation to prove that the data in your credit report is erroneous.
After you've settled your credit report, estimate your debt-to-income ratio, or how much income you make every month in contrast to how much you pay for your debts every month.
Creditors will need this to determine whether to give mortgage and how much money they will lend to borrowers.
Creditors utilize a point system to facilitate in establishing the eligibility of a mortgage applicant on the basis of the debt-to-income ratio.
This is done by dividing the applicant's entire debt by his or her yearly income.
A small quotient is favorable to the applicant.
Should it be larger, an applicant could work something out to trim down his or her debt-to-income ratio.
This can be done by cutting down on spending and allotting a bigger amount towards debt payments.
This could take some time but it is better to have done this before presenting the mortgage application, being rejected, and adding another negative mark on an already poor credit.
Lenders who give poor credit mortgages need to protect their investment just in case a debtor defaults on a loan.
They get this by way of a mortgage loan insurance.
Down payments are typically obligatory when getting financing on a mortgage loan.
Most mortgages finance just 80% of the total price of a home.
Those seeking to buy homes through mortgage have to come up with the remaining 20%.
But if a homebuyer cannot come up with the money, mortgage lenders will propose an 80/20 piggyback mortgage loan.
The idea is quite simple.
If a home-buyer cannot provide the 20%, he has to buy private mortgage insurance or PMI for the financing to push through.
Normally, PMI will raise mortgage payments by a hundred dollars.
But if a PMI is not requisite in the 80/20 home loan, then the buyer will get two separate loans for financing the purchase of a house.
One mortgage will finance 80% of the cost of the house, while another mortgage will cover the 20% balance.
A piggyback loan is ideal for a first-time buyer.
Young newlywed couples who don't have much cash reserves yet can also make use of this loan system.
By doing this, they don't have to wait long before getting a home of their own.
This way, they do not have to put off buying a home.
Poor credit or no credit, the dream of living in a house of your own, even though you got it through poor credit mortgages, does not have to remain a dream.
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