5 Tips for Bad Credit Home Financing

1. Find a Good Deal on Your Home

You can start yourself on the path to home ownership by finding a good deal on a home. You may wish to consider looking in to foreclosures or other ways to purchase homes cheaply. Not only will this lower the cost of the home and consequently your monthly payments, but it will also be to your benefit to have equity in the property when you go to get financing.

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Lenders look at a particular figure, known as the “loan to value ratio” in addition to other factors like credit when you apply for a home loan. Equity in the home will give you a more attractive loan to value ratio which will facilitate financing in many cases.

2. Creative Financing Options

Many times, alternative options are available to help those with bad credit own their own homes. If you are fortunate enough to find them, some sellers offer seller financing and rent to own arrangements.

If that is not an option, perhaps the seller would be willing to consider holding back a 2nd mortgage to assist with allowing you to present a higher down payment to the primary lender. A larger down payment will make it easier to get approved for traditional financing in situations where credit is an issue.

3. Hefty Down payment

While you see advertisements for 100% financing all over the place, this is not easy to get approved for if your credit is less than perfect. Every little bit you can save to go towards your down payment will help with lowering your interest rate.

In many cases, it is even to your benefit to wait to purchase a home if you will be able to save more and come to the table with a larger own payment in the near future.

4. Compare Mortgage Options

When you actually go to apply for the mortgage, you will probably hear a variety of different answers and be presented with a variety of different rates and terms from various lenders. Ultimately, there will be some lenders who can help you while others can not.

Amongst these lenders, the interest rates available and terms will vary. Shopping around for a better interest rate can save you substantial money over the life of the loan and is very much in your best interests to do. Luckily, there are many online services that make mortgage rate shopping an easy task.

5. Credit Repair

Before you go to actually apply for a mortgage, it would be in your best interests to take steps to understand and repair your credit score as much as possible. It is easy to order your credit report and get your exact credit score.

It is also a good idea to go over your credit reports and look for any entries that may be incorrect. You can then dispute incorrect items prior to applying for your loan. Even this small degree of attention to your credit prior to a loan application can make sure that you present your best possible credit score to prospective lenders.

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