Home ownership has been a long standing staple of the American dream. It is one of the most fulfilling, valuable purchases a person, or family, can make, and it almost always involves getting a loan from a bank. To get that loan you usually need to have good credit right? No, bankruptcies, foreclosures or otherwise possibly negative marks on your credit report. Fortunately, that is not the case. Owning a home with bad credit is not out of the question once you’ve been forced to file for bankruptcy or foreclosure while you were down on your luck. This week we will highlight a couple of programs dedicated to helping you become a home owner again.
Gather your tax returns, pay stubs, bank statements, past W-2s. You’ll also want to be sure you have documentation of any assets, savings accounts, stock, or bond investments; as well as your liabilities, standing credit card debt, student loans, or car payments that you’re making. The goal is to convince lenders that despite the past, you are now a good candidate for a home mortgage, and in the process of gathering these things you will also likely get a better idea of whether or not you can afford a mortgage, and what you budget may be
If you have anyone willing to co-sign a mortgage with you, it can make a world of difference, and be an important tool for negotiating better terms for your mortgage. Keep in mind though that as far as your lender is concerned, they are essentially a co-borrower. If you default on your payments they will be held liable as well, and it will reflect on both of your credit statements.
If you’ve found yourself in a position where you need someone to give you a second chance to own a home, it’s likely that an FHA (Federal Housing Administration) loan is your best bet. FHA Loans are essentially mortgages that are insured by the federal government. Because they are insured by the government, they do not follow the stricter guidelines used by other mortgage lenders. Borrowers who have filed for bankruptcy, undergone foreclosure, and who have high amounts of debt on their records are all eligible to apply. FHA loans also have the benefit of requiring a much smaller to down payment, which can be as low as 3.5 percent, as opposed to others which can be as high as 20 percent.
Subprime loans are your second option. For borrowers who are viewed as a risk by major financial institutions, subprime loans are an available option, but may come with some downsides. One of the first and consistent of these is a higher interest rate. This is due to something called risk-based pricing. Essentially, if you think of the interest rate as how much a financial institution will charge you to borrow money from them, the more of a risk you appear to be, the more they will charge.
Subprime loans also tend to have a couple of penalties in case, to ensure that the borrower pays the loan in full, and discourage people from taking advantage of these programs to turn around and sell the home. The first of these is called a balloon payment penalty. It requires buyers to pay off the loan in full in one lump sum, refinance, or undergo at the end of the term. The second is a pre-payment penalty, which subjects the borrowers to fees for paying off the loan in full before the specified term has ended.
Have questions on financing or need some direction, give us a call at (210) 588-9999. And as always if you need to sell house fast San Antonio, we can help. Click here for more information:
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