The following are handy bits of advice about getting a bad credit mortgage:
Here s a tip: Don t take out a mortgage Indemnity Guarantee (MIG) if you can avoid it. MIGs are generally charged when the loan to value rate is perturbing to the lender, or as a way of making more money from you, if you get it from the same company.
MIGs should be used if you have little or no deposit. If you can come up with a 20 or greater deposit, you can avoid paying this extra premium.
Watch your credit report. There are four major bureaus, three of which will be pertinent depending on whether you re in the UK or USA: Equifax, TransUnion, CallCredit and Experian. It is important to review your report at these agencies because they may contain errors.
Be aware that lending companies and banks become suspicious when you apply for new credit cards or close current accounts at the same time as applying for a loan; are you trying to borrow all over town, or put your deposit on your credit card?
It s a good idea to pay off all outstanding debts before applying for a bad credit mortgage, if you can. Having regular earnings backed up by paperwork is also reassuring to a lending company, so try not to change jobs or quit your current one before applying.
A bigger deposit means a lower interest rate. Aside from a deposit, you have to consider other expenses such as closing costs. It may be worth considering lock in fees to guarantee that you still get the same rate should interest rates rise in the general market.
Assess your current financial situation, figure out your debt to income ratio, and thereby determine how much you can afford to pay for the property. Be honest when filling out your application; you re doing yourself no favours by getting a loan you can t pay back, and may be laying yourself open to charges of fraud. Also, no lender will then want to deal with you from there on.
You can get a bad credit mortgage even if you have been made bankrupt, have CCJs, arrears, hire purchase defaults or IVAs; it s just that you ll have to pay more. Therefore it makes sense to settle your debts before any of the aforementioned arise; a missed payment on a car may cost you dearly when it comes to buying a property later on.
You may be surprised to learn there are brokers out there eager for your custom, even if you have bad credit. Why? Because they can make more dosh from you! This is especially true if you re borrowing to buy property; the debt is collateralised against a good that can be sold off if you get into trouble with your payments. They get their lolly back, regardless.
However, finance companies don t like to repossess if they can help it; it s too much trouble. They d rather have the cash. This allows you some wiggle room to re negotiate.
As with so many other things you buy in life, there s a price point below which you ll not be getting a good quality product. See for yourself: get a few quotes from different bad credit mortgage providers. Some can shave a half percent here or there, but you may pay it back with insurance, fees, or potential penalties later. Read the small print.
Any lender s or broker s site on the world wide web you find should be scrutinised according to the following checklist: Has it got an official registered company name? Has it got a registered office? Has it got a street address, rather than a Suite or a P.O. Box? How long have they been in business? Has it got a regular telephone number? How quick are they to respond to your questions? How far away are they from you physically? Are broker s officers mentioned by name on the web site?
Once you ve settled on a few bad credit mortgage companies, you can enter their business name in a search engine along with words like problem or scam , and see what, if anything, comes up. |
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