Bad credit home loans: Things you must know
An average American is running $7000 in credit balances and his average credit score is around 730. If you have a credit score less than this, you have slim or no chances of getting a home loan for yourself. But that doesn’t mean people with bad credit cannot have home loans. Had that been the case, half of the American population would have been homeless. There are a lot of myths and half truths that do the rounds and people do not have correct information on this front. Many think that credit repair is a must before applying for a home loan which is not true. They also think that to avail home mortgage loan, they need to pay off their debts.
All these notions make people with bad credit not exercising their option of availing a home loan. Yes, it is difficult for such people to get a home loan from banks but there are lenders who give loans to people with bad credit. These lenders are helping a lot of Americans with poor financial history to realize their dreams of owning a home. Here are some important points to know about bad credit lenders:
You need not worry if you have a bad credit score. It is possible for you to get a home loan or a home mortgage loan. We have helped a lot of Americans with poor credit scores to secure a home loan.
There is no need to first repair your credit score before going in for a home loan. However, it helps if you can repair the credit score.
Paying off old debts is not at all necessary to secure a home loan. It may look strange, but there have beeen cases where the lenders declined to give loans to those who tried to pay off old debts.
However, bad credit lenders do not distribute loans with eyes shut. They will not just approve all the applications they receive. They have their guidelines to follow and they do reject applications. The bad credit lender takes a risk while giving out loan to a person with bad credit score. As such, he charges a higher rate of interest than the banks, which is understandable.
We understand that a poor credit score does not necessarily mean that a person who avails a loan from us has no intentions of repaying the loan. But we maintain vigil and disburse loans only after satisfying ourselves about the credit worthiness of a person.
What bankers do not tell, and you must know
To have a dream house of your own is lot easier than it was a few years ago. Banks consider it to be safer to invest in home loans than in other types of loans, and they have made the formalities easy for anyone to come up and avail the home loan facility. Banks are even advertising to disburse a home loan which was unthinkable a generation ago. Now you do not have to toil hard to avail a home loan in India as it has been greatly simplified.
The first question that you must ask yourself is that do you really need a home loan. It is a long term process and you will have to pay monthly installments for a long time to come. There are certain things that the banks do not discuss with you but are important for you if you are interested in taking a home loan. Here is a short discussion that will enlighten you about these facts.
Amount of loan
You are the best person to judge your repayment capability. You may come up with papers that have inflated figures about your income, but in your heart of hearts, you know the EMI that you can pay easily. So do not take a huge amount of loan even the bank is willing to give it to you. It is only you who will be harassed when you find yourself unable to repay big EMI’s later on. Do not agree to an EMI that is more than 40% of your monthly income. If possible, reduce it further down to 25%.
Plan your future
Though it is true that your income will rise in future, but it is equally true that so will your liabilities. So make a fair assessment, and also keep in mind unforeseen expenditure that may come your way that you have not planned for. Do not base your EMI on the basis of your projection of your income after a year or so. You have the option of paying a higher EMI when your income really goes up. Alternatively, you can pay a lump sum to get the principal amount reduced. You can also opt to reduce the tenure of your home loan. If you have take a home loan on floating rate of interest, see to it that the banks charge you accordingly when the rate of interest goes down.
If you keep these points in mind, home loan will never become a bother for you.