Mortgages for people with bad credit are doable, you just have to know a few simple tricks of the trade to get what you want. Well, maybe not tricks of the trade but a few simple tips can help.
Start out by finding the best real estate deal you can. A nice property with some equity in it would be an awesome find for you and may make the lender you choose to go with more likely to finance the property for you. A property with built in equity can be just as good as having a down payment to some lenders. It just depends on the property’s loan to value ratio. Talk to your lender of choice to see if this can assist in qualifying you.
You must always keep in mind that the lender would love to make a loan, that’s how they make money. But they want to feel confidant that they won’t be stuck with a bad loan. Anything that you do to take away some of their risk will make you a more attractive candidate for a loan.
If the home you are trying to buy is worth more than you want to borrow, the lender is assuming much less risk than if you are financing the total value of the home. For example, if you buy a $100,000 home with little or no money down the bank is on the hook for the full $100,000. That gives them less wiggle room for selling the home and recouping their investment if you default.
But if you go to the bank with a deal for a home valued at $100,000 that you can buy for only $75,000 they are on the hook for much less and would have a much easier time of selling the property and recouping their total investment (including fees) if you were to default. Ultimately the bank is looking out for the bank so do whatever you can to lessen their exposure and you’ll have an easier time of getting a loan.
Another way to qualify for mortgages for people with bad credit is to ask the seller to carry back a second mortgage on the property. An agreement is contracted between you and the seller to have you make payments, with interest included, on $10,000 to $20,000 of the listed price of the property as a second mortgage. The seller may balk at this unless you sweeten the deal by putting in the contract that the whole amount will come due by the end of two years. This tactic gives you time to save for the balloon payment or find someone to refinance so the seller does not feel stuck.
At the end of the day the one thing you need to keep in mind when it comes to qualifying for mortgages for people with bad credit is that the bank wants to lend money so they can make money. Do everything you can to prove to them that they won’t have too much exposure to loss and they’ll be much more likely to deal with you. It’s just a business, approach it that way and you’ll likely succeed.