Buying a Home with Bad Credit

If you have bad credit, you don't necessarily have to sacrifice the dream of owning a home. Mortgages aren't reserved for only those with good credit.

If you have bad credit, there are home loan options out there. But keep in mind, the worse your credit situation, the higher the interest you will pay. Your interest rate affects your buying ability, your monthly payment and the overall amount of money you repay the lender.

Sub-prime loans are available to potential home buyers with bad credit. These loans consist of two parts. The first part is the down payment. The down payment shows the lender that you are serious about repaying your mortgage. You have now invested your own money into the home, which makes it in your best interest not to default on the loan. The higher the down payment, the lower your interest rate may be. Large down payments look really great to lenders. If you think your credit may disqualify you from a mortgage, a nice down payment will definitely put you back in the running.

You should have at least 20% of the potential purchase price reserved for a down payment. Any less will mean that you will have to pay extra for private mortgage insurance to protect the lender in the event that you default on the loan. You are already facing a high interest rate, so don't add any more to your monthly payment than necessary. Pay at least 20% down on your mortgage.

But don't forget that you will also need money for the closing costs and other various expenses. Lenders like to see that you have enough to cover your down payment, your closing costs and your first monthly payment in your savings and checking accounts. Really building up your savings will counter your poor credit situation.

The second part to a sub-prime mortgage is the actual home you have chosen. Most lenders approve you as a borrower, but they still have to approve the home. The home must be appraised by a licensed appraiser, who will report the value of the home to the lender. The value must meet or exceed the amount you are hoping to borrow. If it doesn't, you will have to come up with more money out of your pocket or find another home.

In general, you will find that there are few differences between a traditional mortgage and a bad credit mortgage. Those with bad credit will need a larger down payment and will probably be required to answer more questions and fill out more in the application process.

Many advisors will tell you to wait until your credit score has improved -- usually two or three years. This will get you a lower interest rate. Some say go ahead and get that mortgage now. It will help you rebuild your credit. If rates stay favorable, you can always refinance in two years for a lower rate.

No matter if you are taking out a bad credit loan or a great credit loan, keep in mind that you have to be able to afford the loan. Take the time to shop around for a sub-prime mortgage. Compare rates and terms to find the most favorable loan. You can save a lot of time and money by simply shopping for your loan first and your home second. Know what you can and can't afford. Know what your bad credit will cost you and consider all of your options carefully. You may find that it is a good idea to buy right now. Or you could find that you should go ahead and wait a few years while you repair your credit. Keep your goal in mind. You don't have to sacrifice owning your own home just because you have bad credit.

Martin Lukac http://www.MartinLukac.com, represents http://www.RateEmpire.com, an Internet consumer banking marketplace.

5 Easy Steps to Rebuild Your Credit after Bankruptcy

Bankruptcy often is the last ultimate solution for many debtors who have unbearable debts. With filing a bankruptcy, you will get rid of your debts instantly and relief you from the harassing call of your creditors.

Although bankruptcy has many undesirable consequences such as your bad credit record will remain on your credit report for 7-10 years, but with a little work, you can improve your credit even before these negative records expire. Here are five easy steps you can take to rebuild your credit.

Step 1: Get to know your current credit status

The first step to rebuilding your credit is to look at exactly where you stand. Order all your three credit reports from those three national credit bureaus: TransUnion, Equifax, and Experian. You can order these reports online, it easy and secure.

Print each report and review it closely. Try to understand the information listed in your credit reports and highlight any negative records or inaccuracies that are damaging your credit score.

Step 2: Check the expiration dates

By law, your bad credit record will remain in your credit report for 7 to 10 years, but the exact expiry date might be different among these 3 reports. Your bad record will still remain at your credit report although you have pay off your old debts and discharge from bankruptcy.

Look up the exact date of each of bad records including judgments, liens, charge-offs, late payments, bankruptcy filings, and collection records. You will likely see a major improvement in your credit score when these records expire.

Step 3: Request For Correct On Any Inaccurate Records

If you find inaccurate records, fraudulent accounts, or records that should have expired on you credit reports, you have the right to send a separate dispute letter to each of the credit bureaus to correct your Equifax, Experian, and TransUnion records. The bureaus will initial a 30 days investigation to see whether your requests are valid and if so, they will correct the inaccuracy in your credit report.

Just one note, don't try to dispute any of the positive information listed in your credit reports and it is a waste of time to attempt to dispute these records. Disputing positive information may actually harm your credit scores.

Step 4: Start to create good credits

Since there is no way to remove your bad record from your credit report, the best way to improve your credit score is to add good credits and building up your credit from there. You can easy do this by open up a new credit card from banks like Orchard Bank (Orchard bank has credit card plan designed specially to help people rebuild their credit after bankruptcy).

Use this new credit card responsibly and make the monthly payment timely; with this you are building new history of good credit behavior on your credit report. Over time, you may want to open additional credit card accounts or obtain a loan to boost your credit score even higher.

Step 5: Monitor your progress

Subscribe to a credit card monitoring service or get a credit card monitoring software and use it to track your credit score progress closely. Your credit score should improve steadily as you continue to use credit responsibly and add new positive information to your credit reports.

Summary

Bankruptcy does not need to chain you to bad credit for the next seven to ten years, but you have to be proactive in order to recover and rebuild your credit.

Cornie Herring is the Author from StudyKiosk.com.

Easily Raise Your Credit Score

When it comes to your credit score, you can always work to increase it. Today's world seems to revolve around your credit score. It affects so many parts of your life -- your apartment, your employment, your insurance premiums and your ability to borrow money. A good credit score enables you to purchase a home, get a cellular phone, pay less on your interest rates and easily find credit.

Your credit score is also frequently called a FICO score. The score tells lenders what type of borrower you are. If you have a high score, it says that you pay your debts on-time and as promised. A low score says that you are at risk for not paying your debts. FICO scores range between 300 and 850.

Credit scores reportedly focus on the last two-years of your credit report. They will consider all of your information, but the main focus is on the most recent. This gives you the ability to increase your score fairly quickly. Yes, it still can take up to a year to see great results, but they are well worth it.

Your credit score is based upon:

• Payment History -- 35%
• Availability of credit and usage -- 30%
• Duration of open accounts with creditors -- 15%
• Credit inquiries -- 10%
• Composition of your credit file (the type of debts you have) -- 10%

The good news is that while it takes some time, the steps to improve your credit score are quite simple.

Start will getting a copy of your credit score from each of the three main credit bureaus: Experian, Equifax and TransUnion. Review each report for inaccurate information. Most people will find a mistake on their report at least once in their lifetimes. These mistakes can lower your score and cost you a lot of money in interest, so it is important to make sure your report is accurate.

Once your report is accurate, start paying your bills on time each month. This is the main thing that will raise your score. Late payments will lower your score faster than anything else. You have to pay on time, every time.

Take steps to lower your debt as much as possible. You want to have at least 50% of your credit unused. That means if your have a limit of $20,000 on your credit cards, you don't want any more than $10,000 charged on them. In fact, lower that as much as you can. The less you owe, the higher your score.

Pay on time and pay off as much as possible. These two methods will help you raise your score easily. Not only will it increase your score, but it will save you lots of money. You won't have late fees to pay, you will have fewer bills to pay towards debt and you will get better interest rates from lenders. There are many advantages to having good credit, and anyone can have good credit. It just takes a little work and a little time.

Martin Lukac http://www.MartinLukac.com

Repair Your Credit History Yourself

Don't let previous credit problems slow you down. Regardless of your credit past or present you can safely and easily repair your credit history yourself. Nobody can do more than you can do yourself with information available from your local credit bureau. There is no credit repair clinic.

It's worth pointing out that credit reports are not just "good" or "bad"; there's all sorts of shades in between. For example, if your credit report shows credit problems two years in the past, but an excellent payment history since then, then a creditor may decide that the recent history is more important.

If you feel that some of the entries on the credit report are unjustified, then by all means dispute them. Any consumer has the right to dispute inaccurate information at no charge. This is the law. But you should be concentrating on rebuilding a good credit profile in the present by making payments promptly, rather than concentrating on past events that you can't control. And be forthright about your situation.

When you apply for a loan, don't wait for the creditor to pull your credit report and see the damage; attach a letter saying "Here's what happened to me, and here's what I'm doing to make sure it doesn't happen again." This sort of honesty can go a long way with some creditors; and the creditors who would reject you on the basis of such a letter would almost certainly reject you on the basis of negative credit report information anyway, so you've got very little to lose.

Larry is a frelance writer intersted in items such as credit repair