Home Purchase Loan

By: EconomyWatch Content   Date: 17 December 2009

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Owing to increasing foreclosures, banks have tightened their restrictions on home loans. You need a credit score of at least 650 to qualify for a home loan. However, there are still many options that people with bad credit can use to get a home purchase loan.

Home Purchase Loan: Do-it-Yourself Approach

One can implement the following strategies to get a home loan despite bad credit:

  • It is important to know the documentation and financing requirements for qualifying for a mortgage loan. A loan officer or mortgage broker can help you with that. You will be required to improve your credit and submit evidence of your income and ability to pay off the loan.

  • One way to prove a healthy payment history is using non-traditional sources. For instance, you can make timely payments towards utilities, rent, cable, electricity and cell phones. Obtaining receipts for at least the past 12 months from all the merchants will help you stand in good stead in terms of credit.

  •  If you had suffered pressing conditions in the past, such as divorce or sickness, which led to a bad credit history, you can write hardship letters to the underwriter. Also, mention how you plan to correct the situation and what endeavors you have made till now to improve your credit. This will enable the underwriter to take a fair decision.

  • Enquire about the availability of down payment assistance programs. Some lenders also offer 100% financing programs.

Home Purchase Loan: Getting a Co-signer

In case your home loan application gets rejected due to you poor payment history, getting a co-signer is another option to get the loan. You can ask family members, relatives or friends who have a good credit history to act as a co-signer for you by signing the loan documents. Establish contact between your co-signer and loan officer. Ensure that your co-signer provides all the required documents to the loan officer as soon as possible for quick processing. In the meantime, you can improve your credit by paying off your outstanding debts. This will assure the loan officer about your willingness to repay the loan. It is important to note that if you default on loan repayment, your co-signer will have to bear the loss.


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