Home financing for bad credit

Home financing for bad credit does not have to be a challenge for buyers looking to buy a home. Once you have bad credit profile, its much easier to sort things out, rather than when you are going through it. In today’s economy most of the bad credit we see happens because of job losses or drop in personal incomes, business failures, and mortgage delinquencies. Mortgage delinquencies are the greatest source in creating bad credit these days. The economy has wrought havoc on many home owners and buyers unseen in last two decades or more.

Bankruptcy

Once a foreclosure or bankruptcy occurs its stays on the credit report, unless some action is taken by the holder of that credit profile. Passive attitudes never help borrowers at all. Under current statutes a person can file bankruptcy once every seven years but the information stays longer on your credit report.

A bankruptcy filing stays on the credit report more than 7 years and its up to 10 years before you can legally remove it. If you filed a recent bankruptcy some credit lenders may grant you loans after 6 months. The period varies with lenders and there is no hard and fast rule here.  Hard money lenders will take bankruptcy discharges one day after and provide you a loan with 25 to 40 percent down. The rates and fees are  much higher as expected.  If you need to get good rates it my take up to 4 years  getting A paper loan rates.

Foreclosures

This information stays on credit reports more than 3 years and indefinitely, unless challenged and removed by the borrower after 3 years. But the borrowers can start looking for loans with FHA after 2 years. The FHA program provides 3.5 percent down payments and is very helpful and forgiving to the foreclosure challenged buyers. Many other lenders still won’t  consider loaning money to a borrower more than 3 years from the date of foreclosure action reported on the credit report.

Repossessions

If you had gone through a time period between 2007 and 2012 known as the “Great Recession” and have incurred any repossessions of autos, motorcycles , boats or other items this information will stay on the credit report more than 3 years and indefinitely unless challenged and removed by your actions after the statutory periods ends as per the Fair Credit Reporting Act. Credit bureaus are not in the habit of  ” dropping off” bad credit information easily. An active borrower would have to invest time in clearing up these spills of misfortune and start afresh.

Borrowers can easily get financed by used car dealers right after any such event on their credit profiles. Do expect to pay more interest rates and fees. Some car dealers will also finance, if you put more down payment.

Present Cash Flow

Most important thing to remember here is you present situation. If you can demonstrate financial cash flow to a prospective lender or a mortgage company like us than you will always make a stronger case no matter what.  Its what the lenders are looking for. It’s the monthly income from a new job or a new venture that will help the lender determine your loan. There is some timing needed for these things to mature also. They can see now that you are able to meet your obligations and it will expedite anything you will attempt.

When people contact me for a loan the first we determine is your present cash flow and the the future ability to pay your obligations on time. The past records are past, but they are reminders of what happened and why it happened. Specially the period 2007 to 2012 has to be considered and taken into full account.

If you are still experiencing financial upheavals than its a good idea to wait for sometime, before attempting these curves. Let the things settle down a bit, and let the passage of time erode some of the negative impacts. You don’t want to go into another home right after a foreclosure, may be renting for sometime will help, and you can gather more confidence and use the tools here to launch your next step.

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