Getting into a bad credit state is easy to do. Getting out is not that easy, but it takes time. And what if you want to apply for a home loan (taux hypothèque) and buy a home now?
When a mortgage lender examines a loan applicant’s file, one of the most important things he will look at, is the potential borrower’s credit record. This will help him determine the risk he might take with the borrower.
Description
The home loan strategy for “less than perfect credit” takes place in 3 or 4 steps. The goal is to obtain an average interest rate during 15 or 25 years which is as low as possible - taux hypothécaire.
Step 1: Secure a mortgage
You can get a home loan, even with a bad credit report. You will just have to realize that there are some limitations that those who have good credit ratings don’t have to accept.
There are a few lenders (at least 10) who specialize in these types of loans and have less strict credit criteria than other lenders. You can usually obtain a home loan with a short maturity period, such as three years. This is not normally recommended, but it will get you started.
Just remember that the two most important aspects that impact your interest rate are your credit rating and your down payment.
Step 2: Repair your credit
Once you have a home loan, you should spend the first two years getting your credit back in shape. If you work with an experienced home loan credit counselor who specializes in these situations, he will have the knowledge to help you with the steps you need to take to arrive at this goal.
Step 3: Get a new mortgage at the best possible rate
Your credit has now reestablished, so you should be able to negotiate with standard lenders to get a good rate (taux hypothèque) on your new home loan. If you work with the right lender for your case and properly prepare your case for the mortgage application process, you will be able to achieve this. If your credit was really bad in the past, you may have to go through an additional stage to get the best rates (taux hypothèque). (taux hypothèque)
Advantages
• It permits you to buy a house which will increase in value over time. (See: Will housing prices continue to rise? Forecast for 2006 and 2007)
• It gives you some time to re-establish your credit
• It will allow you to obtain the best rates in the near future - taux hypothécaire
Disadvantages:
• There will be a very high interest rate (taux hypothécaire) during the first three years of this plan
• There will be high home loan payments during the first three years of this plan. However, you may be able to keep your payments lower by extending the amortization period of the mortgage, and then you can adjust it to a longer period when you take out the subsequent mortgage.
• You may have to supply added documentation besides a mortgage note.
• You will have to pay the assessment fees. But if you consult with a financing credit counselor who specializes in poor credit risks you may be able to avoid some of these additional charges.
CAUTION:
Certain mortgage brokers charge additional commission for “difficult” cases. It is typical for the broker to require fees if the financial institution does not pay a commission or if the amount of the mortgage is more than $90,000. In most cases (more than 80% of them) the financial institution pays the fee to the mortgage consultant.
Never deal with a broker who:
• Requires payment of their commission before having completed the loan financing (at closing)
• Demands extremely high fees (a commission of 1.8% of the financed amount is typical, with a minimum of $1,500).
What have you learned from all of this. You can actually own a home, and own it sooner rather than later, even if you have less than perfect credit. This will be a big help to take advantage of increasing values in home prices. If you take the right steps, plus work closely with a good mortgage financing credit counselor who specializes in less than perfect credit, you will get your dream home, and you will eventually have a home loan with the best interest rates(taux hypothecaire). Set up a meeting now with a specialized consultant who can help you with less than perfect credit, and find out what steps you can take to own a home now.
Gregory is an Accredited Mortgage Professional (AMP). To get more information on
mortgage rates - taux hypothecaire, please visit:
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