Before you give up on getting a home equity loan because you have bad credit, make sure you can't. It could save you a lot of work and give you more options for buying a house and getting help from a real estate agent.
Even if you never thought you'd be able to, you might be surprised to learn that there are ways to get conventional financing. People with less-than-perfect credit are getting more and more attention from lenders. Interest rates are usually higher than average, but you can buy a house. You can refinance your loan after you've shown that you can make your monthly payments on time.
Here are some ways to get mortgage companies to pay attention to you. If you think this might work for you, talk to a reputable home loan consultant to find out how likely it is. This is one of the easiest ways to get into a house.
Can Your Credit Report Be Fixed?
You might find it easier to fix your credit than you thought. Have you recently checked out a copy of your credit report? If you were turned down for credit, a job, or insurance in the last 60 days, you can get a free copy of your credit report. If you were turned down because of your credit, the company should tell you and tell you how to get in touch with the credit bureau.
No one can legally remove accurate negative information from a credit report (despite what those ads say), but you can dispute mistakes or old items for free. Request that information in your file that you think is wrong or missing be looked into. This doesn't cost anything. Ask the credit-reporting agency for a dispute form or send a letter with copies of any documents to back up your claim. You don't need a company that fixes credit to do this. You can do everything a credit repair clinic can do for you legally for free or very little money.
Check out loans for people with bad credit.
Focus on lenders who know how to help people who have had credit problems in the past. Applying to lenders who don't work with people with bad credit is a waste of time and money. If you know of people in your area who might be willing to help you out, use them.
Other online sources, like Lending Tree, have a large network of lenders across the country, including some who have dealt with credit problems before.
Have a phone in your home
Your chances of getting a loan go up if you have a phone in your home that is in your name. People who don't have a home phone make lenders nervous. I know that a lot of people use their cell phones as their home phone these days, but I still think a land-line looks better. It shows a bank that you are stable and have roots.
Spend some time in one place.
Again, banks want to know that you're not going anywhere. If you have lived in the same place for at least 6 months, that helps. If you just moved, you need to show that you lived somewhere else for at least six months before this (and hopefully several years).
Put down a big down payment
The more money you put down, the more likely you are to get a loan. (See the next chapter for "The 30/70 Rule.") The bank will be more willing to work with you if you put more money down.
Some lenders will like it even more if you can show that you saved the money over time instead of borrowing it. Not all lenders want to know where the money came from, so if you saved it, be sure to say so.
Prove that you are a good person.
Banks and other lenders want to know that they can count on you. Show them this when you talk to them by being on time for meetings, looking nice, and having all of your information in order. Have the numbers and information about your bank accounts and credit cards ready to show them.
It will help if someone you know, like someone you borrowed money from and paid back, writes you a letter of recommendation about your finances.
Be ready to show them any sources of credit you may have that aren't on your credit history. For example, if you pay your cable or cell phone bills on time, this may not show up on your credit history. Even knowing about a loan from a family member or friend that was paid back on time and in instalments will help. Be ready to explain how you will pay back this loan.
Use any kind of security you have to get a personal loan.
You might be able to get a personal loan if you can put something of value up as collateral. This could be a good way to get a down payment together.
Some things banks will take into account as collateral are:
Stocks
Bonds
Gold and other valuable metals
Other Property, like land
Vehicles
Furniture
Collectables
Get a family member or close friend to co-sign the loan.
This is a tried-and-true way to get a house. When someone they care about is in trouble, close family or friends often help. Sometimes all it takes is to ask. You can also have someone else buy the house for you and add you to the mortgage and deed later. Check the laws in your state about the matter.
Boost your income.
Get another job. This can work for a little while. You might be able to get a loan now that your salary has gone up. Also, it gives you extra money that you can use to save for a down payment, pay off debts, and improve your credit score.
Start a small business at home to make extra money. Be careful there. Starting and running a small business can be expensive, and it may not bring in much money for a while. But it helps a lot of people. Find out as much as you can before you start. Think about the pros and cons.
Ask For Help
Ask your church, synagogue, or another non-profit group for help. Some government programmes and groups can help you get a loan or find other ways to pay for a home. Check out our website to find links to a lot of groups that help people get their own homes.
