August 10th, 2011 2:13 PM by Bob Rutledge
Home Loans for Those with Poor Credit and Low Income – St. Charles and St. Louis Missouri
A low income coupled with a poor credit history does not necessarily make you ineligible for a home loan. Please, notice I used the word Poor and not Bad. Bad credit can stop you from getting a mortgage now but possibly not later down the road.
Steady Employment and Salary Requirements
Most often, because it is indeed a different way of life, loans for folks with bad credit and low incomes are more often used in rural communities, but not always, first time home buyers are generally have lower incomes. In rural communities incomes are apt to be lower and many have not really had an opportunity to establish a credit rating of any kind. So, most often when the terms poor credit are used, it really means little to no credit history. Loan amounts are based on the salary of individuals and he or she must meet certain income limits and have steady and reliable employment.
Closing Costs and Down Payments
For most poor credit home loan borrowers, the biggest obstacle seems to be coming up with down payments and closing costs. Closing costs are primarily administrative fees that go toward paying for title and deed searches to ensure there are no other owners of the property, as well as for processing documents, transaction fees, and also for legal costs. Down payments are often required to ensure that the borrower has a stake in retaining the property and making payments. They also lower the actual cost of the mortgage. The closing costs are often an amount fixed by the lender and can be rather low. There are many loan programs that do not require a down payment; also there are many down payment assistance programs available to first time home buyers and home buyer with moderate to lower incomes.
Submitting Applications for Low Income Bad Credit Home Loans
Future Home Owners interested in obtaining a poor credit low income home loan, should submit applications that clearly state their financial situation and their needs. Lenders will want to see an explanation for poor or no credit reports. The borrower should be quite explicit and honest as to what happened, or did not happen, to bring their credit scores to the present state. Lenders also want to see a plan for repaying the loan, what sacrifices the borrower might be willing to make to own their own home.
A Lender will look at two items when underwriting your poor credit and low income mortgage application, your willingness to pay your obligations and your ability to pay your obligations. Paying your obligations is simply a comparison of your income against your debts, if you fall within the debt to income ratios you are set to go.
Your willingness to pay your debt obligations is more subjective; people with a poor credit history or no credit history have a more difficult time initially proving to an underwriter that they should approve your mortgage application. Be prepared, get to know your credit history very well, explain and prove and you will be fine. Your mortgage loan officer is your advocate between you and the underwriter, work with them and they will be able to help you get through the underwriting process.
I Can and Will Help with Getting You a New Home
Every month I am attending closings of new home owners who thought they would never be able to own their own home. They came to me because they had low credit scores, no money saved, little income, no credit scores, whatever their concerns were we were able to work together to get them a home.
Can I help you? Maybe, but we won’t know until you take the first step and contact me.
If you have poor credit, finding funds to finance your dream of home ownership will not be a walk in the park, but there are lenders out there who want to help you. Just be persistent and do not restrict yourself to one lender and then give up. Here are five tips when you start your quest for bad credit home mortgage loans.
Tip One: Find a Good Deal
Finding a property that already has some equity when you purchase could mean an easier path to financing with a poor credit home mortgage loan. Lenders may view it almost as favorably as a down payment. They may even consider the loan to value ratio of the property. Check with your lender to see if this might help you. Be thinking about an FHA 203k Mortgage.
Tip Two: Be Creative
Creative financing could help your quest for a poor credit home mortgage loan. Look into down payment assistance programs, but in areas that offer down payment assistance. There are many cities and counties throughout the area that offer down payment assistances. Work with lenders that can and will help you with the closing costs involved. Find a real estate agent well versed in negotiating selling concessions to help with keeping your money in your pocket.
Tip Three: Down Payments
Even with bad credit, borrowers may qualify for 100% financing, but the interest rate could be considerably lower if you were able to put down between 3-5%. Save as much as possible for a down payment. Indeed, it may be advantageous to wait six months to get a home loan so you can build your down payment. Of course, if you cannot wait and do not have a down payment, you can aim for down payment assistance. Save your money though, having money in the bank after you close will help make an underwriter’s decision much easier. Use down payment and closing cost help to keep your money in the bank and make you a better borrower.
Tip Four: Shop Diligently
You may get a flat refusal from one lender and then turn around and get another lender who will bend over backwards for you. NOT ALL MORTGAGE LENDERS ARE THE SAME! Do not be led into the trap that if one lender cannot help you, no lender can. Indeed, lenders are different in the kind of mortgages they can execute, experience and ability.
Tip Five: Credit Scores
Some really simple acts can improve your credit scores without a lot of extra effort. All three of the major credit bureau - Experian, Equifax, TransUnion - have websites where you can dispute incorrect items on your credit report. It is an easy and quick process. Of course, keep all current bills on time. Keep your credit inquiries to a minimum since too many queries can make you look desperate. While you are in the process of landing financing, do not open any new credit cards, auto loans, or any other credit transaction. Do Not Pay Off any past collections, judgments, or past due accounts until you speak with a lender who you trust and will provide advice.
Home Mortgage Bottom Line
Do not let poor credit squelch your quest for home ownership. With the right moves and right advice, you should be able to secure a mortgage or home loan very quickly.