How to Improve Your Chances to Qualify for a Conventional Home Loan
Written by: Alexis Dey
Before you give up on the idea that you will never be able to
get a home equity loan because of your bad credit, first be sure
you can't get one. It may save you a lot of work, and it opens
up more possibilities for home purchases and help from real
You might be surprised to find that there are ways you can get
conventional financing, even though you never thought you would
be able to. More and more lenders are looking at people with
less-than-perfect credit. Usually the interest rates are higher
than average, but you get into a house. You can refinance later,
after showing how you reliable you are making your monthly
Here are a few suggestions to get mortgage companies to look at
you. If this method sounds likely for you, try talking to a
reputable home loan consultant, and see what your chances are.
This would be one of the easiest ways to get into a house.
Can You Fix Your Credit Report?
You might find that your credit is easier to fix than you
supposed. Have you seen a copy of your credit report lately? You
are entitled to a free copy of your credit report if you have
been denied credit, employment, or insurance within the last 60
days. If you were denied because of credit, the company should
give you notice and give you the contact information for the
No one can legally remove accurate negative information from a
credit report (no matter what those ads say) but you can dispute
mistakes or outdated items for free. Request an investigation of
information in your file that you dispute as inaccurate or
incomplete. There is no charge for this. Ask the
credit-reporting agency for a dispute form or submit your
dispute in writing, along with copies of any supporting
documentation. You don't need a credit repair organization to do
this. Everything a credit repair clinic cando for you legally,
you can do for yourself at little or no cost.
Look into Special Loans for Bad Credit
Concentrate on those lenders who specialize in working with
those who have had credit problems. Spending time (and money)
applying to lenders who do not work with credit blemishes will
accomplish nothing. If you have local sources that you know will
consider such loans, take advantage of them.
Other sources, available online, such as Lending Tree, have a
large network of lenders nationwide, including those who have
experience in dealing with credit problems.
Have a Home Telephone
If you have a telephone in your home and in your name, it helps
increase your chances of getting a loan. Lenders worry about
people who don't have a home phone. I know that today a lot of
people today use their cellular phones as their home phone, but
a land-line still looks better. It shows stability and roots, at
least to a bank.
Live in One Place for a While
Again, banks want to see that you have some stability. It helps
if you have lived in one place for at least 6 months. If you
have just moved, show that you lived somewhere before this for
at least 6 months (and hopefully several years).
Have a Good-sized Down Payment
The larger the down payment, the better your chances will be to
get a loan. (See "The 30/70 Rule" in the next chapter.) The more
money down, the happier the bank is to work with you.
And if you can show that you have saved the money over a period
of time, instead of borrowing it, it looks even better to some
lenders. Not all lenders ask where you got the money, so if you
did save it, be sure to point that out.
Show That You Have Good Character
Banks and lenders want to know that you are dependable and
reliable. Show this when you talk to them by showing up to
meetings on time, dressing nicely, and having your information
organized. Have your bank account and credit card account
numbers and financial information ready to show them.
It will help if you have someone you know write you a financial
letter of reference, such as someone whom you borrowed money
from and who you paid the money back to.
Be ready to show them any sources of credit you may have that
may not be on your credit history, such as paying the cable or
cellular bills regularly. Even information about a loan from a
relative or friend that was paid back in installments and on
time will help. Be ready to tell them how you will be able to
pay this loan back.
Use Any Collateral You May Have For a Personal Loan
Maybe you have something of value that you can use for
collateral for a personal loan. This might be a good way to come
up with a down payment.
Some of the things banks will consider for collateral are:
Stocks Bonds Gold and precious metals Other Real Estate, such as
land Vehicles Furniture Collectables
Have a Relative or Friend Co-sign the Loan
This is a time-honored way of getting a home. Often close
relatives or friends will help someone they care about who is in
need. Sometimes all it takes is to ask. You can also get someone
else to buy the house for you and later be added to the mortgage
and quit-claimed to the deed. Check your state laws on the
Increase Your Income
Get a second job. This can just be for a while. The increase in
salary may be enough to qualify you for a loan. Also it gives
you extra income to save for a down payment or pay off debts and
fix your credit.
Start a small home business to bring in extra income. Be careful
there-- a small business can be costly to start and run, and may
not bring in much income for a while. But it works for many
people. Do your research before you start. Weigh the risks and
Ask For Help
Ask for help from your church, synagogue or other nonprofit
organization. Some government programs and organizations will
help you with financing or other housing options. Check out our
website for links to many of the organizations that help people
get into homes of their own.
About the author:
From the book "Buying a Home When You Have Bad Credit-- 12 Ways
to Purchase a House When You Can't Get a Home Loan" by Alexis
Dey. © 2005-6 Mohave Publishing. All rights reserved.
For more ideas on how to buy a house when you can't get a home
loan, look for our exclusive FREE e-book, "Buying a Home When
You Have Bad Credit," which can only be found on our site at I-can-buy.com.
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