Loan Seekers With Damaged Credit Still Have A Chance
Some might think it is impossible to acquire another loan following a foreclosure or bankruptcy. However, some lending companies do provide mortgage loans to those who have a history of financial difficulties. Even with damaged credit, it is still possible to get a loan and purchase your dream home.
Following a foreclosure and bankruptcy, a damaged credit score can be the main problem preventing future successful loans. The first order of business is to assess current credit status, looking at ways to restore damaged credit. Here are some steps on how damaged credit can be restored.
Get a copy of your credit report and thoroughly check out each item. Take note of those transactions which give a negative credit rating. If the negative credit stems from payment problems, then concentrate on timely payments. This might take some time depending on the number of transactions made with late payments, but consistently reviewing and working out each issue will pay off in the long run.
Getting a new and secured credit card is a good way to improve your credit rating. Try to make payments on time with your new credit card for a year to show lending organizations that you are financially stable. You may open new credit accounts but maintain regular payments – this is what lenders will be concerned about when they review your credit.
Even with bad credit, sub prime and high-risk mortgage lenders do business with people who have credit ratings starting at 650 and above.
Make sure that you plan a budget and spend according to it. A budget will help you maximize your savings. Use simple budgeting programs or work with a credit counseling specialist to plan your budget on a monthly basis. When you start budgeting, try saving some cash in an emergency fund as cash reserves help in qualifying for a mortgage loan.
Most importantly, go for a house that is affordable. Calculating monthly payments including property taxes, insurance premiums, even the cost of maintenance for the upkeep of the home, will help determine your new loan and budget and see if it’s realistically within your reach.
How soon someone can apply for a new mortgage depends mainly on how much the homeowners are willing to work to repair their current financial situation and how serious they are about establishing new, responsible credit histories. The bad news is that it will be extremely difficult for former homeowners to qualify for a new mortgage within a year of facing foreclosure; their credit will just be too damaged and the loss of the home too recent. The good news, though, is that the more resources and work they put towards the effort, the quicker they will be able to purchase a new home and the better the terms will be.