Getting a Home Loan with Bad Credit
How hard is it to get a home loan with bad credit?
Looking for a question that isn't here? Try a search at this website for bad credit and home loans questions.
Question:When applying for a home equity loan with a top-tier bank, what are
our approval chances if before 9 months ago, we had sterling
credit and now have 4 major credit cards (3 out of 14 credit cards (8
major, 5 store) that are 9 months past due. We have lots of equity
in our home ($450,000) and are never late on mortgage payments. And
my husband's business looks more romising this year than last which
was a disaster; I also plan to
return to work after stayiing home to parent. We need the money now
and have reached settlements with the 4 outstanding cards to pay them
off, however. Any tips on how we should position ourselves with bank
for
approval? Any suggestions regarding good-standing banks which might
be open to our situation? Past due card are with 1st USA (3 cards);
Citiank (1 card). We have a current home equity loan with Banc One --
our primary bank -- and we have never been late with payments. Should
we apply there?
My best buddy has a first (and only) mortgage of many, many years with
a large, well known mortgage company. He owes $70K on it. His home
is worth roughly $185K. Great credit, he says. (No late payments in
anything, ever).
Here's the bad (and embarrassing) news. His income is now so low that
he wouldn't qualify for a mortgage on his own home (if he was buying
it today). Not even close! He certainly plans to earn much more in
the future, but cannot say when or how. Just confidence talking from
his past experience as a self employed person.
Here's the basic question. Will some company loan him money on his
home equity even though his income would not merit such a loan?
Presuming they appraise the house and agree that the equity is roughly
$100K, might they extend a line of credit for $60K even though income
is almost non-existent at this time? Surely this is a familiar
dilemma to mortgage companies whose customers fall upon hard times?!
Answer:
Sure, it happens every day, they are called no-doc loans, and they
don't require income verification. The interest rate is higher, but
the loans are out there, everywhere.
The No Doc program fills these needs:
http://www.suntrustmortgage.com/nodoc.asp
Easy Qualification
No disclosure of income, employment or asset information required
No debt ratio calculations
There's even variations of no-doc loans
No Doc Loan
http://www.nva-mortgage.com/no_doc_loan.htm
..."No Doc loan requires no employment, income, or assets to be stated
on your loan application. We do not verify any information beyond your
credit profile and the value of the property. Our No Doc lenders will
allow as little as a 5% down payment on an owner occupied home or
investment property depending on your credit profile. If you have had
credit issues in the past you may need to make a slightly higher down
payment but I can get the loan done. This is the product of choice if
your asset or income is difficult to verify or if you simply do not
want the "hassle" of traditional mortgage documentation. Your good
credit, a decent property and we are done.
Another option would be to add your employment to the application.
This program is frequently described as a "NINA" (No Income No Asset"
loan. In this case, we will verify your employment, but again, no
income or assets are on the application. If you are self employed, the
business must be verified with a business license, written contracts,
supplier invoices or similar documentation. If you are employed by a
company, we will verify your employment but nothing else. This small
bit of documentation will generally save you .125% on the interest
rate.
Yet another option would be to have us verify your assets but not
income or employment. Using this approach will require verifiable,
relatively liquid assets of not less than 6 months of your PITI.
Again, this bit of documentation will usually save you .125 on the
rate. If your situation will allow you to verify both assets and
employment, you are better served with the Stated or No Income
Verification program. If there is an issue with your debt to income
ratio, you may want to consider a No Ratio loan..."