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First Time Home Buyers Guide - A Valuable Resource For Those With No Credit Or Bad Credit
First time homebuyers with bad credit can find buying a home a challenge. Are you a first time homebuyer who has bad credit? This does not always mean you have to suffer with high interest rates or no mortgage at all. There are many choices out there for both first time buyers and those with bad credit or limited credit. Many mortgage companies or banks specialize in providing loans to first time homebuyers who may have bad credit or no credit and can help you get through the mortgage application process.
One of the first concerns for first time homebuyers with bad credit is their credit score. Remember that there is not one universal credit score rating, but many different credit scoring systems that are used in the financial world. This makes it difficult to assess exactly where you stand as a borrower.
Because of past overdue charges or high credit card bills, you may have a credit score that is less than perfect. While mortgage lenders will look at your credit rating, they usually examine your credit report more carefully, since they need reasons for granting or denying a loan. This means the mortgage lender or broker who is examining your mortgage application will also look for reasons why you have a lower credit score. Some of the factors that effect your credit score are the number of debts you currently have, this includes all credit card debt, other loans in progress, and any outstanding or past due notices that were reported to the credit bureau. As well, the credit report will show the amount of debt you have accrued and how long it has been since you had issues with bad credit.
If some of your bad credit issues were over a few years old, it may still show in the numbers on your credit report, but the mortgage lender may be willing to take that into consideration. If the mortgage lender asks questions regarding past due notices or accrued debt during your application process, be sure to answer them honestly and promptly so you can move on with the mortgage application process.
In the instance that you are turned down for a mortgage loan because of bad credit, the mortgage lender is required to share the reasons why you have been turned down with the borrower. Usually you will be sent a formal letter giving this information. When this information is sent to the borrower, the borrower is eligible for a free credit report and that will also help you to evaluate your bad credit and see what changes can be made. Sometimes there are mistakes or leftover information on a credit report, so be sure to assess and deal with any discrepancies immediately.
Another important piece of information to keep in mind as a first time homebuyer who may have bad credit is that there are special first time homebuyer loans offered both by lenders and by the government. There are numerous government loan applications available to help you become a first time homebuyer, without suffering because of high interest rates. Most local housing government agencies can give you the information you need to begin filling out mortgage applications. Often the lender will also offer a special mortgage for first time homebuyers, and this loan always takes into consideration that the buyer may be young or without sufficient credit to adequately determine good or bad credit.
One of the most important steps to take as a first time homebuyer, or a buyer with bad credit or no credit, is to research the current interest rates and the different types of mortgages available on the market. Even though there are a great deal of companies and government agencies that are available to help new homeowners or homeowners with bad credit, there are unfortunately some will only be concerned with the profits of an inexperienced new homebuyer. Be sure to check your credit report before you get started and remember that new federal laws have been set in place that require credit report agencies to offer a free credit report once a year. As well, the Truth In Lending Act requires mortgage lenders to be clear and up front about what rates they plan to charge you, so if you are not receiving answers, ask questions or find another lender who will provide you with those answers.
40 Year Mortgages - Are They Right For You?
A 40 year mortgage, with either fixed or adjustable rates, is starting to receive more attention in the mortgage business. With interest rates rising and real estate prices booming in 2005, lenders are starting to offer the 40 year mortgage as a viable option for buying your dream home.
Although the 40 year mortgage has been around since the 1980s, it only made up for a small percentage of loans, less than 1% at most times. Now with higher interest rates, borrowers are looking for a way to save money with lower monthly payments. With rising interest rates, the 40 year mortgage gives buyers the opportunity to still buy the home they want and receive a lower payment.
For those that aren?t interested in putting that many years into a mortgage or in a 40-year amortization, many are beginning to also consider a combination of other ARMs and interest-only mortgages. These mortgages are currently making up a large percentage of the mortgage originations and continue to increase as interest rates increase. These loans are often referred to as option ARMs, or short-term ARMs that start out with introductory rates of as low as 1%, but give buyers a variety of mortgage payment options.
Other mortgage options that are being offered by mortgage lenders include a 20-20 mortgage, where the interest rates would adjust after the first 20 years.
Another reason many borrowers are considering, and lenders are offering a 40 year mortgage is so that buyers can spend more money while purchasing a home. By stretching out the mortgage from thirty to 40 years, there is still the possibility of purchasing the home of your dreams.
The 40 year mortgage is also good for first time homebuyers or those who need extra help, like young couples or those with less than perfect credit. This will give those homebuyers a chance to still invest in a home but without a high monthly payment. They need to keep in mind, though, that the disadvantage of this forty year mortgage is a higher interest rate in the long run. It also takes longer to build up the equity on the home because the borrower is further stretching out paying on the principal of the mortgage, which builds equity on a home.
Many lenders are still finding that there is not enough interest in the 40 year mortgage to sustain offering them through the lending company, but this may change since Fannie Mae recently announced that they would begin purchasing these loans. In September 2003, with a pilot program of 22 credit unions, Fannie Mae offered to buy back both fixed and adjustable rate loans and will soon expand the pilot program to many other banks & financial institutions.
For borrowers who don?t have many options, consider starting with a 40 year mortgage and then refinancing down the road. If you don?t refinance the loan there is always the option to send in pre-payments as your income increases.
Most experts are noting that these lengthier mortgages are not good for older couples or an older person seeking to invest in a home because it will take too long to build up that equity and the person could be paying for the home into their seventies or eighties. The retired person may not have the means to sustain paying a mortgage.
The bottom line is that there are a number of options for homebuyers and those options need to be taken into consideration before deciding on the mortgage that best suits you. These new mortgage options also open up the market to a range of new borrowers so this could always fuel even higher values in the real estate market. As well, a 40-year mortgage is not the best option for everyone but there are viable alternatives that can help you purchase the home you want. Be sure you are aware of the advantages and disadvantages and always consider your options for refinancing down the road.
Refinancing Your Mortgage - Is It The Right Choice For You?
Mortgage refinancing is an option for many homebuyers who are paying interest rates 2-3% or higher than what they can find today, or who need additional cash. Were you a first time homebuyer or you had poor credit the last time you obtained a loan? Now you are on your feet and make a salary that could help you receive the best interest rates. Possibly you are looking to refinance your mortgage so you can free some funds for a new car or for educational purposes. There are many options available when you refinance.
Before you decide if refinancing is right for you, look at your current financial situation. Do you have an adjustable rate loan or a fixed rate loan? How long do you plan to be in your home after you obtain your new mortgage? What is your ultimate goal? Most people want to refinance so they can access more money now. Refinancing is a great solution, but is a refinance of your loan the right solution for you?
The first step is making contact with you lender, and be aware how much your monthly payment is now. It is also helpful to find out how much you have paid of your mortgage towards principal. Since you will refinance the amount left on the mortgage principal, and not refinance the original mortgage amount, it is really important to know how much principal is left. If you plan to stay in your home for a length of time and still have a sizeable principal left on your loan, then a mortgage refinance may be a good option for you if interest rates are lower than when you obtained your last loan.
Just as with most conventional loans, refinancing offers similar options of adjustable and fixed rate mortgages and anywhere from 10-40 year loans. Be sure to review with your mortgage lender the reasons you are interested in refinancing; do you need to refinance to obtain cash for home improvements or for a new car purchase? These are important factors to make your lender aware of as you are deciding how to refinance your mortgage.
Another factor that determines whether borrowers refinance is interest rates. Current mortgage interest rates can rise and this often scares refinance borrowers who have ARMs because they are afraid the adjustable rates will rise after they refinance. It is difficult to assess what will happen to the adjustable refinance mortgage interest rates over the next few years. If you refinance into a fixed rate mortgage during a high interest rate period, then when interest rates go back down, you are stuck with a high fixed rate mortgage and another decision about whether or not to refinance again. Of course the only sure-fire way of knowing if you should apply for a refinancing is to assess your reasons for the refinance and how it will affect you in the future.
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