Getting a loan is never easy. There are so many things that are taken into consideration before you can get a loan. Things like your credit score and source of employment. If you are self-employed or have a bad credit score, it can be difficult for you to secure a loan from a bank. Irrespective of either, you can still get a mortgage. It is possible to get a second or a third mortgage without completing the first one. The Certified Mortgage Broker will help you to understand how you can go about it and come up with a plan that will help to ease the financial burden. Here are some solutions:
Bad Credit Mortgage
When you have a bad credit mortgage, the broker will focus more on the ability to pay the loan back instead of having failed to pay instalments. Your income capacity has a crucial role to play. You would have to prove that you earn enough to cover the monthly payments till the mortgage term is over. The lender will go through your records and determine what will be the right amount to lend to you. This is calculated by using Gross Debt Service Ratio or Total Debt Ratio. Mostly, the bad credit mortgage lenders will only approve a mortgage for those borrowers who have less than 30% of GDS and TDS. However, if you don’t have a low ratio, then you might be required to pay at least 35% as a downpayment. The broker will guide you to arrange all the required proof of income documents and ensure that they are up to date.
Larger Down Payment
A large down payment is one of the solutions when you don’t have good credit. This helps to reduce the risks for the lender. If you are required to pay a large down payment and you don’t have that kind of money, then one of your properties can be used as cross collateral. Some money lenders also allow people to use property from a family member or a friend to be used as collateral. When you have a collateral property, it helps to increase the loan to value ratio, which in turn reduces the lender’s risk.
Property Appraisal means calculating the value of the property. This will help the lender and you to determine your worth of the bad credit mortgage. When you are applying for a mortgage, you are required to undergo the process of property appraisal. This appraisal should always be done by a reputable professional. Sometimes the lender would ask you to get the appraisal done by a certain company that they have worked with before. Some would let you choose your own appraisal company. Even if the lender asks you to approach a particular company to do the appraisal, you must do at least two appraisals irrespective. This will help you to get more accurate results. When the lenders are aware of the value of the property, they would be able to calculate the loan–to–value ratio and calculate the level of risk involved.