Financing Options after a Foreclosure

A foreclosure is a big black mark against your credit. There’s no getting around it. Lenders will be less willing to work with you and if the foreclosure has been within the last 2 years, they may not be willing to work with you at all. When a lender is making a credit decision on a borrower, they are trying to assess your ability to repay the loan. A recent foreclosure makes a very strong argument against your ability to repay a mortgage.

This being said, a foreclosure doesn’t mean that you will never be able to buy a home again. Given enough time, you can buy a home after a foreclosure as long as you continue to keep your credit clean.

VA Loans

If you qualify, lenders that offer VA programs are the best place to start. Getting a reasonable interest rate after a foreclosure will be a challenge. That’s why programs like Low VA Rates for veterans are preferable since they’re designed specifically for veterans. The rate you can get won’t be as low as if you had perfect credit with no history of foreclosure, but every little bit helps.

If your prior foreclosure was also a VA loan, be aware that some or all of your entitlement may be tied up in the foreclosed property. Veterans receive entitlement of 25% of the loan amount with the entitlement amount capping at $104,250. Any shortfall from your prior foreclosure will be deducted from this amount. If you had a sizable shortfall, a VA loan may not be an option.

FHA Loans

If a VA loan is not an option for you, a FHA-backed loan is your next best option. The FHA requires that you wait a minimum of one year from your foreclosure before they will consider your application again. Your particular circumstances will dictate if you’re eligible after one year through the Back to Work program or not.

If you don’t qualify under this program, you may have to wait up to three years before you will be eligible again. Note that failing to qualify for an FHA loan doesn’t prevent you from getting a mortgage during this waiting period, though a non-FHA loan will carry higher rates in most cases.

Local Credit Unions

Local credit unions often have softer underwriting requirements than more traditional lenders. They are also more likely to perform manual underwriting rather than just plugging your information in to a piece of software. That means that there is actually a person reviewing your specific situation rather than some automatic calculation.

Credit unions can be especially helpful if you already have an established relationship with them. Positive history on a checking account or bank issued credit card will help to offset the negative aspects of your application.

Mortgage Brokers

One final source is to speak to a mortgage broker. Mortgage brokers have their pulse on the market and can submit your information to lenders that are more likely to work with those with recent foreclosures. Rates may be higher, but if you have exhausted all other options it may be the only way you can get a mortgage.

There’s no harm in submitting your information to a mortgage broker. You won’t have to pay anything out of pocket. Brokers only get paid if your loan closes.

When All Else Fails

If the above options fail, don’t get discouraged. A foreclosure doesn’t mean that you’ll never be able to buy a home again. But it will take time and work to put the foreclosure in the past and rebuild your credit. As you’re waiting for time to pass, continue to pay your bills on time. So long as you don’t add any negative marks to your credit, try applying again in 6 to 12 months. You will eventually reach the point where a lender is willing to move forward.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

How to Choose between Secured Loans and Unsecured Loans

When we look for finance options, we notice that there are thousands of options available to us. However, two of the main avenues to go for are secured loans and unsecured loans. Both have their pros and cons and it can be difficult to choose between them. Hopefully, the following information will help you to make that decision.

Secured Loans vs. Unsecured Loans

When looking for secured loans, financial experts have reported these are the most common, not in the least because there are many different types (house loans, payday loans, title loans, pawn loans and so on). Loans secured against a home offer the highest sums of money. Unsecured loans are quite new, however, and became available as more and more people did not own homes and were not able to get any type of finance. However, to this day, only people who can prove that they are worthy creditors will be able to get unsecured loans, with the exception of extremely high interest doorstep collection loans.

Misconceptions about Secured Loans

A lot of people have the wrong idea about secured loans. For instance, you do not actually have to vacate your property if you take out a secured loan on it. All you do is transfer a piece of ownership right. Your home is still yours to live in, unless it gets repossessed because you don’t make the necessary payments.

If you take out an unsecured loan and you don’t make repayments, you may still lose yourmb-2015-03-checkbook home. This is because a lender could then take out a lien on your home, or sue you in another way that will force you to sell in order to repay them.

Because of this, more and more people now opt for secured loans.

Requirements to Obtain a Secured Loan

Secured loans are more forgiving of bad credit. However, lenders are becoming more and more stringent. The exception is in a secured loan that is not secured against your real estate property, such as a payday loan or title loan. There are a number of other requirements as well, including:

  • The collateral must be lien-free, regardless of the type of secured loan you are looking for.
  • You must be in employment and be able to prove your income.
  • You must be able to identify yourself.
  • You must have proof of residency.
  • You must have a bank account.

Most people apply for secured loans rather than unsecured loans because they are easier to obtain, have more variations and have better terms. Regardless of what you decide to do, it is of vital important that you shop around in order to find the best possible deal. The difference between various lenders is huge and could literally save you thousands over the overall term of your loan. There is a great deal of information available online to help you learn more about the difference between the various constructions and you should use this before you agree to any terms and conditions.

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Don’t Take it Personal…It’s Just Your Credit

Credit is something that not only affects you, it can affect everybody around you on a personal and professional level. Many people believe that having a bad credit score should not affect their credibility or reliability in their circle of friends or colleagues. Well, it does and can be a tremendous part of why none of your friends want to rely on you for big decisions that are more than just commonsense.

Bad credit comes down to a couple of core principles really: self-control and level of responsibility. Having bad credit may not make you irresponsible, but the decisions made to get there are what could give people the idea that you have a hard time controlling your money, and your own life. Can you control your own life if you are less capable of controlling your finances and money? Probably not.

Your financial state really does affect everything you do on a daily basis. Being in debt and not having money means one is less likely to go out as often and spend money. When friends see that you’re never able to go out and spend money because of debt, chances are they will stop sending invites to you.

On the other hand, if you have a grasp on your finances and are making wise decisions, you are more likely too go out and treat yourself. It’s satisfying knowing that if you really wanted, you could go out and buy the newest smartphone and have your credit approved. There are some really inspiring credit repair stories out there that you can watch on Youtube and other websites to see real testimonials. The reason is that when your credit is bad, it can seem near impossible to turn things around.

And, professionally, yikes. The day you get denied a job because of your poor credit may be a day you stay inside and overdose on some ice cream. It’s rough. Especially in non-profit companies, they do not necessarily have the financial backing corporations do to support any mistakes you may or may not make. Non-profit businesses tend to be a little smaller and more tight knit–if they run your credit and see a long list of no-no’s, they are going to be hesitant to hire you. Most likely they will be thinking, “If he can’t control his own wallet, can he really control ours?”

The answer may be no; perhaps it’s a yes. Just because you made poor decisions personally does not always mean professionally you will do the same, but are employers really seeing that? Sadly, no.

Take the steps you need to take to repair your credit; it’s going to feel like moving mountains, and the light at the end of the tunnel may be about as small as the tip of a sewing needle, but it’s there, I promise.

Need advice? Do your research. Have a friend you feel is making wise financial decisions? Trust in them and ask them for advice. They can probably help you out. Do not be embarrassed by this– honestly most people in this country struggle with debt of some sort. Shoot, our country is in debt by trillions of dollars. Maybe when you figure this all out, you can give the CFO of America some tips.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.