Is getting an equity loan poor credit possible, or is it just a tag line used by unscrupulous lending companies who are out to scam your money off of you? There are a good number of unscrupulous finance companies, on the internet in particular, and you should be very wary of places that are offering easy loans for those with bad or poor credit. Often these offers sound almost too good to be true – because they are.
The truth is that it is quite difficult, although not at all impossible, to get a home equity loan if your credit is poor or bad. There are, however, a few options available to you if you need this kind of loan. You will have to be prepared, however, to either pay a higher down payment for the home or pay higher interest rates, or even both. Listed below are a few ways you can go about buying a home with poor credit:
– You can ask the seller to carry the loan. This way you bypass having to deal with a bank. If the person who is selling you the home is still making payments on it themselves, then you can work out a wraparound mortgage. What this means is that you will be paying both the monthly payment on the existing mortgage along with an additional payment. You should be aware, however, that this type of loan is not legal in all states. Check to see what the laws are in your states before you consider this option.
– As was mentioned above, you could offer a higher price for the house. If you do not have the money right away to make a larger down payment, you can ask the seller to credit you the money, or borrow money from relatives or a pension or retirement plan. You should note, though, that if you have borrowed the money to make the down payment, you need to make this fact known to the person selling the house to you. If the money was a gift, you may need to be prepared to offer proof of the fact.
– You can also work out a lease agreement, or rent to own agreement, with the present owner of the house. Using this option, part of the money you pay each month for either rent or lease will be considered part of your down payment. Usually lease agreements are made from anywhere between one to three years. Make sure that all the details of the agreement are very clear and put down on the contract that both you and the owner sign. It is very important that the contract be very specific and that all that you have agreed to is written down.
Something you may want to seriously consider is waiting for some time before purchasing a home and using that time to clean up your credit. There are a number of ways to repair your credit ratings and taking the time to do this before taking out a home equity loan can in many cases is a wise idea. The better your credit ratings are, the better the chances of getting a home equity loan with a low interest rate.
Whether you choose to take out an equity loan with poor credit or try to rebuild your credit first, it is very important that once you take out the loan, you have a realistic, doable plan in place for making the monthly payments in full, on time. Defaulting on the loan will not only mean that your new home will be repossessed but that your credit ratings will be wrecked, thus making it harder to get a loan in the future.
Financing