Home Finance

America is still reeling after the crash of five years ago, which hit sub-prime borrowers particularly hard. Since then it has become increasingly difficult for many Americans either to hang onto their homes. There have been many foreclosures on homes and although it seemed earlier this year as though things were getting better on the financial front, recent news from the White House has put a damper on those who are seeking home loans.

However, recent news is good and bad for those who have been refused a home loan by the banks. A handful of private investment companies are now offering what appear to be very like sub-prime mortgages to people who have been turned down by the big banks. This is good news for those wishing to own their own homes, but bad in a way because of the costs involved.

For example, if you can get a fixed rate mortgage or home loan from a bank now, then you will only be expected to make a down-payment of 10 % of the cost of the property you wish to buy. The private investment firms will ask for a 40 % down-payment and ant borrowers to pay off the loan in 5 or 7 years, or refinance. They will also charge more interest on the loan than banks and you will end up paying almost double for your home than if you could get a home loan through a bank.

However if you have been unemployed and have recently returned to work, these investment firms will consider you application for a mortgage favorably, as they don’t need tax-returns, but will accept a payment stub from your workplace, and a series of bank statements as they still want proof that you can pay off your home loan. Whether or not you take this route to get a mortgage is up to you.

If you have equity in your home, but need to refinance, then this is possible with a Home Equity loan, which is less difficult to obtain. If you have always paid bills including your mortgage payments on time, then this could be the right time to take advantage of low interest rates and refinance. You can consolidate your debts and pay one monthly bill which will mean lower monthly payments plus lower interest rates if you have had your mortgage for several years. However you will need to read the fine print on your original contract carefully and check to see if there is a penalty for early payment.

You may want to look into the Federal Housing Administration’s (FHA) refinancing packages, or perhaps their mortgage protection insurance (if you have a loan that is from an FHA approved source). The rules differ depending on the type of mortgage you currently have. If you want to apply for a FHA home loan, then you will need to provide details of bank statements and tax-returns for the last two years, along with personal details such as your social security number, you addresses over the past two years, check stubs of the past two years and W-2 forms among other items of personal information regarding your financial standing.

One of the first things you should do before you inquire about a home loan is to get a free credit report from the three main agencies of Equifax, Experian and Trans Union. You are entitled to a free report from each of these credit reporting agencies every twelve months. It is worth taking advantage of this free service as you may need to have information contained in these reports corrected. Your credit score determines whether you will qualify for a home loan and you repayment history on any credit cards, installment purchases and mortgage repayments are all contained in these reports.

It is best to have any erroneous information corrected before applying for a home loan, rather than to be turned down because of information on your credit reports which you have not seen and which may be untrue. You can contact these agencies on a central website or contact each separately at their official websites. Remember that you do not have to pay for an annual credit report. You get one free every twelve months from each agency if you request one. However they are not sent to you unless you request them.