First Time Buyer Schemes

First time buyers are just one of the many groups being affected by the recent credit crunch, with many shying away from such a large financial commitment or having trouble securing a mortgage. And due to the economy, having the opportunity to buy your first home is slowly decreasing too, with less homeowners selling their properties and developers struggling to get the financial backing they need to build new houses. Mortgage lenders are avoiding any unnecessary risks, which means first time buyers are facing large deposit payments or expensive monthly repayments.

To counteract this, the government have introduced a number of schemes to help first time buyers get their foot on the property ladder and along with developers are looking for new and simple ways to encourage people to buy. One of the things first time buyers can do is consider buying a house with other people. This could be family members, friends or partners and means sharing the cost of the initial deposit, monthly mortgage payments and even general household expenses.

It isn`t just the government who are looking for new incentives either, developers are in desperate need of new buyers – without them their properties sit empty and any possible investment thought too risky. Because of this, buying a new build house can actually be of benefit as there are many good deals to be had. Also known as the First Buy Scheme, buying a new build home can often mean being able to take advantage of lower deposits, wavered stamp duty payments or even subsidised loans, with many well known house developers also offering part exchange schemes.

This can also benefit parents who are looking to help their children buy their first property. In the same way, developers are offering to pay interest on money lent by parents for the property, though these deals only cover a certain amount of years, usually between two and five.

Other incentives include shared equity deals, where the government will subsidise a certain amount of the house price or deposit payment, making purchasing your first property slightly less daunting. However, these schemes are not yet widely available and to qualify you need to have a household income of less than £60,000.

As with all financial incentives, being able to invest in your first property sounds great but beware, the reality is that somewhere down the line you will need to pay any loaned or subsidised money back and you may end up struggling with payments in the future. Developer deals can also be restricting as you may have to ask for approval to make modifications to your home or if you plan to re-mortgage.

Doing your research, getting independent advice and reading all the details before you commit to any deals is essential. As is knowing you have the means to pay your mortgage or loan payments each month. Making use of a loans calculator can help you see how any repayments might impact your monthly in comings and out goings and help you plan for your future on the property ladder.

Refinancing with bad credit

Having bad credit can be frustrating. You struggle to get approved for new credit and you may miss out on great opportunities. Refinancing a mortgage is one way to take advantage of lower interest rates and maybe save a little money on your house payment. Depending on how long it takes to get the paperwork complete, you may even be able to skip one house payment. Are you just out of luck if you have bad credit? No, but it may be a little harder to obtain.

Shop Around

Don`t just go with the first refinance option that you see. While it may look great and sound great, it doesn`t mean that everything is going to work out in the end. Get multiple quotes from different lenders to get a better idea of what is available to you with bad credit. It might be tough to get the lowest interest rate, but lenders may still be competing for your business.

Once you find a lender, make sure that you read everything and understand how the refinance is going to work before proceeding. Doing your research means that you are not only informed, but also will be able to spot a red flag if something just isn`t right. In other words, if something seems too good to be true, it may just be a gimmick. Ask your lender questions if you don`t understand something.

Plan to Pay a Little More

Unfortunately having bad credit isn`t going to make a refinance easy; in fact you may end up paying more than most people. Lenders will look to your credit report as a way to decide on an interest rate for your new mortgage. The lower your score, the higher the interest rate will be. You may even find that it would cost you more to refinance than it is worth.

Because of the unsteady economy you may be denied the opportunity to refinance. You may also be asked to provide someone that can cosign for your loan. Be prepared for these types of responses. You can keep searching for the right lender, or regroup and plan to refinance later.

Work to Correct Your Credit Situation

If you can`t refinance right now it doesn`t mean that you will never be able to refinance. Consider working to fix your credit score in the meantime. This is a long term goal that may take months or even years to achieve. If you think you want to refinance in the future start repairing your credit now. You can make your payments on time, pay off some of your debts and decrease your credit line. Over time your credit score will improve and you can try the process of refinancing again.

Reconsider

While the pull of a lower interest rate may sound like a great deal it is important to take all parts of the situation into consideration. It might be tough to admit, but refinancing may not be the best idea. Talk to a lender to find out more about the options that you have and the loans that are available to you.

This will help with the decision making process. You can also look to a mortgage cost calculator to get a better idea of what your new payment will be with a change in interest rate. Take a look at that number and see how it compares to your current mortgage payment.

Who are bad credit credit mortgages suitable for?

Bad credit used to be deemed something vulgar: a nasty, indelible smear on an individual`s good name; a badge of dishonour and certification of untrustworthiness. Nowadays, bad credit is more or less the norm for society; after all, why should people be expected to maintain unblemished credit profiles when banks routinely lose pots of gold belonging to the public? Bad credit is simply a term describing a credit history that has suffered the odd bump in the road.

Unfortunately, many financial institutions – including those that had to be bailed out by the UK Government – refuse to accept credit as anything other than the Holy Grail of lending: the standard by which all applicants must be judged before borrowing is permitted. People with poor credit histories, therefore, cannot expect every credit card, loan or mortgage application to succeed – but bad credit does not necessarily mean no credit.

Most lenders make provisions for people with poor credit profiles, which are adversely affected by County Court Judgements (CCJs), defaults, bankruptcy, rent arrears, Individual Voluntary Judgements (IVAs) and so on. Notifications of defaults and other credit-related problems can remain on file for years, while mortgage lenders often require full credit histories (including admission of defaults that are no longer on record). Evidence of bad credit almost always works against borrowers (the exception being that no credit history at all is sometimes deemed worse than one that is considered `sub-prime`).

When it comes to mortgages, which tend to be pretty large and scary at the best of times, applicants with a history of poor credit can end up feeling hopeless if they continue to press lenders whose criteria do not include provisions for sub-prime buyers. Fortunately, as more people have fallen into debt over recent years, more lenders are underwriting mortgages for higher risk applicants.

Bad credit mortgages are available to any person who has, at some point in the past, defaulted on a credit agreement or suffered some other financial hiccup that has found its way onto a credit profile. Mortgages for bad credit applicants are also suitable for people who are self-employed or those who have no evidence of prior credit.

Typically subject to relatively high rates of interest, reduced borrowing options and severe penalties, bad credit mortgages are considered to be sub-prime because they are less desirable options for all parties – less desirable but not necessarily least desirable, of course, as no mortgage at all is often worse than one that is not the most competitive.

Choosing a bad credit mortgage requires consideration of various facts and figures, not least the applicant`s ability to meet the monthly repayments on time and without exception. Lenders are likely to apply stricter criteria to applicants with poor credit histories to ensure that repayments do not default, but ultimate responsibility lies with the applicant to consider whether a particular mortgage is suitable for him.

Although intended to finance a new home, a bad credit mortgage can serve to improve an individual`s credit rating, which is essentially a numerical score used to evaluate the risk associated with granting credit to the borrower. A high credit score suggests that a person is likely to meet repayments, having shown evidence of good credit relations in the past. A low credit rating suggests that an individual is at greater risk of defaulting on a debt, having done so in the past or possessing no evidence to the contrary.

Finally, an individual`s credit rating can be so bad as to preclude any hope of securing a bad credit mortgage. Fortunately, credit ratings can be improved by rebuilding credit profiles over time. Obtaining a credit card to make occasional purchases that are fully repaid each month, for example, can dramatically increase an applicant`s chances of being approved for a bad credit mortgage.

Buy-to-let Mortgages

There are ample investment opportunities available for those that still see the property market as a good long term option. Although some predict that property values will not grow over the coming years, the returns from letting have increased due to the demand from consumers unable to afford the deposits necessary to raise a mortgage for an outright buy.And this is predominantly where the challenge lies.

Mortgage companies are still licking their wounds over the losses made during the recent financial markets crisis and ongoing recession. Property values have stalled and lending practices have returned to conservative levels to avoid further loss potential.

That means lenders are typically looking for at last a 10% deposit before even considering a mortgage application.

With average home values still in the £160,000 range that means gathering a deposit of at least £16,000. In reality most first time buyers are looking for homes in the £100,000 to £125,000 range but even that means a substantial five figure deposit is required to secure a mortgage.

So demand for rental has increased sending rental values up for desirable properties and locations. As an alternative way of getting a return for an asset that may appreciate over the longer term, buy to let is back in fashion for those that are cash rich and/or can support a mortgage payment matching lenders requirements.

Most buy to let mortgage providers are looking for a deposit in excess of 20% of the value of the property. At this level it is possible to get a three year fixed rate mortgage of around 5.5% APR.

Although there are a range of offers available, many providers charge valuation and/or administration fees so a careful review of any offer is required to find the best deal. As rates are fixed there are also heavy exit penalties should the mortgage be redeemed within the fixed period.

Generally speaking, the bigger the deposit offered the better the lending terms on offer. For those able to raise a 65% deposit a current lending rate of less than 4% APR is achievable with no redemption penalties. This is offered on a variable rate basis so mortgage payments will increase if market rates rise.

Those seeking certainty of mortgage payment should opt for the longer fixed rate periods. Currently, 5 year fixed is one of the longest terms on offer to buy to let purchasers with a rate approaching 5.5% APR.

With the continued dire state of the economy it is likely that market rates will remain at current levels for some time to come so only consider this option if your view on long term rates makes this a viable option.

So if considering a buy to let purchase it can pay to raise as big a deposit as possible to get the optimal terms for any mortgage borrowing. It may even be sensible to take out a short term loan or use a credit card to raise those extra pounds to top up any savings.

Look carefully at any credit card deals that give interest free periods and extra benefits before borrowing. Make a Credit card comparison at Moneysupermarket to see what options are currently available and weigh the value of those extra pounds of deposit against the short term ability to pay off the card debt.

Tips on getting through a home mortgage application

In order to buy a home most of the people are required to get a home mortgage. This is because the cost of buying a home is so high that it becomes impossible for the people to pay for the costs in cash. But, in order to get a home mortgage you will have to go through various eligibility criteria. It is also important for you to determine your affordability before you apply for a home mortgage so that you don’t default on the home loan payments later.

Tips to follow before applying:

Some of the things that you need to do before applying for a home loan in order to get through the lending process are:

1. Check with your credit score – In order to get easily approved for a good home loan offer, it is important for you to have a good credit score. A credit score above 730 is considered to be a good score. If you have a good credit score, you will be able to get good mortgage offers with low interest rates.
2. Check with your credit report – It is also important for you to have a clean credit report with balanced payment history and types of credit. If you think that you don’t have a clean credit report and if there are various negative listings on your credit reports, you should better repair your credit and then apply for a home mortgage.
3. Check with your affordability – You can also check with your affordability so that you apply for the right loan, the mortgage against which you can afford to make the payments. You can use an online budgeting tool and a mortgage calculator to determine on your affordability and get the details of the mortgage costs.
4. Compare mortgage offers – Compare the different mortgage offers so that you are able to decide on the best home loan offer as per your affordability.
5. Get pre-approved – Try to get pre-approved for a home loan. This helps you to quicken the loan processing and you get the loan fast enough. In addition to checking with the offers, also go on accumulating all the documents that you will be required to submit while applying for the home loan. If you stay equipped from the beginning it will take less time for the processing.

So, you can follow the above tips to make sure that you get the home mortgage to finance the costs of buying your home. In addition to the above, it is also important for you to check with the various types of home loans available for you.

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