It’s an American dream…buying your dream home…a house you can proudly call HOME. However, buying a house can be quite complicated because your head tells you one thing and your heart tells you another.

So before you go ahead and think about getting a mortgage to buy a house or a condo/apartment or receiving commercial real estate loans to build commercial buildings, be sure to do your research and understand the basics of lending.

First of all, know your personal finances: that is, how much do you earn in a month? What is the cost of your home (utilities, car payment, student loans, etc.)? Determine your personal goals (do you prefer to travel or do you participate in many events and social gatherings)? Remember…everything costs money and if you are willing to stay home then make the financial commitment to buy, but if you prefer to travel and socialize then buying a home might not be the answer for you. Prioritizing your commitments will allow you to make the right decision because what you will have left will be the mortgage payment.

Also, know your credit history or credit score before going to the bank to receive real estate financing. There are many sites online that will give you three credit scores, so use the Internet.

Whether you’re a first-time homebuyer or just trying to refinance the mortgage on the home you already have, there are a few things prospective homebuyers should (or at least should) own before lenders determine if you it is worth a home financing loan from them.

1) What is your credit score or FICO scores? This is a very important factor and usually the first factor lenders look at before moving on with their decision making. Generally speaking, banks want a credit score of at least 650; however, these candidates will pay higher interest and upfront costs (if the banks are willing to take a chance on this loan). It’s simple… the higher your credit score, the more likely you are to get a loan.

2) Potential lenders require job security from their applicants, usually two years of history.

3) If you own a business, you must show documentation of your business history for two years or so; however, you can apply for a “No-Doc” loan. The No-Doc Loan is specifically designed for individuals whose income is not paid through traditional paychecks or financial privacy is an issue for the applicant.

4) Rent… rent… rent. Credit scores aside, some lenders are willing to accept “subprime” loans as long as you can show proof of income and as long as your monthly debt payments are at least 41% or less of your gross income.

5) Down payment is another important key factor when banks/lenders are deciding on a loan. Before the housing crash, many banks/lenders gave loans to individuals with little or no money down (or 100% loan). Today, most banks require at least a 10% down payment to receive reasonable interest rates; However, if you can put down a 20% down payment, banks will offer you great home loan rates.

All of that said, it can be pretty depressing for people who find themselves caught in the middle. There are many people with bad credit scores with an income level higher than the debts that are trying to fix the problems that they have created or that were created through no fault of their own in the past.

It’s a vicious cycle… how can you fix your credit problem if no lender/creditor is willing to take a chance on you to improve your credit score?

Well… there are few loans available for people with similar problems, but it can come at a hefty price tag. Bad credit mortgage is designed for people with bad credit history due to late or missed payments, bankruptcy, etc. Unlike what you might perceive from the “bad credit” loan terminology, this type of home equity loan interest rate has dropped dramatically over the years.

Few lenders (both private and public) are willing to mortgage bad credit loans, so it is important for the applicant to do their own research or hire competent mortgage brokers to find the best possible mortgage quotes and rates for you.

Just remember… not all lenders are the same, and not all banks are the same. You may get special services or leniency from your bank (or small, locally owned banks) because you’ve already established a relationship with them rather than large banks with no vested interest in mind. At the end of the day… it all depends on the criteria of the bank, after providing them with all the necessary documentation, to say “yes” or “no”.

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