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How to Get Mortgage Financing if you have Bad Credit
A couple years ago, Jim was a successful regional operations manager for a major restaurant company based in Vancouver. He was bringing home $750,000 a year, and he and his wife bought a lovely home, using a bonus to make the down payment but still taking on payments that were close to the maximum they could afford on their budget. Times were booming, and they figured Jim’s income would continue going up, which would make the payments affordable even if interest rates ticked up a bit at renewal.
Then one day, Jim gets an email from his boss, asking him to come in first thing that morning. It turns out that one of the other companies in the conglomerate that owns Jim’s company is hemorrhaging money, and the executive group has decided to streamline all of the companies to help make ends meet. As a result, Jim’s position has been combined with another regional operations manager, a guy five years younger and perceived as a little bit hungrier. Now, Jim doesn’t have a job.
There’s no problem right away, though. Jim’s been prudent and has saved six months of expenses, and he has connections. However, while he does turn up a few leads, they aren’t lateral moves, and the management at those positions is concerned that Jim will only stay there until he finds a position equivalent to what he had before. As a result, they aren’t willing to take the risk of hiring him just to lose him. So Jim stays out of the job market. Unemployment compensation helps, but it’s not nearly enough to cover the mammoth budget of their home.
Even after they cut some extras, such as the premium cable channels, select soccer for their younger son and a few other nonessentials, Jim realizes that the mortgage is not going to be paid with the income that comes in each month, if the family also wants to keep the cars and maintain any sort of lifestyle. He doesn’t want to let his wife know, though, so he lets other payments slide, just enough to avoid repossession of the car. The credit card balances start to swell with interest and principal, as he even starts to miss minimum payments now and then. Their credit score starts to slip, and he misses a mortgage payment — and then a second. He hears from the bank but has no idea how to structure a modification.
Finally, he goes in and talks to the bank. He is honest with them about his situation, and they realize that even a modification will not take care of the loan long-term. He puts the house on the market, but values have dwindled a bit since they bought the house (and they overbid on the house because they loved it so much), and they hadn’t built up a lot of equity before the layoff. The bank won’t refinance, and they won’t approve the short sale. Jim’s poor credit is keeping other banks from taking over the loan as well.
Mortgage Financing With Poor Credit
Does this sound like you? Is foreclosure a pending reality in your life? The good news is that there are plenty of other options out there beyond the banks. Private lending is one option that allows you to get your current lender off your back while you keep looking for that next job that will get you and your family back on your feet. A private lender comes in and pays your mortgage balance to the bank, and that amount becomes your new loan. The equity you had in your house can convert into the down payment on the private lending loan.
If you still can’t handle principal and interest, you can often structure the loan so that you only pay the interest on the loan. Over the term of the loan (usually no more than one or two years), you have the time you need to find another job and restructure your budget so that you get back in good standing with your creditors. When the term is up, you generally have the option to renew if you can’t quite qualify for mortgage financing yet from the bank. The good news is that there’s no reason to lose your house just because you’ve got poor credit. If you don’t own a house yet but have at least 15 percent to put down, you can structure your first mortgage through a private lender as well. Amansad Financial has relationships with individuals and companies looking to invest in real estate by becoming private lenders, and we can connect you with one of them to put together a win-win deal for both sides.