The real problem with getting a loan these days is not actually the fact that we’re in a recession. Sure, the lending crisis that preceded the recession has caused lenders to tighten the purse strings. But there are still loans available for those who meet the proper criteria. And the problem isn’t even that the requirements have become more stringent. The trouble for most people looking to purchase a home is that job loss, foreclosure, or other related issues have resulted in poor credit, so that banks that would have considered them even a few years ago are now turning them away. Fortunately, there are still ways to work towards owning a home, despite the fact that the world is mired in an ongoing recession. By formulating a plan of action and knowing the options available to you, a home can still be within your reach. Here are a few guidelines to help you along.
1. Get a free credit report. Just about any lender is going to require you to have a good credit score before they’ll give you a home loan. But how do you know what qualifies as a “good” score or whether or not you have one? A FICO score of 720 or above is considered excellent, while 620+ is pretty good, but these days you’ll have to be on the high end to secure a loan. As to what your credit score is, you can find out easily by ordering a free credit report. Simply go to www.annualcreditreport.com to get your report annually at no charge.
2. Pay off debt and clear up black marks. You are probably aware of where you owe money, and once you have your credit report in hand, you can start to clear up any problem areas. Just make sure, as you pay things off, that they are removed from your credit report. Otherwise all your hard work will have gone to waste.
3. Save up for the down payment. One great way to secure a loan, even if your credit rating is not top-tier, is to save up a substantial down payment. Of course, if you’re carrying a lot of debt, this may not be an option. But if you are working towards a loan, you can certainly start saving even as you pay off credit cards and other loans (car, student, etc.). Then, when your credit is in good shape, you’ll have the money for the down payment on hand.
4. Scrutinize lenders. When trying to find a loan in this economy, you need to be careful about where you get it. There are all kinds of unscrupulous characters out there trying to scam people with bad credit by promising outrageous loans. So if it seems too good to be true, it probably is. Exercise due diligence by checking in with the Better Business Bureau to see what others have said about the lenders you’re considering.
5. VA Loan. For those who have served their country through the armed forces, a home loan through the Department of Veterans’ Affairs could be an excellent option. Eligible veterans may not even be required to provide a down payment. With troops beginning to pull out of occupied areas, this type of loan increased by 30% last year. So if you think you might qualify for such a loan (whether you have the funds for a down payment or not), you should look into the VA program as a viable option for financing a home.
Kyle Simpson writes for PO Factoring. With PO finance you can grow your business and pave the way for more.
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