If you are looking for a home financing for bad credit loan, then you need to read this article, as it will show you what you need, as well as what kind you can get. After reading this article you will have a much better understanding of the process, and which options are available to you.
Have equity in your home:
This is basically the main issue, you must have equity in your home to get this kind of loan. They consider it a 2nd mortgage on your home. You are usually required have at at least 1 years worth of equity built up before you can apply.
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However, the longer you wait, the more you will be able to borrow. Most loan offices, or banks will not allow you to go above and beyond the current value of your home equity.
There are ways to increase equity, besides paying into the principal. You can do some minor renovations to the home, this will increase the value, thus giving you more equity. Anytime the value of the home increases, it will increase the amount you have invested in your home, thus giving you more to work with when applying.
Line of credit?
This would actually be the best kind of loan to get. As it is not really a loan at all, but a line of credit, so you only get charged interest on the amount you use, instead of the full amount.
Lets say you have, $20,000 built into your equity, instead of getting all of that as 1 large lump sum, you get a line of credit. That means if you do not need the whole amount, you won't get charged the full interest on it, just whatever you use. However, as soon as you pay back into it, that amount is still open and available to you.
They will normally open another account for you, and give you a debit card to use on this account. Normally the card will say line of credit on it, this is so you do not confuse it with your regular debit card.
Full Loan?
This is where you take the full sum of what you want. So if you want $20,000, and you have that in equity, then you will be given that amount. With interest being charged on it all. And once you start paying that back, you will not have that open to you again until you request another loan.
When requesting home financing for bad credit loans, you are basically taking a lien on your home, which is called a 2nd mortgage. This will decrease your equity by that amount. However, you can choose between a line of credit, or a full loan. The choice is yours.
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