When you have bad credit or perhaps your savings just aren't enough to qualify for a bank loan, you might think you don't have any option other than to rent. This isn't always the case. If you have a steady income and are rebuilding your credit and paying off your debts at a reasonable time frame, it still is possible to get a mortgage to buy your home. You could opt instead for a private lender.
Traditional Lenders Strict Rules
For the most part, when people needed a loan or a mortgage to buy their house, the bank is where they would head to. Since the economic downturn, many banks simply are not handing out mortgages to those they deem a higher risk. This could be anyone who has a less than stellar credit rating, who doesn't have enough saved in their bank account or those who don't have enough of a down payment.
Traditional lenders such as banks turn away those they believe will have a hard time paying back the loan. After the economy started to rebound, banks and financial institutions brought in stricter rules and regulations surrounding who could apply and be accepted for a mortgage. In some cases, that left out people who lost jobs, had damaged credit or even were contract workers.
Private lenders became the way more people could get a mortgage when their credit wasn't the greatest, or they simply didn't have enough saved for a down payment. While it is true, you will pay a higher interest rate when using a private lender, the difference isn't so high that it can't be overcome, especially if you find a home well within your financial means. You will also have a greater chance at receiving a mortgage from a private lender as they mostly consist of business people and investors in the real estate market that want to give everyone the chance at home ownership.
These investors are registered with their state and you can get information on the investor if you would like to. The lenders are watched over by the Consumer Financial Protection Bureau that oversees them and will protect borrowers from unscrupulous lenders.
Don't Go Over Your Budget
The same rules and common sense factors into approaching a private lender as with approaching a bank for a mortgage – don't go over your budget on what you can realistically afford to pay. You should always factor in interest rates along with all other housing costs and bid accordingly.
For more information about mortgage options, contact companies like Nine Tails Inc.