For ninety nine percent (99%) of the population purchasing a home means applying for a home loan. This is essentially an agreement between a borrower/mortgagor and a lender/mortgagee for the latter to put up the entire purchase price of the property for the account of the former who undertakes to pay on regular amortizations the principal plus interest within a specified period of time. And mortgage the property to the lender to serve as a security in case of default. For a majority of that 99% getting a home loan is a bit tricky, especially given the fact that their credit rating is bad to worst. This article will provide some basic tips to follow in order to remedy that situation.
Credit Rating
Is a system to measure risk thru past credit related and financial transactions collected by credit bureaus and sold to authorized entities. Simply put, the more defaults and negative financial information (i.e. bankruptcy, alimony, garnishment, etc), the lower your credit scores and ratings the greater the risk on the lender. This justifies loan application denial or approval but with less favorable term and higher interest rates.
Tip #1: Repair your Credit
Repairing your credit ratings and scores is simple. First, you just need to pay your debts but require the creditor to request removal of the negative information on your report with credit bureaus. Second, you wait for negative information to be removed or fall off the report, for example you wait 7 to 10 year for a prior bankruptcy filing to fall off your credit report. Third, you dispute verbally and in writing information that is false, inaccurate or obsolete.
Tip #2 Negotiate and Consolidate
If paying all debts in full is a bit of a problem then you may want to consider taking out a new loan to pay off some, or all of your debts. The tricky part is finding a lender who is willing to lend you money at a rate and with terms that is both manageable and lower than the total interest on the debts to be paid off. Tip, negotiate first with your creditors to have the interests and penalties reduced or dropped to minimize the new loan amount thereby increasing your chances of getting approval.
Tip#3 Lump Sum
The probability of you having substantial cash is low. Given the fact that you have a low credit rating which means you are not paying your debts. But, if you do have the same then you can bargain for a loan approval with it.
Tip#4 Collateral
A bad credit rating is nothing if you have substantial property to use as collateral. This means, automobiles, real estate, stocks, bonds, or any interest therein. This is because the lender has more reason to allow you the loan in the hopes of you defaulting and them taking your collateral to be applied for the payment.
Tip#5 Co Borrower/Surety/Guarantor
When all else fails you need someone to co sign with you either as co borrower, surety or guarantor. The best choices are your immediate family members or relatives with good credit ratings. This way their financial stability and credit standing is associated with yours. This means if you cannot pay they have the ability and will pay, thereby lowering the risk of default.
The author is the content coordinator for a site that provides SA home loans. To learn more visit gethomeloans.co.za

