How to get a mortgage with bad credit: legal advice

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Mortgage loans are one of the most sought after types of loans worldwide. The opportunity to purchase your own home immediately, and not after many years of infringing on yourself literally in everything, attracts more and more people. However, getting a mortgage with bad credit can be a serious problem on the way to the dream of owning your own corner.

What to do in such a situation? Where does the stain on the financial reputation come from and how to solve the issue with little bloodshed? These and many other questions are of great interest to the reader, who has at least once faced a refusal on a mortgage.

What is the essence of a mortgage loan

First, let's talk about what mortgages and credit history are, how they are related and whether one can affect the other.

The term "mortgage" refers to this type of lending, when housing is purchased on credit, which becomes a bank pledge until repaymentloan. At the same time, although the buyer is considered the owner of the apartment, he cannot perform any legally significant actions with it. If the client stops paying bills before the loan is fully repaid, pen alties are included. Ultimately, the bank may even sue an apartment from a negligent borrower. In this case, a person runs the risk of being left without money and without housing.

In addition to stops or delays in repayment of the loan, there are other grounds for terminating the contract:

• damage to housing, non-compliance with operating conditions;
• transfer of premises for use to third parties;
• violation of insurance conditions;
• re-planning of the premises, changing the technical characteristics of housing.

Given the fact that such loans are repaid for a couple of decades, banks very carefully check those who are given a mortgage. They do their best to reduce the risk of debt default. For an average bank, the ideal borrower looks like this:

• Age - about 27-30 years old. This is enough to ensure that the client has not yet retired by the time the payments end.
• High official salary. If your earnings are at least three times the monthly mortgage payment, you will become a desirable customer of any bank.
• Impressive work experience in a good company, preferably in a prestigious position.
• A stable marital status, as well as a couple of children, will only strengthen your position. In addition, it is desirable that the spouse (wife) be employed with a good salary.

But evenif you meet all of these criteria and need a mortgage, bad credit can play tricks on you.

Where does credit history come from

Everyone who wants to apply to a bank with a request for a mortgage, first of all, must understand what the concept of "credit history" means, how it is formed, where it can be viewed and what it affects. Then, instead of knocking on the doorsteps of friends and acquaintances shouting: “Help me get a mortgage with a bad credit history!” - a person will be able to independently influence the situation.

Before deciding on a loan, any financial institution must apply to the BKI (credit bureau). It contains information about every person who has borrowed money at least once in his life. Information is entered into such databases about which loans this or that person issued, whether payments were made accurately, whether there were delays. If there have been breaches of the agreement, a record of this will also appear in the credit history.

What is "bad credit history" and what does it affect

As you already understood, a spot in the CI is a reason for refusing to receive a mortgage. All credit institutions without exception have access to the databases. There are several criteria by which verification is usually carried out. For example, these:

1. Non-compliance with the terms of the contract, late payments, complete rejection of the obligations assumed.
2. Causes beyond the control of the borrower, but worsening CI. These may be errors in the details, making payment through anotherthe bank that delayed the payment, incorrect calculation of the last installment, other factors.
3. Fraud activities. There are cases when scammers draw up a loan using other people's documents. Of course, they are not going to return the money. In this case, even if the criminal actions of third parties are proven, your CI will be thoroughly damaged.

Of course, in the last two cases, the client seems to be not to blame, but he will definitely need help with a mortgage.

How to check your own credit history and why you need to do it

To avoid unpleasant situations, it is best to take care of knowing your CI in advance. The fact is that the bank is generally not obliged to somehow motivate its refusal, but most often employees of financial institutions refer to it. In addition to all of the above factors, even minor events can ruin it:

• small (a few days) delay on a consumer loan;
• early repayment of a loan without agreement with the bank;
• failure to fulfill your obligations if you acted as a guarantor for a relative or friend's loan;
• debt of 2-3 rubles due to an error in calculations.

To avoid trouble, make it a rule to check your credit report at least once a year. Moreover, it is quite simple to do this:

1. First you need to contact a special division of the Bank of Russia, which is called the "Central Catalog of CI". There is a need to getinformation about exactly where your story is located.
2. Now it is enough to send a request to a specific BKI and get the necessary information. You can do it once a year for free.

How to get a loan with a tarnished reputation

Whatever information you get, don't despair. Remember: you can still get a mortgage. Of course, you should not brag about a bad credit history. But the situation can be corrected. How? There are several ways:

• submission of documents to a small financial institution, where verification may not be as meticulous;
• applying for help to intermediaries;
• submitting documents for a mortgage to the bank that has already provided you with a loan once;
• getting a loan from a developer;
• executing a lease with a buyout.

There are also ways that you should not resort to. It is no secret that there are organizations in the service market that are ready to correct documents for a fee. To do this, as you know, is illegal. May end in sad consequences.

Also in the field of bank lending, such a phenomenon as commercial bribery is quite common. This means that some employees of the financial institution are ready to turn a blind eye to the negative credit history of the client. Of course, not just like that, but for a solid reward. Don't settle for this. Such actions are also illegal.

Can a bad story be fixed

A mortgage with a bad history is a very troublesome business, but quite real. If you find errors in the CI, you can apply for changes. In this case, you will have to prove that the information contained in the credit history is unreliable and subject to correction. Your application will be reviewed. At this point, you need to prepare documents that characterize you as a trustworthy client. Such papers can be:

• checks confirming timely payments;
• statements from financial institutions showing no outstanding loans;
• certificate from the police that the loan was issued by fraudsters according to your documents;
• other documents proving your innocence.

According to the results of the check, a decision will be made to make changes to your credit history. If you were provided, and you do not agree with the results of the check, you can go to court and defend your rights there.

If, however, there were violations on your part and now you do not understand how to get a mortgage with a bad credit history, you should do the following. Take a small consumer loan from any bank to buy, for example, household appliances and carefully pay it off. Repeat these steps a few more times. In this way, you will improve your financial reputation, and small mistakes in the past will be forgiven.

In debt to the developer

Now let's talk about how to get a mortgage with bad credit if you can't fix itsucceeded and the bank refused you. In this case, you can try to contact the developer directly. Not very large construction companies quite often need to attract third-party capital. To do this, they are forced to apply to the bank for a loan. However, this is not so profitable, since you have to pay interest.

A more profitable option is to conclude an installment agreement with the client. At the same time, the developer receives additional money for construction, and the individual receives the opportunity to pay the cost of housing in installments.

With obvious advantages, such as the absence of interest, commissions, payments for assessment and insurance, this method also has a significant drawback - an insignificant installment period. It is rare that a company will agree to conclude such an agreement for a period of more than 5 years. In addition, you will certainly require a fairly solid down payment. Most often, it is about 30% of the cost of housing.

Applying to a small bank

If you're wondering where to get a mortgage with bad credit, try a young bank or small financial institution. Such establishments fight for each client and quite often reduce the requirements for mortgage applicants.

In addition, such institutions often employ specialists who do not have sufficient experience in the field of lending. Simply put, they simply do not know where to look, but they have a great desire to conclude a contract.

But this method also has disadvantages. Most often, these are rather high interest rates or charging additional fees. In this way, small banks seek to reduce the risk of defaults.

Guarantor + pledge

Another option for getting a mortgage with bad credit is to provide a large amount of additional collateral and multiple guarantors.

Since no bank will deal with unreliable clients, you will have to convince their employees that you can be trusted. First you need to enlist the support of a person who is financially impeccable and has a solid income. It is even better if there are several such guarantors. In this case, your negative credit history will no longer look too weighty in the eyes of the manager. After all, if you fail to fulfill your obligations, the debt will be demanded from the guarantor.

If you can give the bank something valuable that you already own, it will also significantly increase your chances of getting a mortgage. It can be a summer house, an expensive car, a country cottage, an antique piece of jewelry, and so on. It should be understood that the purchased apartment will also be a pledge. And if you fail to meet your obligations, you may lose both collateral and be left with nothing.

Increase the amount of the first installment

Almost all mortgage loans are issued with a minimum (down to zero) down payment. So if you don't know how to get a bad credit mortgage but have enough cash to spare, try taking out a loan with a higher down payment. If you are able to immediately deposit about 50% of the cost of housing, the bank will most likely turn a blind eye to a negative story. This happens because, even if you cannot pay the loan in the future, the bank will easily sell your apartment for half of its real value and return the money to itself.

We turn to the intermediary

Sometimes a client's credit history is so bad that he may need help with a mortgage. For this, there are special loan brokers. These people will offer you a list of banks that are willing to talk to problem customers. For an additional fee, the broker will take care of all the negotiations and almost guaranteed to provide you with a mortgage. True, the services of such assistants are expensive, but sometimes this is the only way out.

Leasing an apartment

There is another, rather new for Russia, way of obtaining a mortgage with a tarnished credit reputation. This is a home lease. Its essence is that a person enters into a housing lease agreement with subsequent redemption. Monthly expenses at the same time consist of the cost of rent and the amount of the loan payment. Credit history in this case does not play any role. Indeed, until the payment of the entire cost, the owner of the apartment is not the client, but the financial institution.