I recently bought my Grandmother's house off of her and it is owned by me free and clear (no mortgage). I wanted to borrow against this, however my credit rating is not very good. Can anyone tell me what I can do to borrow against the equity of the house? Thanks in advance.
2006-08-13 14:50:27 · 8 answers · asked by kenny_scarface 4 in Business & Finance ➔ Renting & Real Estate
Curious as to why you want to jeopardize losing the house when you own it free & Clear? You have power in not being a slave to the lender and not having debt.
You should be able to borrow up to 80% on a first mortgage at any bank since you own it free & Clear. Stay away from loan sharks or B-C credit sources.
Conversely you could work and save yor money to get what you want. As you pay the utility billes, cell phone, telephone etc you are also rebuilding your credit. For any outstanding unpaid debt you should arrange to make payments and pay then them off accordingly. Since you have a credit poor history let that be a warning to you that you can not handle debt properly, steer clear of it. You should also take courses in finance and how to handle debt.
2006-08-13 15:15:52 · answer #1 · answered by hithere2ya 5 · 0⤊ 0⤋
You will be able to borrow against it. Your credit score will affect both the interest rate, and the loan to value percentage. If your credit is really bad, you may be limited to 60% or 65% of the appraised value. If you don't need more than that, you don't need to be concerned. If you've owned it for less than 12 months, the lender might use the price that you bought it from her for, as the value and base the loan on that. After 12 months, they use the appraised value.
Depending on how bad your credit is, you could be looking at 9% or even more. But take a 2 year or 3 year fixed rate that turns into an ARM after that, and then you can refinance it after a year of paying on time, before it starts to adjust. Make sure not to accept a long "pre payment penalty", or else you'll have to pay a penalty to refinance it. (The lender wants you to keep the loan for awhile to guarantee that they make some money off of it.) Try to keep it to 1 or 2 years, which is about the length of time that you want to keep that loan. Then, when you'v got 12 to 24 months of good payment history on the loan, you can refi it.
You'll need to use a mortgage broker for something like this, because they have more loan options than a bank. The bank only wants "A" quality credit.
2006-08-13 23:12:48 · answer #2 · answered by Me-as-a-Tree 3 · 0⤊ 0⤋
You can get a loan but it would be a first mortgage rather than a home equity loan since you own the house unencumbered.
Just a suggestion, don't! You say your credit is not good so I imagine you're bad with money. Don't get sucked into the idea that you'll just borrow what you can afford and no more. In a few years you'll have the house fully leveraged and the only way you'll be able to pay the mortgage is to sell the house. You'll have lost a home you owned free and clear for a bunch of bull*hit you don't even remember spending money on.
2006-08-13 22:54:03 · answer #3 · answered by Oh Boy! 5 · 0⤊ 1⤋
Go talk to your bank or a mortgage broker. They may be able to advise you on loans that fit your credit rating. If you own the home outright, then there is equity. It's just a matter of finding a lender that will finance your loan.
2006-08-13 21:59:08 · answer #4 · answered by free2b 3 · 0⤊ 0⤋
If you recently bought Grandma's house and own it free and clear..........why don't you have good credit? If you get a home equity loan and then screw it up by not making payments, you will LOSE grandma's house. I advise against it. Strongly. Get your credit straight first. If you had enough to buy it, then you shouldn't need a loan.
2006-08-13 23:06:43 · answer #5 · answered by Anonymous · 0⤊ 0⤋
I can't, of course, assume the reasons why you have a poor credit score. I also can't assume your reasons for wanting to take out a loan.
Before talking to a broker, talk to you local banks and credit unions. Do not assume that because your credit rating is poor that you cannot aquire a traditional or FHA loan.
Actually, paying on a monthly mortgage will help to improve your score. But don't sacrifice yourself to the wolves by closing with sub-prime lenders out of desparation or intimidation.
If locals can't help you, consider waiting for a year or two and following professional recommendations in regards to improving your credit score to obtain a home loan.
In other words, wait to talk to reps of Quicken, Lending Tree, Capwest, Ameriquest...too long of a list to cover all.
First talk to your local bank mortgage loan reps. If you don't qualify, ask them why and what steps you can take to get yourself to that point.
If you do qualify, legitimate lenders will process your application and lead you toward closing without requiring bogus prepayments and closing costs.
Talk to your bank first! They have true professionals working for them.
2006-08-14 01:54:07 · answer #6 · answered by buggeredmom 4 · 0⤊ 0⤋
You got it made, you do. You own the house Free & Clear, depending how much you want to take out. You can go anywhere, as long as you take less then 60% percent of the house value. You'll be fine.
Do yourself favor, and shop around. Go to the big guys first, Countrywide, Citi, Chase, ......
Good Luck
2006-08-13 22:11:53 · answer #7 · answered by mevanr8x7 3 · 0⤊ 0⤋
Call Quicken Loans.
2006-08-13 21:56:31 · answer #8 · answered by tooyoung2bagrannybabe 7 · 0⤊ 0⤋