Filed under: Bad Credit Loan
Question: I am in need of help in purchasing a home i know nothing about the 0 down and along with having little to bad credit i feel stuck and also wondering if it is a good idea. I live in nyc and i rent a 2 bedroom for $725.00. MY mother lives up stairs and rents for $806.00 per month so we were thinking of a 2 family home and putting the rents to the morgage but i need help. Can anyone who knows about homes or gettting a property with little down payment give me some advice? thanks
Answer: if your credit is bad, or not enough info, you may have a hard time finding anyone to sell to you, check all new home buyer loans, and dont forget to try with your mother as a co-signer, maybe as the primary, i am looking at the same situation myself, and my credit and my fiancees needs alot of work, we will be stuck renting for the next couple of years, just becuase no-one wants to touch us, even though we could come up with a possible 5% down payment. good luck. 
January 1, 1970
Question: My sister and her husband would like to buy a home. This house is very special to her since it is close to our parents house and always wanted to buy it. She can get the house for a good price around $40,000, but they had some credit problems a few years ago. They also filed for bankruptcy about two years ago.
Her husband is a Veteran, but he did try to apply for a VA Loan and was told that he missed the eligibility requirements by a few weeks.
Are there any companies that would give someone like them a chance? A mortgage on $40,000 will be lower than the rent they are now paying per month. Since he is also a veteran, are there any companies that may give them a better chance because of his military service?
I do remember a discussion a few months ago on this newsgroup about a bank or loan company for veterans, But I can’t remember the name or if they offer loans to people with bad credit.
Answer: Yep, state laws undoubtedly vary. Point is, if you have bad credit it’s going to be difficult to find a property owner who won’t want some extra consideration over and above what a conventional lender would. That usually translates to at least a higher interest rate (to cover the increased risk that the borrower will default). In theory the default provision whereby the owner gets the property back shouldn’t be of concern to a borrower who intends to make timely payments.
One caution I *would* mention to potential buyers is to make sure they have the option to pay off the balance of the contract at any time. Thus they do have the option of getting conventional financing ASAP as well as selling the property to someone else should they decide too.
January 1, 1970
Question: Am I the only one in this particular situation? I feel very alone…
In 1996 after graduation, I consolidated my student loans, and one credit card (with school expenses – equipment essential to my education) under a private company (Merlin-Plato). The original amount was around $35,000. To make a long story short, I have paid (conservatively) around $20,000 on the entire loan, but still have $30,000 remaining. I realized much too late that I made a horrible mistake, but it seemed like the right thing to do at the time. I am paying an obscene 6-6.5% above prime, and I shall never be able to pay this loan off at the current rate. I have had only one 6 month forbearance due to financial difficulty, but diligently made payments of $300-375.00/mo every other time, even while dirt poor.
I know now if I had kept the original loans, or used a government consolidation program (I was not aware of this at the time!), I would have half of this amount paid off, and it’s made me quite depressed (part of the reason I am under psychiatric care/meds). I am now contemplating Chapter 13. Yes, I am ashamed of having to to this, and actually looked forward to paying off my student loans, to prove I can indeed do this, and to show that non-trust fund kids have a fighting chance of financing a good school. I wish I had another choice, but everyone I’ve spoken to is stumped. My mom has even tried to take out a second mortgage to pay the loan, and I would have paid her, but the rates were too high (I cried when she told me this). I worked with an organization called MyVesta.org, and they couldn’t negotiate a rate reduction with the company. I’m at the end of the rope.
There was also an incident that pushed me over the edge; a collections person mistakenly called my mom (the cosigner) when my loan was not in collections. He then proceeded to insult and patronize her. I did call back and raise hell, but received no formal apology. I don’t know what else to do. As of now, I’m told my loan is no longer a student loan, but “private.” Obviously, it will be a cold day in Hell before I can refinance this with an unsecured loan (I live in New York City, so of course I don’t own a car or home). I know I can’t be the only one in this situation, but I know of no one who consolidated with this company after graduation, so I have no one with which to compare notes.
I would really rather not have to file Chapter 13, and heartily welcome any advice or similar stories. Another note: I also have a hefty IRS debt, left over from a few years back when I had a choice of either paying the IRS or the loan company. I am working from home at this time, so I do have time and energy for any “creative” solutions.
Answer: Why was the collection person calling your mother? Check out the federal fair debt collections act. Keep track of the name, date, time and content of each collection effort. Write the company and tell them not to contact your mother any more. Debt collection people are prohibited from contacting relatives, employers, etc. to discuss your debt with them.
It may be that the consolidated loan is dischargeable in bankruptcy, but your student loan probably was not, except if a considerable time goes by or in the case of hardship.
Older loans are sometimes sold to companies who specialize in people who have defaulted. These companies often accept a lesser amount in full payment, but be very very careful and do this only through an attorney or they could rip you off again.
Chapter 7 bankruptcy may be a good idea in this stage of your life and the debt, if you do not own anything above the exempted assets. If you do not have a car or a house, you may just be able to discharge these debts without further payment. Again consult a bankruptcy attorney with a list of your assets and debts. Many bankruptcy attorneys give free initial consultations.
Your credit appears to be shot anyway, so a concern regarding what bankruptcy would do to your credit really is not a big consideration.
Keep in mind that trying to pay these debts after you have defaulted does not help your credit ratings. If you keep trying to pay and drag it along for a few more years, that just means that your credit report will show years of bad credit. Bankruptcy brings all the bad credit reports to an end at a specific date and after that you can do things to restore your credit ratings.
Hope this helps.
January 1, 1970
Question: I know you mean kindly, but you’re just not in their world.
>There are thousands, if not hundreds of thousands, of people who don’t >have credit cards on which they could borrow a deposit. If you were a >bank, would you issue a credit card to someone who was sleeping in a >cardboard box or a homeless shelter?
>As to relatives from whom they could get a loan, that’s another huge >unknown. Are there any? What are the relationships between them?
>These poor souls are so far out of the mainstream, that it is nearly >impossible for someone like you, suggesting rational decisions in a >helpful way, to put yourself in their place.
Answer: If I remember correctly, this author had a similar article in the New Yorker a couple of years ago. The whole premise of her experiment was to see how reasonable it was to expect the women getting kicked off welfare to be able to make a go of it on their own. She assumed they could only get work as unskilled labor, waitressing or hotel housekeeping, and she tried to survive as they do with no back up help from her bank account or anybody else’s.
Obviously, coming off welfare one would have no savings and either no credit or bad credit. She ended up running herself ragged trying to hold it together, and she didn’t even have any kids to worry about like the rest of the women she encountered…
January 1, 1970
Question: Home equity: $25k equity on a $150k house. (not enough for a home > equity loan.) > I think my interest rate on this mortgage is 10.5%
My best thought fo you, if your mortgage rate is indeed 10.5%, is to >REFINANCE ASAP. Get a lower rate. You can probably get something around >7.25% with no closing costs. This will likely lower your payments enough >that you can take the money you will save every month and apply them to the >credit card bills to accelerate your payments.
Answer: I’m doubtful anyone would refinance this first mortgage loan for a lower interest rate now since 1) he/she doesn’t have 20% equity, and 2) his/her financial situation is now a nightmare.
Probably his/her best bet is to try to get a second mortgage loan with one of those ripoff “borrow up to 125% of the equity of the home, NO CREDIT, BAD CREDIT OK” agencies that send brochures to (mostly) poor and disadvantaged neighborhoods. I’m sure they would charge some outrageous rate – BUT REPAYMENT WOULD BE IN PRE-TAX DOLLARS.
This person’s financial situation is so bad that, for example, a ripoff rate like 14% on a second for $43K, would make payments equivalent to maybe a 10% after-tax credit card rate. Would effectively cut the monthly payments on the $43K in half.
January 1, 1970
Question: Having a flight of fancy — “renting” out my guest bedroom in exchange for housekeeping, maybe some meal preparation, etc.
Anyone have stories, horror or no? What did you do to make sure you got a good person? Thanks all.
Answer: People tend to think that others are like themselves. And people who own homes tend to be responsible people.
With that said, people who own homes and want to rent out a room think they will find some nice responsible person to rent the room to…
But think about this a minute. Who are these people that do not own any furniture? Why don’t they have any personal belongings? Why can’t they rent their own apartment?
Possibly because they can’t hold a job. Maybe they have bad credit. Maybe they have a criminal record. Maybe they have a bad rental history. Poor handling of their personal finances. Etc.
With that said, these days professional apartment rental companies will run many different checks on potential renters before renting to them.
The way they look at it is they are renting/loaning the person a property worth upwards of $100,000.00. So they take the same care a bank would to be sure their investment will be well taken care of.
They verify employment and length of employment. They run a rental history check. They run a credit check. They run a driver’s license check. They run a criminal check. (Ask a local rental company how you can run these checks yourself.)
The rental check shows they paid their rent on time and left the property in good condition after moving out. The credit check shows they pay their bills on time. The driver’s license check shows they can follow the rules of society (would show tickets for speeding, DUI, etc.). The criminal check could reveal a person who uses/sells drugs or a dishonest person.
In my opinion and experience, it is more important to run these checks on people who are renting a room than someone renting an apartment or house. That is because they don’t have furniture and they don’t have the money to rent their own apartment/house. The question is WHY?
There ARE good responsible people out there who will pay their rent on time. But there are also many irresponsible liars who will lead you to believe they are the responsible types. And being the responsible homeowner you are, you would tend to think these people are like yourself! (Not!)
Then other than that, put it in writing what you expect of your roommate. That is food, cleaning supplies, watching TV in the living room, using your stereo and the volume level, etc.
Will you pay for all cleaning supplies? Will you pay for all kitchen condiments (salt, sugar, spices, ketchup, etc.)? Can they eat your food or not? Who will do the dishes/clean the kitchen? Perhaps leave the kitchen as you found it?
You will get along better with your future roommate if you work this all out ahead of time.
It does not matter what you agree to, just that you both agree to the same things. You might say they need to buy their own food, but the roommate can use all of your condiments. No problem if you both agree!
You may come home and want to watch the news on TV, but find your roommate playing the stereo at full BLAST! And the roommate gets mad when you ask that it be shut off so you can watch the news.
Etc. Be sure you can live with the person and come to some sort of agreement with these things. Sort of like being married or having a relationship. Better if you like to do the same things.
January 1, 1970
Question: Sometime this summer I’m planning to take out my first auto loan in over ten years. And already I’m a bit worried about my credit qualifications. There are no derogatory items on my credit report, and my income is certainly large enough to support the amount of loan I have in mind. Debt is the problem – more precisely, the *lack* of debt. My only current debts are a mortgage and a credit card, both with modest balances. But I’ve heard that the “credit scoring” systems used by most lenders today actually treat low debt balances (expressed as a percentage of income, presumably) as a suspicious item. I suppose that’s funny in a way, as excessive debt also is a no-no. I’m really worried that lenders will reject me due to my relatively debt-free lifestyle and I’ll be relegated to one of those ghastly “For Good People with Bad Credit” used car lots. Should I accept one of these unsolicited credit card offers that keep coming my way – not that I want to – just to boost my debt level and hence my credit score? TIA.
Answer: I’m no expert on this subject, but I think that you probably have enough of a good credit history that you’re fretting needlessly. However, if it would put your mind at rest, sure, pick up a couple credit cards. Just make sure they have no annual fee and a grace period on payment whereby the card costs you nothing as long as you pay off the balance every month. Then charge a few minor purchases of things you’d have bought anyway. Once you get the loan you want you can always cancel the cards.
January 1, 1970
Question: I was wondering if anyone knew of any kind of “pre-pay” card that can be used for on-line shopping. I don’t have credit cards, but sometimes there are things that I can find on-line that I can’t find anywhere else, or I can find them at a better price. But what’s a person to do if they don’t have a major CC?
By the way, I’m one of those lucky people that got my credit identity stolen. Someone applied for multiple credit cards in my name. Fortunately none were approved, but it was a mess to clean up my credit records just the same. I’ve gotten my credit straightened out, but I don’t really want to start the whole CC thing again just to shop online. Right now my mother lets me use hers. Any ideas guys?
Answer: You should NEVER use a debit card when shopping online. Debit cards are not secure (meaning that if someone were to use your number to buy anything they pleased then you’re stuck paying for it, where with a credit card you can dispute fraudulent charges).
I know several people who’ve ended up paying for someone else’s shopping ventures because they used a debit card online. I, personally, use a credit card that has no annual fee. I pay it off every month so it doesn’t accrue interest. When I make a purchase with it I write the purchase amount in my checkbook & pretend the money isn’t in there anymore so that I won’t spend it. With the buyer protection it provides I find it 100% worth it and it’s free for me to use since I never pay any interest!
January 1, 1970
Question: I agree with you Melody. I am not going to give someone access to my checking account (which is what a debit card does) online. But as I said before, getting a major credit card (Visa, etc.) has been a problem because of the credit fraud that happened before. I could get a secured card or one with hefty annual fees or interest, but I’m just not willing. Everything pertaining to me should allow me to have one of the “good” credit cards. It’s the credit fraud that screwed it up.
I still think this is a business opportunity that someone should pursue. We have pre-pay, fixed amount cards for phone calls, gasoline, etc., why not one for on-line shopping.
Answer: Can you get one with a high interest rate & no annual fee? As long as you pay it off every month the interst rate won’t make any difference at all. I’ve seen cards that offer no annual fee but have like a 24% interest rate on them for people with no/bad credit. I’m sure you could get one of those.
I’ve also seen some where they require you to open a savings account & your credit limit is the same amount that’s in that account. They have no annual fee but a rather high interest rate.
We had pre-paid credit cards here (in Atlanta) during the olympics. Visa did them. They were called Smart Cards & you could buy them in $10, $15, $20, $50, $100, etc… and they worked just like a credit card. It was considered a good alternitive to buying travlers checks. They were pretty neat, maybe if people wrote to them wanting them to do that again (on a permanent basis) they’d consider it?
January 1, 1970
Question: Hi, I’m new here.
As the subject line says, I have some questions about buying a house.
Based on my numbers, if I stick to my current budget, I should be able to buy a house somewhere between one year and 18 months from now. However, this will decidedly be a “starter” home. (Not that this bothers me at all; I grew up in a refurbished one-room schoolhouse that cost less than my used Subaru did.)
Mostly, I have three questions:
1. What sorts of problems should I be alert for, especially in older houses? How much do they cost to fix, and how urgent is it that they BE fixed promptly? (i.e. is the problem just an annoyance or cosmetic thing that can wait, or is it a safety hazard, or does it occupy the middle ground of being inefficient but not truly unsafe?)
2. I have a long-term contract work assignment. There is a chance it will go permanent, but also a chance it will not. If it doesn’t, I should be able to get another job wiht similar pay quickly. How much does this mess up my chances of getting a mortgage? I don’t want to look elsewhere unless it’s absolutely necessary because I really love my job, and that seems to be a rare thing these days.
3. The credit bureaus are convinced I don’t exist. I can’t get a Target card, even, and my SO’s 17-year-old sister got one with no problem. How the heck do I fix this so that I have a chance to build a decent credit history? It’s driving me nuts. And it’s not from bad credit, either, it’s because the credit bureaus can find no record of me existing at all. 
Any help with any of this would be appreciated. *smiles*
Thanks!
Answer: Hi, and welcome! You’ve made some excellent posts already!
First, since you have some time before you make the jump, start reading. Before I bought my house, I read a book by Bob Vila that was entitled something like Guide to Buying A House (can’t recall the title specifically). That’s probably out of print now, but may be available at your library — otherwise, there are probably new books on the market that could help. That book was enormously helpful to me once I started house hunting in earnest, as it helped me learn what to look for.
Second, once you find a house that looks good to you, has a decent price, and you really want to buy, make your offer contingent upon passing an inspection by a professional inspector OF YOUR CHOICE. Don’t let your “buyer’s agent” realtor pick one for you — they don’t like to see sales fall through, since then they don’t get paid. Rather, ask around amongst your co-workers for recommendations as to who is a good house inspector for pre-buys.
I’m much less an expert at getting credit. When I was young, first thing I did was to open bank accounts — savings and checking. I also had an ATM card. Then, I got a Sears credit card. In those days you didn’t need to have a credit history to get a store card, just some sort of banking history. I’ve heard that if you apply for a “secured” credit card, where you deposit, say $500 in an account and are then given a card with a $500 limit, that it can help your credit rating. I’ve **also** heard that this method does not help your credit rating at all, since they know that you weren’t really borrowing at all! So, someone with more knowledge on this credit issue will have to steer you in the right direction!
Good luck!
January 1, 1970
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