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Getting into a bad credit situation is easy to do. Getting out is not that easy, and it takes time. And what if you want to apply for a mortgage (taux hypoth'caire) and buy a home now?

When a mortgage lender looks at a loan applicant's file, one of the first things he will look at, is the potential borrower's credit report. This will help him determine the risk he might take with the borrower.

Description

The mortgage strategy for 'less than perfect credit' takes place in 3 or 4 steps. The purpose is to obtain an average interest rate over 15 or 25 years which is as low as possible - taux hypothecaire.

Step 1: Secure a mortgage

You can get a home loan, even with a bad credit report. You will just have to realize that there are some limitations that those who have good credit ratings don't have to accept.

There are a number of lenders (at least 10) who specialize in these types of loans and have less strict credit criteria than other lenders. You can usually obtain a mortgage with a short maturity period, such as three years. This is not normally recommended, but it will get you started.

Just remember that the two most important issues that impact your interest rate are your credit report and your down payment.

Step 2: Fix your credit

In the beginning two years of your mortgage, use that period to work on your credit rating. Meet with a good mortgage financing credit counselor specializing in loans for less than perfect credit. He will guide you through all the steps you need to take in order to repair your credit.

Step 3: Renegotiate your mortgage at the best rate possible.

Now that your credit has improved, you will find lenders who are able to offer you a mortgage at a very good rate (taux hypothecaire). It is a matter of working with the right sort of lender and presenting your case properly. If your credit was extremely bad, you may have to have an additional step before you can start to get really good rates - taux hypoth'que. (taux hypoth'que)

Advantages:

' Buy a home sooner and be able to take advantage of any upswings in real estate values. (Read our publication: Will housing prices continue to rise? Forecast for 2006 and 2007')

' You have now a period of time during which you can work on your credit rating

' You will get improved rates (taux hypothecaire) in the future - taux hypoth'que

Disadvantages

' The interest rate for the first three years is often very high - taux hypoth'que.

' The mortgage payments will probably be very high (it is possible in some cases to keep the mortgage payments lower by increasing the amortization period during step one in order to reduce it in the third step).

' Lenders often demand more documentation in addition to the mortgage note.

' The down payment is very critical, but it is possible to have a no down payment mortgage in some cases.

' Assessment fees are paid by the buyer

' It will not be possible to receive a pre-authorization, but a good mortgage financing credit counselor who specializes in this type of situation should be able to help you.

CAUTION:

Certain mortgage brokers charge additional fees for 'difficult' cases. It is normal for the broker to require fees if the financial institution does not pay the fee or if the amount of the mortgage is more than $90,000. In most cases (more than 80% of them) the financial institution pays a commission to the mortgage consultant.

Never deal with a broker who:

' Demands payment of their fees before having completed the loan financing (at closing)

' Demands extremely high fees (a commission of 1.8% of the financed amount is normal, with a minimum of $1,500).

Hopefully you have learned something important from all of this. You can really own a home, and own it now, even if you have less than perfect credit. This will be a big help to take advantage of increasing values in home prices. If you take the necessary steps, plus work closely with a good mortgage financing credit counselor who specializes in less than perfect credit, you will get your dream home, and you will eventually have a mortgage with the best interest rates(taux hypoth'que). Set up a meeting now with a specialized broker who can help you with less than perfect credit, and find out what you can do to own a home now.