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How to Secure Financing After a Bankruptcy (financial coach)

By Barton Simmons

 Unless you are willing to pay terribly high interest rates, you should try to raise your credit score as much as possible. The lower your credit score, the higher the risk for the lender to grant you a loan and the higher the risk, the higher the rate. This is unavoidable, of course there are special situations that may have caused your financial breakdown, but there are no means to avoid this and lenders can’t take subjective facts into consideration when it comes to fixing the interest rate.

Repairing your credit

Repairing your credit may take some time, but here is the way to start. Open a savings account and start making regular deposits. You don’t need to deposit large amounts, but the fact that you have an income that lets you put away an amount of money regularly will soon be recorded to your credit history and will highly contribute to raising your credit score and improving your credit history. This is just the first step but as a first step, the most important one.

Credit Cards

Once you’ve a reasonable amount of money in your savings account, use it to apply for a secured credit card. Secured Credit Cards are just like regular credit cards only that you can only borrow the money that you’ve previously transferred to an account. There is no risk for the card issuer so you’ll be able to get it even if your bankruptcy is close in time and your credit is not that good.

After using your secured credit card for a while you can apply (if you haven’t been offered one yet by that time) for an unsecured credit card. Your credit score improvement will most surely let you get approved without hassles. Make sure you use the card wisely, make small purchases pay the credit card balance always in full if possible, and never miss a payment nor make late payments.

Using your credit card wisely will help you skyrocket your credit score. Now is the time to start requesting small personal loans. Asking for small loan amounts will guarantee that you’ll get approved. Your regular monthly payments will do the rest, your credit score will soon reach a status where you’ll be able to request personal loans at very reasonable interest rates.

Final Steps

At this time you should have reached a good credit tag and you’ll be able to obtain any financial product that you need. Refinancing your home loan would be the next wise step to continue improving your credit score. Or you could request a home equity loan. Either of them will prove to future lenders that you are able to commit to repaying higher amount loans and that you’ve finally put behind your bankruptcy.

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What Exactly is Escrow?

By Barton Simmons

 When we talk about escrow as it relates to mortgages and real estate we are actually talking about two different topics that concern home buyers: the closing of the sale on a house (referred to as escrow) and the mortgage escrow account (a fund set aside for on-going expenses while the lender holds the note on your house). Let’s take a brief look at both of these concepts so you can be better prepared when you decide to buy your first home and take on a mortgage.

Escrow

Buying a house is not a simple procedure. With very few exceptions, it will be the largest financial decision you will ever make and will mean that you have an obligation to your lender for many years to come to pay down your mortgage note. It is important that when you purchase a house that certain procedures, rules and paperwork be followed and signed. In almost all real estate transactions you will be dealing with a neutral third-party called the escrow holder (or escrow agent). The purpose of the escrow holder is to make sure that everything is in order so that all parties involved follow the rules and are protected.

An escrow holder will make sure that all documents are received and filed. They will also insure that all stipulations in the buying and selling agreement are met before the sale of the home is finalized. They will request a title search to make sure the home is free and clear of any liens. They are in charge of receiving the funds from the buyer and releasing them to the seller only when the sale has been finalized.

An escrow agent will never give advice to either party. They are to remain neutral. If you suspect that your escrow agent is not being neutral you should immediately inform your mortgage lender and realtor. They also will not offer tax advice or opinions on your mortgage. Again, they are there to make sure all the t’s are crossed and I’s are dotted - they are not there to get involved personally in any way.

Escrow Account

The second topic is escrow accounts. You can think of these as “home bank account” in some ways, even though it is not a typical bank account. Escrow accounts are used to fund certain on-going payments that must be made over the life of the loan. Such items that have on-going payments include property taxes, insurance and mortgage insurance.

Escrow accounts are usually partially funded at closing and then a certain amount from each month’s mortgage payment is directed to the escrow account. When items come due, the escrow account is used to make payments on behalf of the mortgage holder.

It is important to note that not all mortgages have escrow accounts. If they are needed for your loan they will be disclosed to you when your mortgage lender prepares the documents and terms of your loan.

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Wednesday, March 10th, 2010 at 7:40 am and is filed under finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.