A Quick Guide To The Use Of A Guaranteed Mortgage When You Don't Make A Lot Of Money
If you are ready to buy your first home or you need a bigger home than the one you have now and you don't have a big paycheck to help you do so, it is important to consider the option of a guaranteed mortgage. It is useful because it can guarantee up to the full cost of the loan for many borrowers, thus allowing many individuals with a low-income to buy a home when they might not be able to otherwise. Therefore, if you are interested in purchasing a home and you are concerned about being turned down for a mortgage loan due to your income, it is a good idea to be aware of the information discussed below.
Do You Understand Why Your Mortgage Needs A Guarantee?
When planning for the purchase of your new home, it will be helpful to understand why your loan will often need to be guaranteed. When a loan is guaranteed through a third party, whether that is a family member, the government or another source entirely, the lender will not lose money if your circumstances were to change and you wound up defaulting on the loan. A guaranteed loan is inherently less risky for the lender because they will still eventually be paid by the guarantor if you cannot do so.
However, that guarantee only protects the bank, credit union or other financial institution that is actually providing the loan. If you skip payments, you are still at risk of being sued or facing other legal action for failing to make mortgage payments on time, risking default or experiencing foreclosure. Therefore, you should be sure that you can afford the payments for your new home and that you have enough of a financial cushion saved so that you don't risk foreclosure because of financial concerns in the future
Is It Possible To Have Just Part Of The Loan Amount Guaranteed?
It is important to note that while it is not unusual to immediately associate a guaranteed loan as being related to the USDA loans available from the U.S. government, it can refer to other situations as well. For instance, some parents are able to guarantee the amount of a home mortgage loan for their adult children, in what ends up being a form of co-signing that loan. In that situation, the parents may need to qualify separately from the borrower, including meeting the guidelines for credit-worthiness and income.
Alternatively, former members of the U.S. military may be able to qualify for a loan guarantee that is provided by the Veteran's Administration.
In conclusion, buying a home is frequently the biggest purchase that many people will ever make and unfortunately, it is not always easy to qualify for the necessary loan. If you are concerned about being declined for that loan due to a lack of funds, the information shared above will be quite useful.