Homeowners Insurance With Bad Credit

Now Available: Homeowner's Insurance You Needed in 2006

Here’s the good news for homeowners: They can now buy an insurance policy that protects against declines in values. The bad news is that the insurance can’t be applied to the last five years of carnage in the housing market, when most homeowners might have needed it.

The Home Value Insurance Co., a San Francisco-based concern, announced Wednesday the launch of its Home Value Protection, or HVP policy. The policy, which only provides protection for owner-occupied, single-family houses and condominiums, rolls out in Ohio, but is expected to be offered nationally, the company said.

The policy essentially pegs your home value at a certain price (called the “Protected Home Value”). If you sell the home at a loss compared with what it’s insured for, the HVP policy pays you for either the value of the loss, or the difference between what the home is insured for and the decline in home values according the local reading of the S&P/Case-Shiller Home Price Index (whichever is less).

There are a few conditions:

First , if you bought your house within a year of getting the policy, the price you paid for your house is used as the Protected Home Value. If the home was bought more than a year ago, the Protected Home Value is determined using a formula involving several automated-valuation models.

Second , there’s only a payout if home values in the surrounding market have declined during the policy period, also based on Case-Shiller index.

Third , the HVP, a 10-year policy, insures home value declines of up to 25%, but it also comes with a 10% deductible for the first year, a 5% deductible for the second year and no deductible thereafter. After that, the usefulness of the product, from the homeowner’s standpoint, depends on long-term economic malaise, lasting well into the middle of this decade.

There are some obvious questions raised by such an insurance policy. Insurance is usually meant to protect people against accidents or economic anomalies such as when a borrower previously thought to be credit-worthy defaults on a debt obligation. If you live in a place where home values are rising, however slowly, but your house is the exception to the rule (for any number of reasons, including a high foreclosure rate in your neighborhood or submarket), this policy doesn’t protect you. Also, the policy is only helpful for long-term (two-plus years) volatility.

Building a Home with Bad Credit - Tips for ... - Homeowners Insurance

Building a Home with Bad Credit

Many people have a dream of building their own home someday. The dream is help by people of all income levels and financial standings. Just because one has bad credit does not mean they have lost their sight of this dream of building their very own home. But, many have chosen to abandon that dream simply thinking it is too unattainable. However, there are ways to begin readying yourself to build your own home even if you have bad credit.

Sure the guidelines that lenders have set can be quite strict for a potential borrower. It seems like you have to jump through dozens of hoops before you can qualify for their loan to begin building your home . And this is very intimidating for someone that has a tarnished credit history as they feel they will automatically be turned away without a second thought. But, here are some tips on how to make yourself more appealing to those strict lenders so that they are willing to give you a loan to build your own home.

It is a good idea to first invest in the land to build on before you think about going for a loan to build. If you are able to secure the land, then you have collateral for the lender to consider when granting your loan. They will also take you more seriously as you have taken the first step and they will trust you to follow through on your building process.

If you have bad credit it is important to keep in mind that you will not be able to be picky with your interest rates. You are a higher risk to the lenders so they will not be able to offer you the best rates as those are reserved for those with higher credit. You will likely qualify for sub-prime interest rates instead. Remember that you can always refinance down the road when your home is actually built and you have had time to strengthen your credit.

Of course the best way to make yourself more appealing to the lender is to improve your credit score first. You can immediately do this by paying off any past due or outstanding debts. If you show your potential lender that you are seriously trying to improve your financial outlook and are able to currently manage your bills, then they will consider you to be less of a risk. Some lenders are willing to ignore past mistakes in financial responsibility if you show them that you have turned out habits around.

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