Subscribe Feed (RSS)Let’s face it, in this economy it’s tough getting any sort of home loan, especially a bad credit home loan.
That doesn’t mean you should give up, however.
There’s still quite a few opportunities for folks with a few dings on their credit to secure financing for a new home. It’ll take a little bit of research and shopping around on your part, but with a little time and effort, you can realize your dream of owning a home, even if your credit is less than perfect.
A bad credit home loan is essentially any home loan made to folks with credit scores of 620 or under. Folks with credit scores above 620 most likely won’t have trouble in finding financing for a new home at a decent rate.
In general, there are two types of bad credit home loans. The first type is a bad credit mortgage loan. Because your lender is taking a risk in extending credit to you, this type of loan will have a higher than average interest rate. Usually, the interest rate for this type of home loan is 10 percent per year, but the rate will vary based on your specific credit score and credit history.
The second type of bad credit home loan is known as a bad credit home equity loan. These types of loans are given to folks who already have a home and a mortgage. Essentially, a bad credit home equity loan is a loan made against the equity you have built up in your home. Most of the time these type of loans are made to folks who need cash for an emergency or a business opportunity.
There’s also a third option for folks with bad credit who need a home loan. This involves finding a cosigner with good credit to vouch for you on your home loan. By finding a cosigner, you’ll likely be able to get a better interest rate on your loan.
Currently, there are also some government programs available to help folks with credit problems secure the home loan financing they need. For example, under the Obama administration’s mortgage bailout plan, folks who have fallen behind on their mortgage payments can obtain a lower monthly payment or renegotiate the terms of their home loans. This is a great option for folks with bad credit to modify their existing home loans to obtain better terms.
To apply for a bad credit home loan, or assistance from the government, there are a number of things you need to do. First, check your credit score. Freecreditreport.com offers folks an opportunity to check their credit scores for free once per year. You may be pleasantly surprised that your credit score isn’t as bad as you thought it was. Second, shop around for lenders. Some lenders will offer bad credit home loans on more favorable terms than others. Don’t be afraid to haggle, negotiate or walk out. Remember, this is an important financial venture you’re taking, so make sure you get the best possible terms.
Tags: fha home loans, first time buyers, no down
