You have just seen the house of your dreams, but you have had credit problems. Finding home loans with bad credit can be difficult, but not impossible.
Prior to 1990, if you did not qualify for an FHA or VA home mortgage, it was very difficult to get a mortgage. This has since changed, and there are companies providing home loans with bad credit on a daily basis. These loans were introduced to help high-risk borrowers secure a mortgage and become homeowners.
When you are looking for home loans with bad credit, you will probably want to look into what is called a subprime loan. This is a loan to people with a damaged credit history and would be considered a high-risk borrower.
Because of the higher risk, subprime loans normally require a larger down payment and a higher interest rate. The higher the risk the lender feels you are, based on credit scores and other factors, the higher the rate of borrowing will be. If the risk seems lower, you could receive a lower rate and a lower down payment even if you are still considered a high-risk borrower.
Most subprime loans have.1% up to.6% higher rates than those of conventional loans. This may not seem like a lot, but when thinking in terms of a $100,000.00 dollar home, the difference is in thousands of dollars.
So, even if you are considered a candidate for a subprime loan, it is important to shop for the best rate available.
Home loans with bad credit are made because lenders understand that many people with less-than-perfect credit want to make their payments but are unable to do so due to illness, loss of employment, or some other unforeseen event.
If you are searching for home loans with bad credit, you will want to keep in mind a couple of important tips. You will want to plan on keeping this loan for about two to five years. You will want to use this time to help increase your credit worthiness by cleaning up old debts and obligations. You will want to be sure to make your new mortgage payments on time. Following that, you can try to qualify for one of the more common and lower-interest loans.
If you already own a home and have had some financial difficulties, a subprime loan may help you to regain your credit status. By refinancing with home loans for bad credit, you can refinance for more than you owe.
Take the cash back on the equity you have and use this to pay off high-interest credit cards, liens, or collections.
You would save money each month and be rebuilding your credit rating at the same time.
As you can see, finding home loans with bad credit is a bit costly, but it is not impossible, and the final outcome is that with good money management you increase your credit rating and own the home of your dreams.
