What you need to know about Bad Credit Home Loans
There are numerous programs to help you own a house even if you have a bad credit. There is absolutely no need to feel dejected and depressed. A bad credit home loan might be a little tougher but it is definitely not impossible. So, do not give up on your dreams, there is help around the corner. You might even find a lender who specializes in mortgages for those with bad credit. All you need to do is make an effort and conduct a thorough research before you decide on a specific lender.
What is Bad credit?
Bad credit is subjective, that is, different lenders have different scores for bad credit. It is advisable to let professionals take over and find out if your credit score is bad or are you feeling so because you have been told by one or more lender. The FICO score is what a lender looks at to determine the credit score. Few steps followed can help you decide if the bad credit home loan is possible for you.
1. Knowledge of the Credit Score:
Find out what is your credit score and what is required for a home loan. There is a possibility of the credit score being higher than what you had thought. Knowledge of the credit score can also help you determine what types of home loans you can apply for and with which lender.
With a credit score which is termed as ‘apt’ you can get a home loan with a small down payment and a small interest rate. You can plan on a FHA loan if your credit score is anywhere between 580 and 619. With the score being lesser than this you might have to plan on a down payment which is almost 10%. When communicating with the lender ensure you mention your credit score immediately so that you know where you stand.
2. FHA or VA Loans:
Opting for a FHA loan there is a possibility of you paying only 3.5%. This is because the FHA tends to be forgiving for those having a low credit score. In short, you need to shop making an effort so that a bad credit home loan is possible for your requirement of a home.
The VA loan works well if you have the patience and time to hunt for a lender which offers a loan with a low credit score.
3. Bigger Down payment:
Bad credit home loans are possible if you are ready for a big down payment. This works out as a ‘compensating factor’ for lenders. Most lenders are aware of the fact that a borrower will put in a lot of hard-work to avoid any foreclosure. You work out to be a borrower of ‘minimum risk’ and thus it is possible to get the bad credit home loan required.
Finally, you can also plan to work on your credit score so that you can look for the dream house sometime in the near future. This is where you need patience and time. It is not impossible to opt for the bad credit home loan.