Finance Credit

How To Get A Bad Credit Home Loan

Published at 07/14/2011 12:45:31
With a FICO score below 620, one is more likely to be rejected loan as the institutional lenders or credit unions regard this as bad credit. But even with that low score, it is possible to qualify for bad credit mortgages. Banks and typical credit unions do not usually offer the privilege of bad credit mortgages, but the good thing is that, an individual with bad credit still has strong chances of getting bad credit mortgages. Just consider the situation of someone how just has undergone a short sale. To get better rates, it is a rational decision to let two years pass before applying for a mortgage. Guidelines set by Fannie Mae suggest that it takes two years for a short seller to become eligible for a loan, but good credit has to be maintained following the short sale. Even a person who files bankruptcy has a good chance of qualifying for an FHA loan after a few years if the credit is kept spotless following the discharge. Many people do not know that FHA loans do not essentially hold any credit score minimums. However, the lenders funding these loans almost always consider a bare minimum FICO score.

Let's take a closer look at your bad credit home loan options now. To qualify for a bad credit mortgage, you should firstly contact a mortgage broker with the licensing board of your state. DO NOT deal with anyone but a trustworthy company. And DO NOT go for any of those hard-money loan deals through any loan shark. Remember that a bad credit mortgage is only a solution for the time being. So make sure that it is short term. That doesn’t necessarily mean that you will pursue a typical short-term loan. Rather, you should plan to pay off the loan in two years before you have established your credit sufficiently to qualify for a reasonable refinance. It is a good decision to go for a standard adjustable-rate mortgage. The rate of interest is likely to be high on the typical fixed-rate amortized loans. Actually, the rates are likely to be way higher than those advertised online. But chances are high that you’ll end up with much higher discount points. Thus if you get a standard adjustable-rate mortgage, you’ll be to make sure that your payments for the mortgage are affordably low.

Don’t go for the loans with prepayment penalty. Just one payment penalty could cost you six months’ of extra interest. Most of the payment actually is interest, rather than principal. So this is like getting penalized with an additional six months of payments. There are some alternative options that you can consider trying. Work closely with mortgage brokers so you can find yourself the most promising loans and without turning to bad credit mortgages. Working to repair your credit is the first thing to do. Collect your credit report – it costs nothing. Examine it thoroughly. If you spot an error, complain to the credit bureaus so they make the necessary corrections. A mortgage broker can submit you for a rapid rescore. The mortgage broker could of great help for you when it comes to repairing your credit or referring you to a credit repairing company that has a proven track record. The rapid rescore (which happens to be a short-cut tactic in today’s mortgage industry) through the mortgage broker could considerably boost the FICO score within a shorter period of time.

Tips and comments:

Get a co-signer on your loan, since guidelines of FHA now permit co-signers on loans. Try to get a family member, relative or a friend to co-sign and this could help avoid the option of a bad credit mortgage.


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