How To Get A Mortgage With Bad Credit
A common question that first time home buyers have when looking for a home mortgage yet have what is deemed to be bad credit is how do I even get a mortgage with bad credit? Of course, the first question that should be asked is how bad is your particular “bad credit”. Bad credit can mean many things. It could mean that you just came out of a foreclosure last month. If that is the case you are not likely going to qualify for a mortgage for at least a year as a foreclosure is a pretty big scarlet letter on your credit report. In a case like that you may want to go find some day trading software and see if you can’t turn a borrowed $2k into big cash! Ok, that is likely not great advice if you are recently out of a foreclosure, but you get my point. Let’s assume that you don’t have a foreclosure on your record in the past year (or hopefully ever) and look at what options are available…
How To Get A Mortgage With Bad Credit If Your Credit Score Is Greater Than 500
So you are reading this because you have bad credit, but really it is important to define how bad it really is. Looking at your credit report, if your score is above 620 you will likely qualify for a standard mortgage with a reasonable interest rates. Now likely your score is lower than this, as a score lower than 620 is often what people are talking about when they say they have bad credit. If you are below a 620 it likely means that you will be saddled with a higher interest rate if you qualify for a mortgage. Most mortgage lenders will approve loans if your credit score is above 500, it will just be a subprime mortgage. Subprime mortgages are like normal mortgages in many ways (payment terms are similar, structures are similar, often times the same banks and mortgage brokers offer both) except they will come with larger interest rates. You need to be careful and read the fine print as sometimes lenders will try to sneak in other stipulations that wouldn’t be a part of a standard mortgage (pre-payment penalties, large closing costs, etc).
How to get a mortgage with bad credit using the FHA mortgage loan program
A similar, but completely different option is to the FHA loan program that the government offers. The Federal Housing Authority is a program that allows first time home buyers the wherewithall to secure a loan to buy their first home. The FHA makes it much easier to get a mortgage than with a standard loan. The minimum down payment requirement is only 3% and the qualifications required are easier to make. There are some other qualifications that you need to make happen, a quick reading of their online website will get you to understand if you meet the qualifications.
As can be seen, there are a couple of solid options for getting a mortgage with bad credit.
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