Is it possible to get a home loan even with bad credit today?
Today a bad credit mortgage is absolutely possible
Yes you can get approved for an FHA mortgage with as little as a 3.5% down payment and with a credit score of only 580. You may also qualify for a home loan with an even lower credit score as low as just 500, though you will need to put down 10% instead instead of 3.5%.
Bad Credit Home Loans
In the past, applying for a loan involves a thorough check up on your credit history and income background. If your history is less than perfect or if your income is not that high or both, then your application for a loan is instantly rejected. This practice limits the number of people who can apply for a loan.
Today’s market has adopted more flexible methods. Bad credit mortgages makes it possible for people with low credit scores to still apply for a home loan and get approved. When applying for a bad credit home loan, no pre-qualification process is involved. Lenders who offer bad credit mortgages among their list of loan programs give their customers a chance to redeem themselves by helping them work on their loan package to help them get approved. With a bad credit mortgage, your credit history is nothing more than history and you can still get into the home of your dreams.
Bad Credit Mortgages May Come With Higher Interest Rates
Bad credit home loans/ mortgages are usually characterized by higher interest rates. Lenders charge borrowers a higher rate of interest in exchange for their bad credit mortgages as compensation for the risk they take. Like it or not, borrowers who have bad credit are higher loan risks and are viewed as such by lending companies. In exchange for letting customers with bad credit scores and issues with their credit history a mortgage, higher interest rates are charged. This helps protect the lender should something happen and they have to foreclose on the borrowers bad credit mortgaged property.
Be Aware of Discount Points Added To Bad Credit Mortgages
Being charged discount points in a bad credit mortgages is common. A discount point is equal to a percentage of the total purchase price. Bad credit mortgage borrowers are charged higher discount points, usually three to five points. Borrowers with credit may not pay for these points or they do but only for a very low percentage. With bad credit mortgages however, points may go as high as ten, although going this high is not a common practice and against federal law. It all boils down to insurance for the lending company. Lending companies want to make sure that they’re getting their money back from their customers’ bad credit mortgages.
Look For Larger Down Payments Being Requested for Bad Credit Mortgages
Typically bad credit mortgages call for a larger down payment compared to other types of mortgage loans. In exchange for ignoring the costumer’s credit history, lenders may charge a larger down payment from the total purchase price. This gives the lender a greater comfort level that you wont just run if things get tough. . If you can afford the down payment required, a bad credit mortgage might even prove a good thing for you. Since the down payment you made takes a considerable portion of your purchase price, this means that you will pay lower monthly payments due to the lower total mortgage amount on your bad credit mortgage.