Our credit scores feel a lot like the adult versions of the “permanent records” teachers threatened us with as kids. It may take a while but we can clean up our scores and fix errors on our reports. This is the first step towards getting a decent mortgage. There are other things people can do to get bad credit home loans.
Tips for getting bad credit home loans:
- A higher downpayment can offset a bad credit score. People with good credit typically qualify for low deposit home loans and put down about 3.5% of the price of a home when they get their mortgage. If your credit is less than what you want it to be, you will need to come up with more cash at the beginning to get that mortgage. The more you can cobble together to give the lending institution, the better. This is the way many people get bad credit home loans.
- Ask about subprime mortgages. These got a bad name due to the role they played in the great recession and for good reason, many banks and other financial institutions took advantage of some people and offered them these loans when the consumers could have qualified for different kinds of mortgages. They can be helpful for people looking for bad credit home loans or for others whose incomes are not set, such as freelance photographers or contractors. Some people go to subprime mortgage lenders but then refinance their loan to be a different kind of mortgage as soon as they can.
- Look at FHA loans. The Federal Housing Administration (FHA) offers insurance for mortgages for people with lower credit scores. These government backed loans can be acquired by people whose credit is 550 or higher and require a 10% down payment or more. You can apply online for these loans, which are then made by different direct mortgage lenders. You can get a list of mortgage lenders with whom they work from the FHA.
- Try your local credit union. Community banks and credit unions have more flexibility when it comes to lending to people and small businesses in the community than other home mortgage lenders. They are also more inclined to lend money to people in their community and may be more flexible. They are often a good choice over traditional banks and have better home loan rates.
- Go to friends and family and ask them to cosign. Many first time home buyers and others w have someone with a good credit score sigh on their loan. It may be hard to ask friends and family to do this but if you really want or need to buy a home and do not have the credit score to get the mortgage you want, this is one way to do it. This person can sign on as a co-signer or co-borrower. A co-signer on the loan has some responsibility should you default. A co-borrower also has that responsibility but is listed on the title of the purchased property.
Securing a mortgage with bad credit can be challenging but it is not impossible. Do what you can to improve your credit score and you will find it possible to get that mortgage you want.