Many people dream of the day they can open the door to their own home. Buying a house or apartment is one of life's greatest accomplishments, but is it still possible to get a home loan with bad credit? Absolutely, there are loans available for every type of potential home owner and these three tips will get you on track to the home of your dreams in no time.
Tip #1: Know the Process
Before you begin looking for a home loan with bad credit, you need to understand the process you will undergo and what you need to do in order to ensure success. Generally, the information you need and the qualifications for mortgage loans are similar to any loan on the market. However, there are some special areas of concern.
Think about it, buying a home usually means taking out a loan of at least six-figures. Therefore, any lender who is willing to work with you will need additional assurance that you will be able to repay the loan he extends you. Simply put, this means you need to save up a large down payment. By presenting a large sum to the lender initially (at least 10% of the home's value) you show him that despite bad credit in the past you are able to put your priorities in order now.
Tip #2: It Pays to Be Picky
Many people mistakenly think that the reason for the housing crash was home loans given to people with bad credit. While many lenders did extend credit to people unable to repay their loans, the major issue in the housing market has more to do with loan value versus real value. In other words, people paid more for their houses than they were actually worth and are now underwater on their loans, unable to make payments and unable to sell.
In order to prevent a similar problem in your housing search, you need to take the time to research any property you are interested in purchasing. Get an assessment done independently from the seller and make certain that the amount you agree to pay is reasonable given the home's real value. By paying attention to these little details and being a bit picky, your bad credit score will be less of an issue since you know you will be able to repay your home loan and receive a return on your investment.
Tip #3: Know Your Options
Since you have a bad credit score, home loan options are not the same for you as for those with better credit scores. Generally, talking to a traditional bank or credit union about your mortgage loan will only result in rejection. Instead, the best place to look for home loans with bad credit is online through private lenders and to shop around among the many options.
Online lenders actually specialize in working with borrowers with bad credit. Therefore, they are more likely to be able to help you out and give you a reasonable interest rate. However, they will still try to make the most money possible in extending you a loan. Therefore, it's important to get home loan quotes from at least 3-5 online lenders who work with borrowers with bad credit.
Home Loan Facts
Now that you know the facts about getting a home loan with bad credit, the process should be simple and fulfilling. Follow these three tips to find the best deal and realize your dream of owning a home.