Are you suffering from hard times or have made some wrong financial decisions? Well, all of us learn from our mistakes and will hopefully have a better financial standing. However, it will take some time for your credit score to reflect your improved financial footing. Nonetheless, don’t lose hope as you can still get a home loan with your bad credit.
If you have bad credit, you will be required to make certain concessions in interest rate and overall cost of your home. A few options that will help you with this are listed below.
Getting FHA Approval
Generally people with credit issues aren’t given conventional home mortgages. If you have bad credit, you should look into Federal Housing Administration. FHA won’t lend you money directly but will assure the lender that in case you default on your mortgage, the pending amount will be paid. The lender will be more comfortable to give you the loan as it reduces the risk even if you have a bad credit score.
However, getting accepting into the FHA program can be quite troublesome and has many pre-requisites. You might have to wait for 2 years and improve your credit score a bit to get approval from FHA. It’s important that you understand the requirements of the program along with its limitations to avoid any problems in the future.
Look for Alternate Lenders
Majority of lenders that provide services to low-credit people have closed down since the inception of subprime. However, there are still some lenders in the market but are quite few in number. A lot of precautionary measures should be taken before choosing a lender as some may potentially take advantage of you. Better Business Bureau provides a list of reputable lenders so be sure to contact the ones that are listed officially.
Contacting your local mortgage broker will help you find better alternatives as they are acquainted with the current market. These licensed brokers have access to multiple lending resources contrary to local banks.
Keep it Temporary
Getting a loan on bad credit is quite expensive and puts multiple constraints on you. Therefore it’s important to move onto a conventional loan by improving on your credit score. This doesn’t imply that you should look for short-terms loans only but simply pay all your debts and bills within the agreed time frame to improve your credit score.
Adjustable Rate is a good option
Interest rates on a fixed loan will be tremendously high if you are borrowing it with a low credit score. Therefore it’s recommended to go for adjustable rate mortgage as it will give you a manageable mortgage payments.
Adjustable rates is a difficult topic for people that aren’t familiar with the business therefore we encourage you to learn through unbiased resources to gain an insight. Although interest rates will increase over time however if you plan to have this as a short-term solution, adjustable rates can do wonders for you.
Lastly, the best option for you is to improve onto your score to avoid any inconvenience and financial trouble when you are borrowing the loan.