The idea of owning your own home is very attractive to everyone. After all, it is an important part of the American dream. However, is it possible to qualify for bad credit mortgage loans? What steps should you take to ensure that you can find the financing you need for your home despite your poor credit situation? This article will review three additional important factors that can make a difference in your ability to find a bad credit home loan.
Factor # 1: Down payment
If you have bad credit, home loans will be much easier to obtain if you can offer a large down payment. A good rule of thumb is to save at least 20% of the total purchase price of your home. The impact of a large down payment on your ability to find a bad credit home loan is twofold:
1. Reduce the principal amount of the loan.
The more cash you have to offer the bank, the less money you will need to offer a mortgage loan. This means that you will be more likely to qualify for the home loan you want, since it is for a smaller amount. Your bad credit will still be a factor, but the lower principle will reduce the risk to the bank or the lender, VA Home Loans in Florida.
2. Show that you have reformed your ways.
Many people develop bad credit due to two factors: too much spending and / or insufficient income. That is, bad credit is often the result of late and late payments on outstanding debt. Although it is easy to fall into hard times and build up bad credit, recovering from a poor credit score is much more difficult, especially when it comes to bankruptcy. Therefore, providing a large sum as a down payment on your home loan will show the lender that you have become more financially responsible. This will greatly help the lender to trust that you are ready and can take responsibility for a home loan.
Factor # 2: Cost of the house
Again, there are two main factors that will affect a lender's decision to grant you a home loan in this section. The cost you pay for the home you want affects the lender's ability to help you. Obviously, the lower the cost of housing, the lower the loan will be. Negotiating a lower purchase price or searching for a home with the ideal price will make the lender see how serious you are in paying your loan. Know your limits and stick to them.
Also, cost is important because of a little thing called equity. Most of the people who were burned in the bursting of the housing bubble in the late 2000s had to run their homes because they were underwater on their mortgage payments. This means that the value of the house was less than the amount they owed on the loan. Making sure you negotiate the price and get an independent evaluation of the home you want to buy will help you avoid the same fate.
Factor # 3: choose the best lender
The final factor to consider when finding a bad credit home loan is who is lending you the money. In general, traditional banks and local credit unions are less likely to work with borrowers who have credit problems. Therefore, online lenders are a better bet.
Be sure to shop around for your home loan by talking to 3-5 different online lenders for the best price. In general, these lenders specialize in bad credit loans and can help you easily find a bad credit home loan.
Again, there are two main factors that will affect a lender's decision to grant you a home loan in this section. The cost you pay for the home you want affects the lender's ability to help you. Obviously, the lower the cost of housing, the lower the loan will be. Negotiating a lower purchase price or searching for a home with the ideal price will make the lender see how serious you are in paying your loan. Know your limits and stick to them.