Even if you have bad credit, you might still be able to buy that new home. Lenders are definitely getting easier on people with bad credit when it comes to getting a mortgage loan. Here are some things you should know about getting a loan for your next home even if you have bad credit.
The first thing you should know is that only people with good credit can get the best deals on mortgage financing. There are still deals that can get you into that house, though.
With a zero-down mortgage, you might be able to get a loan without putting anything down. In fact, you might be able to get up to 107 percent of what you need, which could even cover the costs of closing. With the right paperwork, you may be able to get this type of mortgage with a credit score as low as 580, depending on your credit score. The borrower gets two mortgages, a first and a second, which is how it works. This usually comes in an 80/20 or 75/25 split, and it lets you save more money because you don't have to pay for private mortgage insurance.
You can also pay less if you can put something down, and the bigger it is, the better. Even though you may want to get a mortgage as cheaply as possible, putting something down, even 3 to 5 percent, can lower your mortgage payments and possibly the interest. This will show the lender that you make enough money to save something and that you have some control over your spending, which is always a good thing for them.
In other deals, mortgages will just be the more traditional kind. This kind of loan for people with bad credit is available to people with even worse credit scores. Some lenders will give someone with a score of 500 a mortgage, and some will probably go even lower.
Even though you can get a mortgage on your new home, it may be better to wait and fix your credit first. By rebuilding your credit first, you can get a better interest rate, a bigger mortgage, and lower payments. This means that you will have to hold on to your dreams for a little bit longer. If you take some quick steps to fix your credit and get it closer to where it should be, you can get the rates you want, a nice house, and payments that you enjoy even more. Also, this could give you extra money so you can do some of the other things you want.
You should be very careful about what kind of mortgage you get, of course. This means you take the time to learn about the different types of mortgages, like fixed-rate and adjustable-rate mortgages, as well as the terms. Unfortunately, some lenders look for people with bad credit because they know those people may be more eager to get a mortgage and may sign the agreement quickly without fully reading it or understanding what it says. You can be sure to stay out of trouble only if you are careful and know what is going on.
