Options For People Seeking A Home Loan With Bad Credit

Home Loan Options for Buyers with Bad Credit. If you haven´t attempted to obtain a mortgage, say since the 1990’s you may be surprised to find that the standards for lending have undergone a significant change. Where it was once virtually impossible to get a home loan if your credit wasn´t spotless, it is now a distinct possibility. These bad credit or sub prime home loans come at a stiff price to the borrower though and may, in some cases, not be worth the eventual price that will be paid.

A bad credit home loan will require a larger down payment

and will charge a much higher interest rate. What this means to the borrower is that over the life of the loan they may purchase the home several times over, paying as much as triple what a prime loan candidate would. At the moment the average interest rate is 6% for a 30 year fixed rate home loan. For bad credit the rates would be in the area of 10% with the same terms. A $100,000 dollar loan at 6% interest and 100% financing would ultimately cost the borrower a little over $215,000. The same loan at 10% interest would cost an additional $100,000, in other words, another house. Not only is the overall payment much higher but also the difference in monthly payments is nearly $300. Imagine the difference $300 can make in your family budget. My point is that it may be in your best interest to work on repairing your credit before obtaining financing.

This brings me to my next suggestion. Perhaps it would be a good idea to look into a lease option or contract rather than obtaining traditional financing for your home loan. This will allow a portion of your payment, plus the option fee to go towards your down payment at the end of your designated option and allow you the time to work on your credit. It only takes a consistent effort for 6 months with no delinquencies to dramatically improve your credit score. I’m not saying this will fix your credit completely, but lenders look at the effort and a lease option traditionally gives you 2-5 years to get the financing you would need for your home as well as a steady escrow account to go towards your down payment (another thing lenders like to see).
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Home Loan With Bad Credit