Is There Really Such a Thing As a Bad Credit Mortgage?


In today's economy there are many people with bad credit. Most of the time, bad credit is not anyone's fault-when an emergency happens like job loss or someone going to the hospital, it can be avoided-but not all the time. So, when people go for a mortgage loan and they have bad credit, they may not get that loan they need. So, it's very important to research your options when it comes to mortgage loans. Most banks and credit institutions that give out mortgage loans are looking for people who pay reliably on time.

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Bad credit ratings can be caused by any number of situations. You can have a bankruptcy on your record-which lasts 7 years-or not pay a bill on time or just plain default on a bill. Missed payments and problems with debt can result in a poor credit rating-although they do also look at people who have had problems in the past, but who are now currently paying bills, loans and other debts on time. While the bad economy has resulted in the mortgage industry being much stricter with who gets a loan based on what's on their credit report, there are still ways you can get that mortgage loan in order to buy your own home. Also, be aware that many lenders consider a credit score of 640 or higher to be a good credit score. Reviewing your credit score is a good idea before you go out to find that mortgage loan.

Bad credit loans-Bad credit loans are available for those who can't get a regular mortgage loan. Be aware that terms for bad credit loans are often much stiffer than those for regular mortgage loans. Also, the interest charged is much higher, as well as the total amount owed for the loan. It's more difficult to obtain and costs much more, but a bad credit mortgage loan may be the way to re-establish your credit after experiencing problems with it.

Prime and Subprime Mortgages- People with a credit score of 640 or better usually can qualify for what is called prime mortgages-these loans are offered at a low interest rate. If you have a steady job history, you should easily qualify for a prime loan. Subprime mortgage loans are like bad credit loans in that they charge a higher interest rate, but can be offered with a limit on the amount loaned. They also have lower requirements for down payments.

FHA loans-These loans are guaranteed by the federal government against default. They are very attractive to banks because the federal government takes the risk, not the lender itself. An FHA loan also is good for borrowers in that a smaller down payment is required. Also, with an FHA loan the borrower doesn't have to have a good credit history-all the FHA asks for is that the borrower has 2 years of good credit, and if they have had a bankruptcy, it must have ended 2 years previously.


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