How a Bad Credit Mortgage Can Help You Purchase a Home
Credit problems can happen to anyone, no matter how vigilant they are with payments. Lenders understand that life can sometimes get in the way. There are more ways to obtain a bad credit mortgage if you have poor credit than you thought. Here are a handful of ideas on how to get around your lousy credit score when it comes to purchasing a home.
People with a score of under 600 are generally considered to have bad credit. Contact TransUnion or Equifax for your credit score and find out where you stand before considering your options. Contact us to learn more.
Improve Your Score
It may seem daunting, but it is much easier than you think. Let lenders know that you are serious about paying back money by:
- Paying bills on time.
- Not applying for new lines of credit.
- Keeping all accounts open and in good standing.
- Staying well under your credit limit.
After following these rules for three months, your score should start to increase, and you will qualify for a bad credit mortgage in no time.
Make a Large Down Payment
Making a larger down payment will afford you more flexibility with lenders. When you have a larger down payment, you have skin in the game and lenders will take more risk. If you put 20% or more down, you will not need mortgage default insurance. One other extremely pleasing benefit to having a large down payment is the amount that you pay out for the house by the end of your bad credit mortgage loan will be significantly less than the amount without the down payment.
Bad Credit Loan Providers
There are people in the business of helping those with bad credit become homeowners. You can use a mortgage broker that specializes in bad
credit mortgages to find private lenders.
The caveat in taking a loan before you start fixing your credit is that you will pay a much higher interest rate than those with good credit. A good credit mortgage will have an interest rate under 3%, while a bad credit mortgage will have a rate above 10%. You may also have to pay extra fees in this situation as well.
When it comes to bad credit mortgages, you can avoid them altogether, if you have someone willing to afford you their good credit. This can be a great situation, but it can also get messy. If you cannot pay on your bad mortgage loan, the co-signer is stuck with the bill. Questions about ownership can also come up in these situations when it's time to sell the home.
It’s What We Do
No matter what you decide is best for you, your bad credit mortgage period will be five years. After five years, you will have to renew your bad credit mortgage. If you have improved your credit, you can shop around for better terms and interest rates. Give BMC Mortgage & Investments a call to find out what you qualify for today!