How to get a Home Loan with Bad Credit
If you have bad credit, you may assume that you will never get approved for a home loan. However, there are various types of loan offers out there that you may qualify for. You have to be ready to pay more in interest though. However, as your credit improves over time you may be able to refinance for a lower rate.
FHA offers a variety of options for home loans that traditional lenders don’t usually offer. You may want to see what they can offer that would fit your current situation. They often look at more than just your credit situation. They will also take a look at the reason why you have bad credit. If it is due to circumstances beyond your control, there is a very good chance they can help you to get a loan.
If you have served at least 181 days in the military, then you may be able to get a certificate for a VA loan. The fact that the VA guarantees the loan means that lenders are less likely to be taking a risk. Should you default on the loan; the VA will be paying at least 25% of the remaining amount of that lender on your behalf.
Consider a balloon payment loan. This offers you a low monthly payment but then you have a very large payment due down the road. This can be in 5 or 7 years on many of these loans. Most people though assume that they can just refinance down the road and not have to ever really come up with the money for that huge payment. That can be an option, but not everyone will be approved for the refinance so keep that in mind.
If you have bad credit, but you can come up with a huge sum of money for the down payment, then the lender may approve you. This is referred to as a hard money loan. The lender may require from 20% to 35% down.
You can also consider getting a co-signer when you have bad credit but need home loans. This is someone that is willing to be on your loan and that accepts full responsibility for the payment of it if you default. That can be very difficult for someone to commit to with the 30 year loan option.
However, you may have a friend or a family member that is willing to do this to help you get into a home now and back on your feet. Then they will expect you to get your own loan in the future once your credit has significantly improved.
Just because you have bad credit, it shouldn’t be a barrier to getting a home. Explore the various options and see what you may qualify for. There are more programs out there for people with less than perfect credit than you may realize. Getting a home is an investment and something that you deserve, so get it in spite of your credit score.