Bad credit mortgage loans are something that every person with less-than-desirable credit needs to know about. It can mean the difference between home ownership and a lifetime of throwing money out the window every month in rent payments. Learn who bad credit mortgage loans are for, how they differ from regular mortgage loans, and how they could benefit you.
When people purchase a home and begin to look for financing, the lender first pulls their credit history. This is an three-digit number between 300 and 850 that is a picture of you and your financial life. It lists your open credit accounts, the balances you carry on each account, and any late or missed payments. Aberrations like a previous foreclosure or bankruptcy wreak havoc on your credit.
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Before you know about bad credit mortgage loans, you need to know who they are intended for. In general, mortgage lenders are looking for people with credit scores above 620. Though exceptions are made, people with a credit score lower than this are going to have a hard tie finding financing through traditional means.
Before you even start shopping for a house, you need to pull your own credit score and find out what it is and what can be improved. Working on your score for a year or two can mean thousands of dollars saved in a lower interest rate on your mortgage loan.
That being said, home ownership is infinitely better than renting. Owning a home is one of the most secure investments you can make with your money, so it's a tossup between waiting to buy while your credit goes up and buying now with a higher interest rate.
If you do decide that you need to buy now but your credit is below 620, then start looking into financing with bad credit mortgage loans. Be careful in your search, because there are a lot of scam artists who advertise "bad credit loans." Cross check any company you find with the Better Business Bureau (BBB) and do a Google search to see what past customers of the company have to say about their experience dealing with them.
In general, bad credit loan companies will take a risk and lend money to people with poor credit because they charge a significantly higher interest rate. That being said, if you've mended your ways and your credit score continues to improve over the next several years of your home ownership, you can always refinance to take advantage of lower rates later on.
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