There are many reasons why you should never take out home loans with bad credit if you can avoid it. A bad credit score is generally anything below 620. You should always check your credit score yourself before you begin applying for home loans because if you are borderline you may be able to avoid the pitfalls of bad credit home loans altogether, even if you have to do a little bit of work to fix your credit before you begin to look for a mortgage loan. When it comes to home loans bad credit is only one of the issues however, and you may find that other factors influence your approval as well.
The first thing to do, as I said, is to check your credit score. Many people, especially those who have had past credit problems from several years ago and have never paid off the debts sometimes think that their credit score is as low as you can possibly get, and that they will have no chance to get financed. This can be a mistake, as past debt problems matter much less than current ones, and you may find that even if you have never paid off your past debts your credit score may be in the 550's or 580's, much closer to that 620 than you might have imagined.
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As I said, other factors also influence your approval. Things like the down payment that you are making, your stability, such as time on the job and time at one address, can also make a big difference in whether or not you will get approved. You might find that increasing your down payment can make a difference, even a couple of thousand dollars, even with a poor credit score. Of course, if you have had a lot of recent credit problems, a foreclosure or a bankruptcy, than you may have to look for home loans for people with bad credit.
If this is the route that you must take than you should know that home loans for bad credit do exist, although usually at much higher interest rates than you would be offered if your credit score was up to par. There are lenders that basically do nothing but lend to those with poor credit scores hoping to make money from the higher interest rates and willing to take the risk of foreclosure to make that extra interest. Remember that even a one percent increase in your interest rate means a lot of money to the lender.
The best advice that I can give you, if you decide that you can wait for a mortgage and don't absolutely need it right away, is to wait a year or two and improve your credit score. This is surprisingly easy to do, especially if all of your credit problems are several years old. You may find that financing one thing for a few months or a year will bring your credit score up high enough so that you are offered the mortgages with the best interest rates, so if you have a poor credit score and you think you may be able to rebuild it in a year or two, then wait to apply for a mortgage until then.
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Posted in Financial Services Post Date 06/27/2018