Owning a home is one dream most of us have. This can be easy with a home loan with low rates of interest. This works well only if you have good credit. It is then that you get the terms and conditions in accordance with your requirements. You do have mortgage loans for bad credits.
How to Get a Mortgage Loan with Bad Credit?
There are multiple options of loans for bad credit by the federal government. These include VA loan or the USDA loan or probably the FHA loan. You can also look for local or state grant programs that offer these mortgage loans. The best source for the required information is the personal loan officer in the local area.
Besides looking for loans with bad credit, an individual can take the trouble to try to improve the credit score. There are many techniques for this and a good credit score can also be achieved only in a day.
VA Loans with Bad Credit:
For the VA loan, the borrower needs to have a score of a minimum of 660 with FICO, though some lenders might be willing to go lower than the requirement.
Most often the VA does not have a requirement for credit score. Instead, the borrower needs to be not too much of a risk. You need to be aware that the loan is not given by the VA. This agency only ensures a part of the mortgage. In the event of any default, the lenders who are VA approved are on the hook.
USDA Loans with Bad Credit:
You have an option of 2 types of USDA loans, direct loans, and the USDA guaranteed loans. How you manage to obtain the loan is the difference between the two loans along with the requirement of the income level.
Why does USDA Issue Loans to People with Bad Credit?
There are many families with low income who have bad credit due to this. To help them buy homes is one way to help them. Providing loans to those with poor credit means an encouragement to invest in homes in rural areas.
The Negative of Bad Credit Mortgage Loans:
For those with good credit, the FHA is not the best option available. The FHA loan requires an Upfront Mortgage Insurance Premium. This amount works out to nearly 1.75% of the loan amount of the FHA.
Besides the fee, you also need to pay an insurance premium for the mortgage on a monthly basis. This depends on the amount of the loan. These premiums can be reduced, canceled, or even refunded depending on the mortgage. The best step you can take is by seeking the help of a qualified and experienced professional, that is the loan officer.
To summarize, a bad credit loan does have multiple advantages but at the same time, this comes with a lot of risks. If you are unable to make the payments on-time, your credit score can fall further. This means you will not be able to get any credit in the future easily.
