Although you can purchase a new home without knowing all the tricks and
techniques for securing a low rate, future homebuyers should educate
themselves on the home buying process.
In some states, it is mandatory for first time homebuyers to attend a
home buying workshop. If you have bad credit, these workshops are
beneficial. They teach you various techniques such as how to improve credit
rating, and how to find a lender that caters to bad credit home loans.
Bad Credit Rating Effect Loan Approval
For the most part, you can obtain a home loan with fair credit. In some
cases, you may even be able to get a low rate. Unfortunately, if your
credit score falls below 500, homeownership may be impossible. Even with
a credit score below 600, your loan options are limited. Thus, it is
important for those contemplating buying a home to improve their credit
Before approving a loan and offering a mortgage rate, lenders will
carefully review your credit report and score. Late payments, collection
accounts, excessive debts, and inquiries contribute to having a high or
low credit score. Mortgage rates are based on credit rating. Hence, if
you are hoping to get a great mortgage rate, which equals lower monthly
payments, now's the time to improve credit.
Save Enough Money for a Down Payment
Because it is difficult for hard-working people to save money for a
down payment and closing costs, various loan programs will incorporate
fees into the total loan amount. However, if you have bad credit, a down
payment can improve your chances of getting approved for a home loan.
The ideal down payment is about 20% of the home price. Nonetheless,
lenders are willing to accept smaller amounts. If possible, attempt to
have a down payment of at least 3% to 5%. Aside from boosting approval
chances, a down payment may help you secure a lower rate.
Use the Right Lender for a Bad Credit Loan
To obtain the best mortgage loan with a low credit score, you need to
use a sub prime or high risk lender. Some traditional lenders offer sub
prime loans. However, choose a lender that specializes in bad credit loans. You may obtain better rates with a bad credit mortgage lender.
View our recommended bad credit mortgage lenders online.
Also check out our recommended sources for a free instant credit report, or view our recommended online debt recovery solutions online.