With all the talk about this being the best time to buy a home, it can be very disheartening to feel like because you have already damaged your credit, you will miss out on the opportunity to own a home of your own. This does not have to be the case. You can find mortgages for people with bad credit; it just might take a bit more work and will definitely cost you more money.
There is a mortgage program out there for absolutely anyone, if they can pay for it. Specifically how bad the credit situation you are in is what will determine what home loans for people with bad credit you qualify for, and what you will need in order to secure that loan. There are two main things affected by what your credit score is when locating a loan program, the amount of money you will need for a down payment and the interest rate you will pay on the loan. When you are watching the commercials for mortgage products with little or no money down and rock bottom rates, the small print reads that those programs are for people with credit scores above 700. Anything below that and the rates begin to climb slightly. A score below 620 is considered sub-prime.
If you are in the market for mortgage loans for people with bad credit, none of the advertisements will apply to you, but there will still be mortgage lenders for people with bad credit available for you to access. You might need anywhere from 25% all the way to 50% down to qualify depending on the severity of your credit situation, and your interest rates will be several points higher, but that mortgage loan for people with bad credit will still be possible to attain. Most times you are given the opportunity by the lender to buy down your interest rate, but not by much and it will be expensive.
Something else to really look out for if you need a mortgage for people with bad credit is the fine print in the loan documents. If you do not know what to look out for, you could sign on for a very high interest loan that will not allow you to refinance for years. In these cases, even if your credit were to improve dramatically, you would be stuck with an outrageous mortgage payment and there will not be anything you can do about it. If you are looking for a sub-prime loan and you are unsure about any of the documentation a lender is giving you, it is worth it to get a real estate attorney to stay out of these traps.
Realistically speaking, however, if you could put that much money into getting a mortgage for bad credit, it would make more sense for you to invest that money in repairing your credit. Find out what is on your credit report and start negotiating with your creditors. Many will offer a settlement that is much lower than what you owe. If you can get the bad things off your reports, your scores will begin to rise. You will also want to have a few good credit items to rebuild your credit faster. You do not want too much credit, but you also do not want to run out and cancel all your credit either. Five to seven open credit lines are all you need, and you need to keep them current.
Getting mortgages for people with bad credit is going to cost more, but with a little patience you could spend the money you would have spent on the sub-prime loan and rebuild your credit so that you can qualify for the mortgage of your choice, instead of the one they can get you.