Mortgage Lenders for Bad Credit

Given what occurred several years ago when mortgage lenders hit the gas pedal and just about sunk our nation’s economy in the process, you might think that every financial institution has tightened its purse strings and would not dare to lend money to anyone with bad credit, certainly not enough money to buy a house.

That would be incorrect. True, fewer lenders are out there waiting to finance homes for people with bad credit, but some are still in the game, although the rules have changed. There are not dozens of bad credit mortgage lenders to choose from anymore, but there are ways to buy a home even if your credit rating is low.

Mortgage Terms and Conditions for People with Bad Credit

Remember that you will not get the same terms for a mortgage as someone with good credit will. Your interest rate will be higher, your down payment requirement might be steeper, and you might even have stiffer fees and service charges. If you are prepared to swallow those conditions, then you can get in the hunt for a house loan.

It would be interesting to see how many people with poor credit speak against the large role of government in our lives. That’s because the Federal Housing Administration has become a popular choice since the mortgage lending meltdown of several years ago.
The FHA demonstrates a good use of government assistance, as it helps people with somewhat poor credit scores to get into homes. Your score can go as low as 580 with the FHA, but you will have to put 10% down on your home.

If you have had to declare bankruptcy or had a foreclosure, you will have to wait two or three years to apply for an FHA loan. If you have a good job and have been with the same employer for a decent length of time, you may qualify for an FHA loan.

Hard Money Lenders

There is another category of mortgage lenders called “hard money lenders.” That doesn’t mean that they only accept coins; the term refers to these lenders being willing to take you on regardless of your credit score, as long as you make a huge down payment.

People who flip or sell properties quickly often turn to these types of lenders. If you have a lot of cash, this is a great option for you, although the interest rate will not be ideal.

Words of advice

Brokers are a great go-between for people with poor credit who seek mortgage loans. Brokers have access to many lenders, banks and programs that your local credit union might not know about, for instance.

Bad credit does not have to be a permanent condition. Consider increasing your score for a few months before looking for a loan. If you make on-time payments for six months and don’t apply for new credit, you can raise your score substantially. A brief pause might help you to compete better when the real game begins. Besides, it gives you more time to shop for houses.