Posts tagged: mortgage loan poor credit

A Poor Credit Mortgage Loan to Put You in Your Own Home

There are quite few myths surrounding whether a person with bad credit can get a mortgage loan – myths on both sides of the table. You have people who say think there’s basically no such thing as a poor credit mortgage loan; and you have people who think that a person with awful credit – if they look hard enough – will find a loan that requires nothing more than their signature, a firm handshake, and a winning smile.

Both groups are misinformed, to say the least, and we can address them both at the same time.

There are plenty of poor credit mortgage loans out there. There is an entire subset of the lending market dedicated entirely to the bad credit, or ‘subprime,’ borrower. The terms of these loans take into account the subpar credit standing of the borrower. They’ll carry higher interest rates, and probably require higher up front fees (if the borrower chooses to buy down their rate with ‘points’).

Bad credit borrowers will almost certainly have to prove their income beyond all doubt – I doubt people with bad credit would have a very easy time getting a ‘stated-income’ mortgage. The lender is going to want to see a couple of years’ worth of tax forms, pay stubs, or both.

Here’s the big kicker – if you don’t have a 20% down payment or more, I’d say you’re a couple of years away from qualifying for a home loan. I can’t really say I think that’s a bad thing though. Think about it. Let’s say you want to buy a $200,000 house. You need to come up with a $40,000 down payment. If you can set aside $800 per month, you’ll have your down payment in a little over four years.  Now, that may seem like an eternity to you, but you can get a lot done in your financial life in four years.

You can significantly improve your credit – maybe to the point that a mortgage loan with poor credit isn’t something you even need to worry about. You can consistently increase your income – which will make it easier for you to furnish and landscape this big new home you’re buying. Most importantly, you can enjoy the benefits of waiting and working for a goal that means a lot to you. I really believe our society would be much better off if everyone who wanted to buy a home had to spend five years or so getting ready for it. Not only would you have much more savvy home buyers, you’d have happier, less stressed people out there who could actually afford their home.

Seems to me that working a few years to prepare for a commitment that will last at least 30 years isn’t a lot to ask.