Buying a home is a huge step and you really have to be well prepared with all financing aspects, especially in a shaky economy like today’s economy. There are plenty of bad credit home loans available, but they come at a cost. Find out more about this form of financing so that you can secure the best possible deal.
Which credit score is bad? This is a really important question, since “bad” can correspond to different numbers depending on a huge range of factors. According to financial experts, at present, you need to have a score of at least 580 to secure a deal. Still, given the property market plunge and the unstable economy, lenders prefer borrowers with a score of 660 to 680 or higher.
Can you get financing even if you have a score lower than 580? The answer to this question is “yes”. However, you have to have at least 500, if you want to get approved even by a lender offering bad credit home loans. Try to get at least to this level. In fact, experts recommend working on your credit score at least a year before you apply for a mortgage, if you want to secure a deal at an affordable cost.
The trade off in mortgages is simple. The lower your credit score the higher the interest will be. Another important thing to remember is that home buyers with low scores normally have to make larger down payments. This means that even if you manage to secure financing, you have to be prepared to pay around 10% of the value of the property right away, according to financial experts. bad credit installment loans
As a borrower, you need to understand that the most important thing is not to secure one of the bad credit home loans available on the market. The important thing is to be comfortable about repaying you debt. Otherwise, you will lose your home.
Experts recommend doing some calculations in advance to decide on the amount of repayments. Take into account the interest rate as well as the fees you owe to the bank. It is best for the monthly installment to be less than a third of your monthly income. You may want to look for a lower percentage, if you have other loans to repay. In general, the lower the installment is the better.
Now you know the basics of bad credit home loans. It is important for you to understand the financial implications of your actions in order to secure a deal that you will be happy with in the long run.