If your credit score is low, a bad credit mortgage may seem like the way to fulfill your dream of buying a house. Here are some things to consider if you are thinking of taking out a mortgage and you have a flawed credit history.
Is now the right time?
A mortgage is a serious item in your financial profile. If you have a low credit score, it is probably from having some problems with debt. Consider that taking on a mortgage will increase your debt, as well as your responsibility. You will be expected to make a down payment and monthly mortgage payments. There will also be some costs associated with closing your mortgage, which can add to your financial strain. Before you get a mortgage, consider whether now is the best time. You may want to give yourself another year or two to repair your credit.
Find out what a bad credit mortgage entails
If you have bad credit and are able to get approved for a mortgage, your score may affect the terms of your mortgage. Lenders look at your credit score as a general indicator of your creditworthiness. So, if you have a good credit score, you have probably steered clear of major debt and always paid your bills on time. But if your credit score is low, you may have made some late payments and racked up debts that are close to their credit limits. A low credit score may tell potential lenders that you will continue your bad habits, and, to offset this risk, lenders who offer a bad credit mortgage may charge you a higher mortgage interest rate and award you a lower credit limit.
Consider your options
There are home-buying programs available to people with low credit scores. You may want to look into Fannie Mae. It is a tax-paying corporation created by Congress that purchases and sells conventional residential mortgages, as well as those insured by the Federal Housing Administration (FHA) or guaranteed by The Veterans Association (VA). Fannie Mae, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable. You may also want to look into programs from the National Foundation for Consumer Credit. These organizations can inform you of your options and offer the advice you need to turn your dream of owning a home into a reality.