Many people work hard their entire lives for one dream: to own a home. If you are one of these people, you are likely wondering if it is possible to get mortgage loans with bad credit. If you are interested in home ownership, subprime mortgage loans can help you to achieve the home of your dreams. However, specific qualifications will need to be met in order to obtain these loans. In this article, I will outline the proper qualifications needed and where to find mortgage loans with bad credit.
First Qualification: Sufficient Employment
First, you must have a good job with a steady income if you want to find a mortgage loan with bad credit. This is because despite the mistakes you have made in the past, having the financial means to make your home loan payment each month is integral if you want to get the loan.
Basically, your bad credit score shows lenders that you have made mistakes when previously repaying loans. This does not, however, mean that you will make the same mistakes in the future. By showing your lender that you make enough money to support the repayment of your loan each month, he will be confident that you are on the right path this time. Without an income that exceeds the value of your monthly loan payment, you cannot qualify for a mortgage loan with bad credit.
Second Qualification: Sufficient Down Payment
The next factor that will play a big role in determining your eligibility for a home loan is the amount of your down payment. While it is possible to find a home loan with a low or minimal down payment, this luxury is reserved for people with better credit scores. Basically, the two most important factors in getting a home loan are credit score and down payment. You need to compensate for poor performance in one area with the other.
Therefore, getting a home loan with bad credit hinges on the amount of money you can offer as a down payment on your new home. Generally, you want to have at least 20% of the total value of the home you purchase to be available in cash. This will show the lender two things: one, that you have the ability to save money (and hopefully can transfer that into making your payments each month) Two, it will decrease the principle value of the loan that you ultimately take, making the risk for the lender substantially less.
Third Qualification: Reformed Financial Practices
The final element that you will need to pay attention to when looking for a mortgage loan with bad credit has to do with the actions that landed you in this position in the first place. That is, bad credit comes as a result of specific actions, such as having too much debt compared to your income, a chronic history of late or missed payments on outstanding loans, and/or loan defaults.
When you sit down with a lender in order to acquire a home loan, you will need to be honest about your bad credit score and be willing to discuss why it happened in the first place. Then, you will need to show that you have changed your ways. Lenders are far more likely to give home loans with bad credit to borrowers who have shown their willingness and ability to reform their poor financial habits. A good way to do this is through a budget that shows exactly how much money you earn each month and what other bills you need to pay in addition to your home mortgage loan.
Finding Mortgage Loans with Bad Credit
When you have met all of these qualifications, it will be time to look for your mortgage loan. Generally online lenders represent the best opportunity to find a subprime mortgage loan with bad credit.
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