Once it was unusual to have a bad credit history. In the financially tumultuous times of today, it is almost unusual not to have a few smudges on your credit reports. This fact of life has been recognized by lenders and there are home loans for those with bad credit. After all, even folks with bad credit need a place to call home. Some of these are loans guaranteed by the federal government and come under the auspices of the Federal Housing Authority (FHA). Since these loans are underwritten by the government, lenders are a little less apprehensive about granting such loans.
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Bad Business to Write Off Customers
At one time a borrower could walk into a housing loan venue and get ten different quotes from sub-prime lenders willing to make home loans for those with bad credit. These lenders were easy in that they would accept a FICO score of 500 and even be willing to finance 100% of the cost of the property. While today it may be a little harder to find a home loan for those with bad credit, they are out there. Think about it. More and more people, often because of these bad times, have poor credit ratings or smudges on their credit histories. And if they, people living those kinds of lifestyles and not really too interested in being home owners. For the lending institutions, banks and credit unions, it would be bad business to write off so many potential customers.
Preliminary Steps
Since any lender, whether you take out an FHA home loan for those with bad credit or not, will be looking at your credit scores, clean them up. Pull all three of your credit reports and go over them with a fine-tooth comb. There are often discrepancies. Get those off before you start applying. Be sure that all your bills are up to date. Do not apply for any additional credit around the time you are shopping for your home loan.
Lenders do not like to see potential customers who are stretching themselves thin. Boost your savings. FHA loans require a down payment. Have a savings goal to make yours as large as possible. This will help the lender feel more secure which may mean a reduction in interest charges. The larger the down payment, the lower your monthly payments may be. And, it shows your financial responsibility by being able to save a substantial lump of cash.
Greasing the Way with the FHA
Yes, a FHA loan for those with bad credit would be an easier way to go if your looking to move up and move in. The thing about these loans is that the government underwrites them. Should you default on the loan, the lender has recourse to get the cash to cover the cost of the loan.
Not That Intricate
Understanding the mechanism of the Federal Housing Authority home loan for those with bad credit, is not difficult. First, you have to qualify under FHA guidelines. Do not be too worried, they are not that stringent. Go online and punch your browser with FHA Home Loans to see exactly what the qualifications are. Once you meet those, find lenders who are FHA approved. Since you are qualified under FHA standards, the FHA will go about insuring your loan.
The FHA has its own guidelines and principles that affect down payments, interest rates, fees, and repayment terms. Most of these effects are protective of the buyer and usually result in substantially lower costs across the board. The FHA and Uncle Sam understand that there are still good citizens who may have had a toss with the credit demon in the past, but that they are essentially decent folks. The FHA home loan for those with bad credit is perfect for folks who fit in that category.
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