When you begin the process of acquiring your home through mortgage, the first thing that the lenders will look at is your credit score. This is because research has shown that those with good credit score of about 620 and above stand a higher chance of paying the loan than those who have a low credit score. This therefore implies that if your credit score is below this number, you might have a hard time convincing the mortgage company to buy that house for you unless you go for bad credit loans.
Another way that credit affects you when you are buying a home is that lenders have different mortgage options depending on your credit score. This goes a long way in determining whether a lender will sell the house to a secondary market or keep it in-house. The better your credit score is, the lower interest rate you will end up paying. On the other hand, if you have bad credit, your interest rate will most likely be astronomical. All this is due to the fact that those with bad credit carry a higher risk when it comes to repaying the loan.
The higher the risk, the more profit a lender will be seeking to make and hence the higher the rates. In addition, a person with low credit will attract more fees to his or her loan. Lenders who offer bad credit loans and mortgage options for those with low credit are referred to as subprime lenders. Even though these mortgages come with high interest, it is still better than nothing. After all, they still make it possible for you to acquire your dream home.
Good options for those who have bad credit and want to buy a home are VA and FHA loans. These loans do not give so much weight on the credit score; rather they check whether a person has met all the other qualifying factors. VA and FHA loans cater to those who are interested in buying a home but with low credit. They require you to have a steady job which you must have held for quite some time.
On the other hand, you must be able to meet other personal requirements which are mandatory when acquiring a loan. Those who are borrowing for the first time are better off going for these types of loans. In addition, if your credit score is not so good, you should as well consider them.
As you will realize when looking for a lender to help you buy your home, credit score plays a very big part of the process. In fact, most traditional lenders will not touch you with a ten foot pole if you have bad credit. The good thing is that you will find lenders who are willing to take the risk and give you bad credit loans or give you that mortgage even if your credit score is not looking that good. You should not therefore give up hope if your credit score is bad. Even if your credit affects how you will buy that home, you can still get your hands on it if you know what to do.
