Are you worried that your bad credit history will haunt you and prevent you from getting a home mortgage. Fret not, because the good news is that even if you have a history of bad credit, you can still get a home mortgage. The same goes for people who have had foreclosure or bankruptcy in the past. Buying a home with bad credit is no longer an impossible thing to do. Many banks and financial institutions now give credit assistance to those who have bad credit history. However, those who have bad credit wishing to get home mortgages will now have to deal with higher interest rates.
An individual usually has to wait for at least seven years prior to filing another case of bankruptcy, although this record will remain on the credit history for the next decade. Those who want to gain better interest rates have to pass 4 years. According to guidelines set by the Federal Housing Authority, a person can qualify a home mortgage loan after a couple of years, with interest rates as low as 3%.
In buying a home with bad credit, it is important to improve one’s credit standing. This can be done by getting a credit card. This allows a person to get a fresh starts, as most banks and financial institutions treat those who have had bad credit before as someone who does not have any outstanding obligations. One needs to prove that he has a source of steady income, as well as provide down payment which can be as low as 10% of the credit card limit. After getting approved for the credit card, the credit card holder has to pay his fees on time and regularly. It is important that the person does not fall behind his payment schedules.
Buying a home with bad credit also can be gained by improving on one’s FICO score, which is a way for banks to determine a person’s creditworthiness. Take note of the differences in every FICO score and how it can affects a person interested in buying a home with bad credit.
For example, a person with a FICO score anywhere from 600 up to 640 has to deal with interest rates that are 1.625% higher to borrowers in good standing. On the other hand, a person who has a FICO score anywhere from 560 to 580 will pay an interest rate that is 2.875% higher than an individual in good credit standing. To illustrate how different the sums are from each other, a loan of $200,000 compounded with an interest of 8.75% means having a monthly amortization of $1,573 per month.
Those who are interested in buying a home with bad credit must remember to improve their FICO scores by making their monthly amortization payments on time. Another way to improve the credit standing is to lower the outstanding balances of their credit cards because having credit cards that are maxed out can negatively affect their credit scores.
Those who are dreaming of buying a home with bad credit should make their credit standing more respectable first to improve their chances of getting a home mortgage.