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.
