How Do Bad Credit Mortgages Help Me?
How Do Bad Credit Mortgages Help Me?. When looking for a home, most home buyers will need to have a good credit score to get an affordable mortgage. For those with bad credit, bad credit mortgages are available. Unfortunately, due to the excessive costs of bad credit mortgages, they should be avoided. However, bad credit mortgages could help you a few different ways.
Helps You Purchase a Home
One way that bad credit mortgages could help you is that they allow you to purchase a home. In recent years the housing crisis has caused home prices in markets across the country to crash. This means that for an average borrower, a home can be purchased at a discount of its value. For people with bad credit, a bad credit mortgage may be the only way to take advantage of those low prices.
Helps You Build Credit
The second way that bad credit mortgages could help you is that they help you build credit. One of the best ways to build your credit is to successfully make mortgage payments. After making your bad credit mortgage payments for a couple years, your credit score could increase substantially. Once your credit score has improved, you may be able to refinance into a more traditional mortgage.
Allows You to Consolidate Debt
The third way that bad credit mortgages could help you is that they could help you consolidate debt. If you have enough equity in your home, you could get cash out on your home equity loan. While the interest rate on a bad credit mortgage is worse than a traditional mortgage, it is still much lower than other forms of credit, such as credit scores.
How to Buy a Low-Cost House With Bad Credit?
Over the past three years housing prices in many markets across the country have declined dramatically. While this has left many low-cost options to home buyers, getting a mortgage with bad credit has become quite difficult. Luckily, there are still several ways a person with bad credit can buy a low-cost house.
Put More Money Down
The first way that you can buy a low-cost house with bad credit is by putting more money down and having more equity in the purchase. The main concern for lenders in lending to people with bad credit is that the person with bad credit will default and the lender will have to take a loss on the foreclosure. If you put down a sizable down payment, you will alleviate that concern and have a good chance of being approved.
Rent to Own
The second way that you can buy a low-cost house with bad credit is by negotiating a rent to own contract. With a rent to own contract, you will rent out the home for a few years prior to purchasing it. Over those few years, you will be able to improve your credit to the point to where you will qualify for a mortgage. You will also be able to lock in the low purchase price in this contract.
Accept a Higher Rate
The third way that you can buy a low-cost house with bad credit is by accepting a mortgage with higher rates and fees. Bad credit mortgages are far more expensive than traditional mortgages, but if you are getting a great deal on the low-cost house, accepting the expensive mortgage may make fiscal sense.
I hope that this information has been of great help and satisfaction to you, so continue reading more articles published on this website so that you continue to learn much more about the different loan that you can see.