Let’s face it, applying and getting qualified for a home loan in today’s market is already tough enough. For people with ‘less than perfect’ or even ‘bad credit’, the experience can be literally heart breaking. If you’re thinking of getting a home loan and you already know that your credit isn’t as great as you would like it to be, arm yourself ahead of time with the best and only weapon you have at your disposal, “KNOWLEDGE”!!
Knowing what you’re up against ahead of time and all the little ‘ins & outs’ in bad credit home loans will at the very least, level the playing field when sitting across the desk from a loan officer scowling over the top of his/her glasses, looking down at your credit report. It is a lot less nerve racking if you already know exactly what it is he/she is seeing in that report, so before you walk in his/her office, you should get a copy of current Fico score. This is what banks and loan companies look at to determine the level of risk involved in granting you a loan. You want to be able to point out and explain any negative marks against you, as well as point out how you have began to improve on making payments on time and even some older charges that you have recently paid off. This will show that you are not only aware of your credit situation, but also that you are trying to turn it around and improve your Fico Score.
Once you have received your Fico Score, another stumbling block you will encounter is whether or not you qualify for an unsecured loan. This is a loan without having to use anything for collateral. Without a pretty high Fico Score, banks and other loan companies usually look towards secured home loans for people with bad credit. Meaning you can expect to need some sort of collateral in order to qualify for the home loan.
Other things you need to know in advance is that bad credit home loans always come with higher interest rates. Typically the interest rate on a home loan with less than perfect credit can be upwards of 7% or even as high as 9-10%, compared to the 2-5% that people with good credit pay. Unfortunately in the ‘money borrowing game’, being poor is very expensive! Another aspect of this is you can also look forward to paying the higher closing cost that will be added into your loan. And if you think that’s hard to digest, ask the loan officer to explain the oddest ‘fine print’ in the loan agreement, pre-payment penalty. That is the penalty the bank or loan company will charge you if you try to pay off the loan early!
So as you can see, it is not a good idea to go around applying for a bad credit home loan without first doing your homework and preparing yourself for all the things you are going to have to face. There is a whole lot that you can do to make the experience a little easier. Arming yourself with the knowledge of what to expect before you sit down at the loan officer’s desk is by far the most important.
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