If you’ve been turned down for a mortgage in the past, you might think all hope is lost. You may feel like there’s no way around paying PMI or getting stuck with a bad interest rate if your credit score isn’t great. But that’s not true!
There are many different types of bad credit home loans out there that can help you get into your dream home despite challenges with your finances.
In this article, we’ll break down four common myths about bad credit home loans — and then show you how to find the right one for your situation:
Myth #1: You need good credit to get a bad credit home loan
The first myth is that you need good credit to get a bad credit home loan. While it’s true that lenders will look at your ability to pay back the mortgage, they also want to make sure that you can afford the monthly payment.
The lender will look at your ability to make payments on time and in full each month, which means they’ll consider more than just your income when assessing whether or not they should lend money to you.
They’ll also take into account any other debt obligations (like car loans) as well as any assets like stocks or bonds that could be liquidated if needed.
Myth #2: The lender will judge you based on your past mistakes
The truth is, the lender is not interested in your past mistakes or failures. They’re looking at what you can do for them now and in the future–and that means paying back loans on time, every time.
A good credit score indicates that you have a history of making payments on time and staying out of debt trouble, so lenders are more likely to approve loan applications from borrowers with high scores than those with low scores or no scores at all (which could mean they haven’t applied for any loans yet).
Myth #3: There’s no way around paying PMI on a bad credit home loan.
You can get rid of PMI once you have 20% equity in your home, but it can be tricky to do so. The lender will require that you make at least your monthly payment for an extended period of time before they’ll remove it from your loan.
This means that if you have extra payments available, like those from an extra job or side hustle, consider paying down the principal on the mortgage instead of using those funds elsewhere until the lender agrees to drop their requirement for private mortgage insurance (PMI).
Myth #4: Bad credit home loans are scams
A lot of people think that lo doc loans are scams, but they’re not! You can get a bad credit loan, and some lenders do offer them. If you have a low FICO score (or no score at all) and need help buying a home, there are options available to you.
As long as you shop around for the right lender and get pre-approved before looking at houses, then your chances of getting approved will be much higher than if you just go into this without doing any research ahead of time.
We hope that you’re now more confident about getting a bad credit home loan. We know how hard it can be to overcome past mistakes and build a new future for yourself, but we believe in you!
If you have any questions about our process or want help finding the right lender, please contact experts today.