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Bad Credit Home Loan

BAD CREDIT HOME LOAN

People with bad credit are not necessarily ineligible for a home mortgage. A Bad Credit Home Loan does exist.  It just doesn't mean that EVERYONE will qualify.  Usually, borrowers looking for a bad credit home loan will have to put down a larger down payment than those required for borrowers with a clean credit history. Also, the rate will be higher as a result of not proving your track history for repaying debts.  Bad Credit Home LoanThis is because people with bad credit are not easily insured, so lenders require more guarantees and evidence.  There are several credit impairments that will be reflected on your credit score and these include, defaults, judgments, Bankruptcy, loan arrears, IRS debts, collections, charge-offs, repossessions, foreclosures & short sales. Getting the best loan with bad credit in 2019 means finding a lender who is transparent about rates and fees and willing to view you as more than your credit score. If your credit score is below 600, you will have to find a mortgage lender willing to give you a home loan.  Even so the interest rate and fees will be higher. So you may want to take the time to rebuild your credit before you start shopping for a house.

Factors for Credit Score

Your credit score predicts your propensity to repay your debts. There are several factors that make up your credit score. Among those is:
  1. your ability to make payments on time
  2. your balance to available credit ratios
  3. the length of time your accounts have been open
  4. whether you have had any reported collections, bankruptcies, foreclosures, short sales, short refinances or tax liens as well as other factors.
Your Income IS NOT factored into the credit score equation. Your bank balances ARE NOT factored into the credit score equation. If you have a thin credit profile or a history of missed payments, a bad credit score will affect your interest rate and the mortgage lender’s perception of your ability to pay them back. They may cap your mortgage loan amount at a lower amount to help the mortgage lender lessen its risk.  Also may require you offer more collateral to secure a loan. You’ll likely have to pay high-interest rates.  

Down Payments

  • For a score between 550-567, expect a 10% down payment requirement
  • For a score of 580 and above, expect a 3.5% down payment
 

Get Your Free Credit Score

First, you should review your credit history and find out how bad your score really is. This will determine if you even need a bad credit home loan.  If it’s too low then you should work on improving it before applying for a home loan.  Every consumer has three different credit reports and three separate credit scores. You have one report and score from each credit bureau: Experian, Equifax, and TransUnion. A tri-merged credit report combines the individual reports from the three credit bureaus. In order to obtain a tri-merged credit report and be able to see your credit scores, visit www.annualcreditreport.com. You will receive a complete report of credit activity involving your credit report from all three credit bureaus plus credit scores. You can check all three of your credit reports once per year for free. The Fair Credit Reporting Act is a federal law that regulates credit reporting. It stipulates that all consumers are legally permitted to review their credit for free once every twelve months.
Experian, Equifax & Transunion
The three major bureaus all report different information. As they get their information from different methods, what is on one report may not be on another. The three bureaus also feature their own credit score formulas: • Experian’s credit score ranges from 330-830 • Equifax calls their score Beacon and it ranges from 300-850 • TransUnion also ranges 300-850 Do not confuse these scores with your FICO credit score; which is the original credit scoring model. The FICO score is a type of credit score by the Fair Isaac Corporation. Lenders use borrowers' FICO scores along with other details on borrowers' credit reports to assess credit risk.
Scoring Models
Although 90% of lenders use FICO, 10% use other scores. They may use VantageScore or Beacon OR they may have their own scoring model. You will not affect your credit score by requesting your own credit report. In fact, if you plan on using a credit repair service, we suggest pulling from www.myfico.com so you can review both the credit history plus the credit scores. That way you have a baseline to compare to after credit repair has worked on your credit score. I can refer you to a credit repair specialist if you are in need of credit repair before you can purchase a home. It is my goal as well as it is yours to position yourself for the best possible loan scenario. However, if speed is your concern, then you may want to consider a hard money lender that won't care as much about credit. Know there will be a hefty down payment - somewhere in the range of 40% down. For more consumer information regarding Credit Repair.

INTERESTED IN IMPROVING YOUR CREDIT SCORE? CALL 702-271-1274 for a referral and how to GET STARTED

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