Are Bad Credit Mortgages Still Available?

Obviously there have been drastic changes in the mortgage market in the last 5 years that have seriously limited the options available. Many types of loan programs have disappeared altogether, especially so-called sub-prime and exotic loans that have been blamed for a large part of the global financial crisis and housing crash. So are mortgages for those with bad credit still available?

A conversation with most loan officers or mortgage brokers will give you the impression that the only mortgage financing options left for anyone are conventional and FHA mortgages. While regular conventional loans have typically been reserved for 'prime' borrowers with great credit, income and assets, historically FHA loans have been used as affordable loans and bad credit mortgages.

However, the lending guidelines for FHA loans have also become tighter and more restricted as well. Whereas several years ago you could qualify for a FHA loan with a credit score in the 500s, now minimum credit score requirements for a FHA loan with most lenders is now above 620. A 620 credit score is not considered optimal credit so by definition you could say that bad credit mortgages are still available, but that window is closing steadily.  The downside of FHA loans is while they are flexible in many aspects they are fraught with restrictions at the same time, especially when it comes to getting an appraisal.

So what if you are looking for a mortgage with bad credit and you have less than a 620 middle credit score or your property does not fit into the FHA mold for other reasons? First, you can try repairing your credit and getting your score bumped up to where it will be accepted. This is relatively easy in many cases. However, try to avoid most credit repair companies as they are notorious for charging hundreds of dollars and taking an extremely long time to achieve very little. Your mortgage broker who is assisting you in your search for bad credit mortgages may be able to help you with a 'Rapid Re-score' which can give your credit score a quick boost depending on your circumstances.

Your other option for bad credit mortgages is to seek 'alternative' lenders also known as hard money lenders, private lenders and equity based lenders. A mortgage broker can still be a great resource for these types of loans and guide you to those that can help. These types of lenders put less emphasis on your credit, income and assets (though they still may want to see them) and are more concerned with the amount of equity in the property that acts as their collateral. In many cases this may mean putting down a larger deposit and paying higher interest rates which may not be ideal for purchasing and financing a personal residence for the long term but can be an extremely powerful form of financing for real estate investors looking for shorter term financing when they have bad credit.

In summary, there are still bad credit mortgages available. However what suits you best really depends on your overall situation including the property, your credit, employment, income and assets and how long you plan to keep the property before selling or refinancing.

For more information on how to improve your credit please contact our credit repair division at www.FirstOptionOnline.com

Our Mortgage Loan Programs

Conventional Home Loans

• Refinance up to 105% of appraised value with the new Fannie Mae DU Plus Program
• $417,000 mortgage loan limit
• Secured by government sponsored entities
• Purchase or refinance 1 to 4 family units

FHA Home Loans

• Insured by the Federal Housing Administration
• Low down payment on a new purchase 3.5 %
• Refinance up to 95% of your appraised value
• $100 down HUD home purchase program
• Streamline with no appraisal if you have an existing FHA loan

VA Home Loans

• ZERO down payment purchase program
• Forgiving credit requirements
• Administered by the Department of Veterans Affairs

USDA Mortgage Loans

• 100% Financing up to the appraised value
• NO private mortgage insurance
• NO limit on seller concessions and gifts
• Flexible credit qualifications
• No loan amount limitations
• Purchase Money Program

Credit Repair

• Learn the true cost of having a low credit score
• Expert advice on resolving outstanding credit issues
• No monthly fee