Financing A Home With Bad Credit

By: Carrie Reeder



Financing a home with bad credit is a common problem for people. Over 25% of homes in the US are financed through sub prime lenders, who offer financing to high-risk borrowers. While sub prime lenders charge higher rates and fees, through comparison shopping you can find a competitive financing offer.



Check Your History



Check your credit score to know what type of rates you can expect. If you have a score of 600 or lower, a down payment will be required between 5% and 20%. You should also check that the information on your credit report is correct.



Place A Down Payment



The larger a down payment, the better terms you can secure for financing your home. One of the benefits of a down payment of 20% is that you do not have to pay PMI, saving most homeowners around a hundred a month.



Pre-Qualify



Before you begin the process of purchasing a home, pre-qualify for a mortgage loan. Determine ahead of time the monthly payments you can afford, and then base your home purchase decision on that loan amount. You can also negotiate the terms of your loans, especially with a down payment.



Compare Financing



Lenders don't charge the same rate, so it is best to compare rates and terms. Fees are one of the hidden costs of loans, so be sure to add them into the total price of the loan when comparing prices.



Mortgage websites make comparison shopping easy by sending your request out to several lending companies for bids. You no longer have to rely on local lending companies for offers. With the internet, sub prime lenders have become more competitive as they vie for loans.



Read The Terms



Once you find a competitive financing offer, print off a copy of the terms and read them carefully. Look for terms that charge a high late fee or several points up front. People with a bad credit history will pay higher fees, but they should not be excessive.



Lock In Rates



After you have done your comparison shopping, lock in the rate by completing your loan application. Most mortgage lenders can complete the process online, and send out a final copy of the paperwork for your approval and signature.