Everyone dreams of owning a home. It is, after all, the American dream. However, for people with less than perfect credit, they may think it is an impossible dream. The truth is there are many alternatives for people with bad credit to acquire a home. Although having bad credit may limit the options available, it does not exclude people with bad credit from buying a home. With a little research, homeowners can find the best mortgage lenders even if their credit is not good.
Federal Housing Administration (FHA)
The Federal Housing Administration (FHA) may be a good choice for first-time homebuyers who have not yet had a chance to build up their credit. FHA credit requirements are more lax than some of the traditional credit lenders. However, if buyers have a credit score below 500, they still may not be able to be approved for a FHA mortgage loan. If a buyer can get approved through a FHA mortgage program, it is a good option. FHA loans have some of the lowest interest rates of any mortgage loan on the market. Some homeowners are able to move into their homes with a very small down payment which can be as low as 3.5 percent.
CitiGroup
CitiGroup operates in over 50 countries all over the world. Many people who are unable to find a mortgage loan with a traditional lender will be able to finance their homes through a CitiGroup home mortgage. CitiGroup offers both adjustable rate and fixed-rate mortgages with very competitive interest rates, some as low as 4.3 percent. While people with extremely bad credit may now qualify for a CitiGroup home mortgage, they have underwriting practices allowing people who struggle with credit to be approved for home financing. The CitiGroup Mortgage application on the CitiGroup website, offers to provide a free consultation to determine what the best loan type would be for the borrower.
Wells Fargo
Wells Fargo is the fifth largest mortgage lender in the United States. They have been in business for many years. Much of the mortgage loan process with Wells Fargo can be completed online. This lender will make mortgage loans to people with less than perfect credit for a lower interest rate than most subprime lenders. The Wells Fargo Mortgage Prequalification contact form is available on their website. Once completed, the buyer can schedule a meeting with a consultant by phone, email, or at a local branch to discuss which mortgage options are available.
Bank of America
Bank of America is the third largest mortgage lender in the Untied States. They offer mortgage loans to people with bad credit and will also work with current homeowners who are facing financial difficulties and having trouble paying their mortgage note. Bank of America advertises mortgages for first-time home buyers and for those with less than perfect credit. They are working to make the mortgage lender process more transparent for borrowers by offering a document they call the “Clarity Commitment” document. It is a one-page summary of all the key terms of the mortgage agreement. The language is written in layman’s terms and all payment terms are highlighted. Bank of America has a mortgage prequalification application available on their website.
There are many mortgage lenders on the market who are willing to finance people with bad credit, even it is with a higher interest rate. Buyers can choose financing through the FHA; traditional mortgage lenders who offer “bad credit” mortgage loans, or choose to use the services of a subprime lender. For homeowners who have bad credit scores, they should consider saving up for the down payment before approaching a subprime lender, as most subprime lenders require a larger down payment. In addition, bad credit mortgage loans carry a higher cost for processing fees, closing fees, points charged, pre-payment penalties, and other service fees.
Even people with bad credit should shop around for the best deal possible. Finding the shortest term possible will cost the buyer less in interest over the life of the loan. No matter which lender homebuyers chooses, they should take the time to check the lender’s rating with the Better Business Bureau, paying close attention to any complaints against the company and how the company responded to these complaints. People with bad credit who want to purchase a home may be well-advised to consult with an independent financial advisor or mortgage broker for independent mortgage advice.
