If you want to buy a home, but have a bad credit history due to late payments, foreclosure, or even bankruptcy then getting a mortgage loan will be a struggle. However, it is possible for people with bad credit to get home loans through non conforming home loans. Not only do these loans provide opportunities for people with bad credit to buy a home, but they also provide a means by which to rebuild damaged credit.
Non Conforming Home Loan Explained
A non conforming home loan operates according to loan approval criteria which is different than that of conventional banking institutions. Non conforming loans are designed specifically for people with a poor credit history as well as for those with a short employment history, are self-employed, do not have a tax return or financial statements, or for those who are non-residents.
With non conforming loans, you can borrow 80% or more of a home’s value, although the interest rate will be between 1% and 3% higher than normal, depending on your credit history. An additional 1% to 3% may not seem like much, but on a large, long term loan this could add up to thousands of dollars in additional expense.
For this reason, it is best to clean up your credit rating before applying so you receive as good of interest rate as possible.
Advantages and Disadvantages
Anyone who applies for a non conforming home loan is considered a high risk applicant. This not only means a higher interest rate, but also stricter conditions for payment, more severe penalties for irregular or late payments and a higher down payment.
However, if you make payments on time and consistently for 1 or 2 years (depending on the individual contract), you are often given a reduction in your interest rate. This will reduce your monthly payment as well as improve your credit rating.
If regular payments are made over a 3 year period, the borrowers of non conforming home loans may be permitted to refinance the loan to a standard interest rate. Usually, lenders will require the borrower to pay a small exit fee which will be either a few hundred dollars or a percentage of the remaining loan amount.
Credit Repair Help and Information
As you can see, home loans for people with bad credit are available. However, it should also be clear that repairing your credit as much as possible before applying is greatly beneficial and can save you thousands of dollars over the life of the loan.
For help with repairing your credit, or for additional information on credit repair and loan opportunities for people with bad credit, contact repair-credit-today.com. Our credit repair experts will provide you with a free consultation, credit guidance and counseling, credit repair information and assistance, and prompt, professional service.