Are there bad credit mortgage loans available and what price am I going to pay for this?
I need to buy a house for myself and my family, but I don’t know if I am in the best position to do so. Let me give you some context: I am a marine, I just returned from overseas and I am now retired. Because I was gone for so long I do not have the best credit score and I’m worried that I won’t be approved for a mortgage. Are there bad credit mortgage loans available and what price am I going to pay for this?
Generally speaking, you have to be within a certain credit score range for mortgage loan approval if you want the best rates. This range is usually 750 and above. I’m not sure what your credit score is, but if it does not fall within this range don’t worry. You can still get approved for a mortgage if you are outside that range, but it will end up costing you. The cost will come at the price of a larger down payment (about 20% as opposed to 10%) and higher interest rates (about 3-4% as opposed to 6-7%). Another thing to keep in mind is that you may be required to purchase mortgage loan insurance due to your poor credit score which labels you as a risky borrower.
However, your situation is a special one. A great option that is available to you is a VA home loan. Because you are a veteran you are pre-approved for a mortgage from the US Department of Veterans Affairs. This loan offers you little to no down payment and lower interest rates. And as an added bonus, these loans do not require you to purchase mortgage insurance like other bad credit mortgage loan options do. Of course every lender is different, and circumstances will depend upon where you are looking to purchase a home, so make sure you speak with a financial advisor to get a better understanding of your financial situation.
For those that are not able to apply for VA loans, FHA loans are a great alternative for people with poor credit looking for a mortgage. Offered by the Federal Housing Administration, these loans have low down payment and interest rate options, but you will need to purchase mortgage insurance to get approved.
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