You don’t need to have a really good credit score to buy a home, and many with bad credit become homeowners every day. Even if you have had a bankruptcy in your past, it’s still rather easy to be approved for a home loan. Home loans after bankruptcy discharge will carry much higher interest rates than those with a good credit history, but it is still a viable option.
How It’s Different For Borrowers
If you have a credit score below 680, which if you have a bankruptcy in your past, you probably do, you will not qualify for what’s called a “prime loan”. In your case you will need to look into a sub prime mortgage lender. These loans are set up to help people who can’t get a traditional home loans due to a damaged credit history. Sub Prime lenders specialize in working with people with bad credit, and are able to offer many more options than prime lenders.
Sub Prime Home Loans
Most people with a lower credit score will be able to obtain a sub prime home loan, but not everyone will qualify. Most lenders will not loan to borrowers with a credit score of below 500. The lender considers these borrowers a very high risk, and these borrowers should attempt to improve their credit score through various avenues before attempting to secure a home loan.
As we mentioned, the interest rates with sub prime mortgage loans are much higher, and if you have a bankruptcy in your past you can expect this to be true. If you do decide to get a home loan after bankruptcy discharge, there are ways you can lower that interest rate.
Probably the best way to do so, is to make sure you make regular payments on your mortgage, and avoid making any late payments. After a period of time, you can refinance that loan, and secure a much lower interest rate..
Alternatives
If you cannot find a loan to suit your needs with your sub prime mortgage lender, there are still some other options available to you. You should consider a no credit score home loan. These loans will be issued without a credit check, but this does come with a price. Most of the time you can expect to pay a 20 percent down payment on the loan, as the lenders will not finance the entire amount.
There is also the option of getting a zero down home loan. Both good and bad credit borrower will qualify for this type of loan, and it’s nice because the lender will finance the entire cost of the home. If you intend to apply for this type of loan, remember that the lender will not approve anyone with a credit rating below 500, so you should be above that before you apply.
