Bad Credit Home Loans

In the last three years, home prices have declined by almost 30%. Amazingly, mortgage prices are also near all-time lows. We’re not going to try to predict the future, but it seems like it’s a great time to buy a home – much better than it’s been for at least a decade. If you have the same income as you did before, the math obviously works out in your favor.

For a first time home owner that has great credit, it’s a fairly easy time to get a home loan. However, for individuals who have negative marks on their credit history, getting a loan for a home isn’t going to be as easy. Since most of the economic implosion of the last two years was caused by lenders who loaned money to less-than-qualified individuals, you won’t be able to get a loan unless you are qualified (this doesn’t mean that you need to be perfectly qualified).

The biggest opportunity that’s out there right now for people who need bad credit home loans is the FHA loan. Not everyone can qualify for an FHA loan, but if you can, it’s a great opportunity that can be taken advantage of, even if you don’t have amazing credit. The federal government backs these loans, taking away the risk from the banks.

To qualify for an FHA loan, you will generally have to show that you have been employed for about two years. It helps if you have been employed by the same company/employer for the entire two years, but this isn’t absolutely necessary. Here are some of the other requirements for this type of home loan:

• You may have no more than two ‘30 days late’ marks on your credit report, within the last two years.
• You may have no bankruptcies in the last two years.
• If you have ever had a bankruptcy, you must have perfect credit in the post-bankruptcy period.
• You must have saved 3.5% of the total cost of the home.
• You must have a credit score of at least 620.
• You may not have defaulted on a loan within the last three year period.

For those of you that aren’t able to qualify for FHA loans, the road is going to be a little bit tougher. As we said before, the current economic difficulties were caused primarily by banks lending money to individuals who weren’t qualified to own homes. This has made them very weary of providing loans to individuals who don’t have solid credit, and for good reason. Many banks went out of business for this reason and other were seriously damaged.

However, those of you that have credit scores of 600 and up may still qualify, depending upon your employment history, the size of the loan, your down payment, and your debt/income ratio.

Bad Credit Home Equity Loans

The current market has also tightened up against bad credit home equity loans. The fact that the average home has declined in value by 30% has also affected this market. There isn’t as much equity in homes as there was a few short years ago. It seems that individuals that have credit scores above 600 are still able to take out these loans, as long as their employment history is stable.

You will probably need to have your home appraised to determine whether this type of loan is a viable option for you.