Mortgage loans for people with bad credit are hard to find anymore. The options that used to be there simply do not exist. In a time when everyone out there was being approved for mortgages, every major bank opened a division specifically tailored to offer mortgage loans for people with bad credit. On top of that, new banks sprang up very regularly that only focused on home equity loans and debt consolidation loans for bad credit borrowers.
These lenders were offering to refinance any home loan available, as long as the borrower was willing to suffer through a very high interest rate, and most of the time an adjustable rate to boot. However, as these options have left the marketplace, there has really only been one effective tool left to fill the void left behind by these lenders.
That tool is loans offered by the Federal Housing Administration, or FHA loans. These loans are very powerful programs. There are no credit score requirements for the program itself, which would tend to make you think that they must carry horrific terms. The terms that they do carry, however, are actually some of the best in the business. So much so, in fact, that while this loan is primarily focused toward first time homeowners and borrowers with bad credit scores, it is actually one of the better mortgage financing options available even for people with tier one credit ratings.
The program will allow a homeowner to borrow up to 97 percent of the value of their home. It does not matter if you have a 500 credit score or a 780 credit score. If you are approved for the FHA program, you can borrow practically the entire amount of equity that your home has.
On top of this, the program is actually very strong for cash out refinances and debt consolidation mortgage loans as well. While most banks have cut cash out programs down to only allow you to borrow against 80 percent of the value of your home, the FHA program will let you get cash out up to 85 percent.
But, more importantly, the interest rates on these loans are not affected by how much you are borrowing. If you go get a conventional loan from your local bank, the interest will not only be determined by your actual credit score, but the more you borrow, the higher your interest rate will be. On Conventional loans, the higher above 80 percent you go, the more drastically the interest rate will increase. Regardless of your loan to value, or how much you are borrowing compared to how much your home is worth, you will have the same interest rate as everyone else who gets an FHA mortgage on the same day.
When you compare a 30 year fixed rate mortgage from your local bank at 90 percent of your home’s value, you will see the significant difference. In this scenario, a borrower with a 700 credit score simply cannot get a mortgage rate on a thirty year fixed of less than 6.5 percent at the local bank. ON the FHA program, a borrower with a 530 credit score who is borrowing even all the way up to 97 percent of their home’s value will still be able to be financed at right around 5 percent on the thirty year fixed rate program.
Even in today’s turbulent lending world, the FHA program continues to thrive. Having the both the strongest interest rates and the most forgiving approval guidelines ensures that it will be around for some time.
Related posts:
- A Bad Credit Mortgage Refinance Loan Is Not As Dreadful A Loan As It Once Was
- Bad Credit Home Mortgage Loans Are Not Yet A Thing Of The Past
- It Is Still Possible To Obtain A Refinance Mortgage With Bad Credit
- A Fixed Mortgage is Always Going to be Your Best Choice
- Mortgage Loans For People With Bad Credit Are Still Available