Bad Credit Home Loans

What is a bad credit home loan? Any loan that cannot pass through prime lending criteria or with low credit scores is defined as a bad credit home loan. Most of these loans are below the standard 620 Fico scores cut off , however there are other exceptions to them. Irregularities in income documentation, property types and conditions also contributes to the bad credit home loans. Major credit problems like foreclosures or bankruptcy also are viewed as derogatory and are clubbed together in this type of lending and viewed as one risk profile.

All bad credit home loans are also fico driven since 2008. If you are purchasing or refinancing a home following table is a guideline for sub prime or imperfect conventional loans. All loans are fully documented income loans.

All bad credit refinance loans in this economy since 2008 are also Fico driven. If you are refinancing a home loan this following table is a guide for imperfect  credit or sub prime conventional loans as they were called.  Incomes need to be documented. There are fewer programs with stated incomes but they requires higher scores and a minimum score of 700 is needed.

This is a table that assumes there are no bankruptcies or foreclosures on the credit file. If you have these issues and they are recent meaning bankruptcy or foreclosure is less than 1 year old it can change the  loan to values.  The time for bankruptcy seasoning varies with lenders and usually 1-2 years. Foreclosures are little longer 2-3 years . Some FHA lenders need at least 2 years. These guidelines keep changing all the time and hard to contain and vary.

Credit scores Loan to values Down payment needed
620 + 90% loan to value 90% financing
580-600 80-85% loan to value 20-15% down payment
550-580 70-80% loan to value 30-20% down payment
535-550 60-70% loan to value 40-30% down payment
500-535 60% loan to value 40% down payment

Assuming a borrower with 600 middle FICO scores who has not filed a bankruptcy in last 2 years and a foreclosure 3 years and is willing to provide 10 percent down payment what kind of rates he can get ? These rates will be higher than prime lenders definitely.  If the existing rate is 5 percent than he can expect to get 6.62 percent. The figures are arrived by taking the existing prime 30 year rate at par ( no cost)  and adding the following variables  in the middle columns. These are just basic guidelines

Credit scores Rates above prime rates Down payment needed
620 + 1.625 percent 90% financing
580-600 2.875 percent 20-15% down payment
550-580 3.500  percent 30-20% down payment
535-550 3.875  percent 40-30% down payment
500-535 4.25 percent 40% down payment

Down payment means having cash in hand or available in near future.If you don’t have the down payment, there are several alternatives available to you. You can still get a gift which most lender should accept , you can have a portion of purchase price carried by the seller in the form of a note as a second mortgage, or you can improve your credit scores where financing is possible. Since 2008 the down payment requirements have also changed and there a newer guidelines which are more stringent than before.

  • For example if you have a 600 middle Fico score, and have $2000 in the bank than the transaction will not work, unless you do the above to change your situation.
  • Recent bankruptcy in the last 12 months is OK but a detailed paper work will be needed.
  • A minimum of 530 middle score is needed for all borrowers on most bad credit refinances or loans in general.

We can Pre-qualify you with a basic loan application and a mortgage credit report for all three bureaus, and we look at all three scores if you had any credit problems. A mortgage credit report, is not the same as a consumer credit, report available to you. Reasons to use our bad credit home loans programs:

  • We staunchly advocate our clients, dedicated to giving you the best service you deserve with dignity.
  • Our loans are geared toward people with bad credit histories and who cannot qualify elsewhere.
  • We can fund our own loans, and have relationships with dozens of other unique lending sources giving you more flexibility and real time solutions.
  • We don’t penalize you for past credit performance. Our loan team focuses on future financial needs and improvement.
  • We are an independent entity, so we are able to make decisions about your loan directly. This streamlines your loan process and ensures a better outcome forloan approval.