4 Types of home loans for bad credit

The last few years have seen challenging economic times for many borrowers. Loss of incomes, jobs, and spendable incomes has created many time more bad credit profile and borrowers are finding it difficult to get home loans for bad credit because they have low credit scores. The low FICO scores may prevent them form qualifying for the mortgages they deserve. More  lenders have tightened credit to borrowers and only lending  a  small faction of  capital of what is usually a normal lending environment.

Finding Home loans for Bad Credit

Internet is the best place looking for mortgage companies and lenders who specialize in home loans with bad credit scores. There are companies who specialize in these type of loans. The quality and quantity varies and your mileage may differ. Here at Alliance we have been providing these type of loans for many years during good times or bad.

FHA Home Loans

The government backed home loans are a great option for new home buyers with less than perfect credit. If you have low credit scores or low FICO scores than these programs works very well. With a small down payment of 3 % to 4 % borrowers can still get these loans. The documentation is bit lengthy and tedious, and it takes  longer to close these loans. FHA also requires your prospective property to meet FHA guidelines before it can be appraised. The seller may have to fix the property to meet those guidelines if they are selling it on the market. FHA loans are capped according to your county and there is a maximum limit  which you can borrow.

The VA Home Loans

For the first time home buyers this is also a flexible  product designed for low credit  scores and there is no down-payment required. It is also insured by VA and qualifying for the loan is also based on the property. There are loan limits on the VA purchases  just like FHA loans.  When looking for VA loans please ask your mortgage lender if they are qualified to do VA loans as many lenders don’t have the necessary requirements to dispense VA type loans.

Private hard Money loans

These loans are available to buyers who have serious credit problems like a recently discharged bankruptcy or foreclosure. If you have experienced a  foreclosure it is usually 3 years before you can qualify for FHA type loans. Therefore private sector and private lender fulfill this need. These loans are  based on collateral  and not on credit. If the property has certain marketability and location and can be sold easily a private money lender will loan up to  70 percent of values.  These loans require minimal paper work and may close within 2 weeks or so.

Seller Financing

During these challenging economic times it not easy to find home loans for bad credit. The sellers are at a loss, how to sell their properties. They find it difficult to find buyers to take over their properties and hence they are often willing to act like banks and lenders. If a seller has fair amount of equity in the property, he will be willing to finance the purchase loan to you. It all depends on the needs and motivation of the sellers. A  buyer can leverage this aspect of loans from the seller directly and  complete his financing. The seller financing works well within communities and people who know each other.

These are the 4 types of  home loans for bad credit that you can use and purchase your home in any economy. There are exceptions to the rule and some people many combine one or two methods to create enough resources to buy their homes.