Buying a Home with Bad Credit

Simply because you have bad credit doesn’t mean that the dream of home ownership is out of your reach. While credit scores and credit history do play a role in mortgage financing approval, it’s not the end all and be all of the approval process.

Different Borrowers Require Different Lenders

Borrowers with good credit and borrowers with bad credit should not be approaching the same mortgage lenders. It’s similar to a bargain shopper heading to the Gucci store. The two things do fit in the same category.

Borrowers with bad credit typically need to seek lenders that cater to low credit score and poor history borrowers. Generally, these lenders are called B-paper lenders or subprime lenders. The interest rates between traditional lenders and subprime lenders is subprime lenders typically have higher interest rates because they are dealing with higher risk borrowers. Fees can also differ between the two, with subprime lenders charging more to process a mortgage than a traditional lender.

Where to Find Bad Credit Lenders

Probably one of the best sources to turn to for subprime lending is a mortgage broker. Since a mortgage broker doesn’t work for any one lender, they have access to a variety of lending sources. One of the lending options is sure to fit the need of a bad credit borrower.

Another option is to work on repairing your credit before applying for a mortgage. Once you have your credit under control, then you can apply with a traditional lender and keep your fees and interest rate down.

Bad credit borrowers are not exempt from home ownership. You may have to take a different route than a good credit borrower, but in the end home ownership is within reach.