You would have to live under a rock to not understand that there has been a serious shift in the landscape of the mortgage market. While at one time mortgage brokers joked that anyone who could fog a mirror could get a loan of some kind, the options have seriously dwindled. This fact can be especially nerve-wracking if your credit is not up to par. So, what are your options? Can you still get bad credit home mortgage loans?
Subprime is dead
The days of 100% financing with a 580 credit score are gone. Actually, the days of 100% financing with any credit score are gone. While some loan products are reemerging, anyone with bad credit needs to understand that they days of subprime lending are gone. Chances are, they are gone for good. This means that you need to be prepared to repair your credit and save up a down payment. Only then can you consider getting a loan!
FHA is the new bad credit mortgage – but you won’t qualify if your credit is really bad!
Most people with less than perfect credit are turning to FHA (Federal Housing Administration) mortgages. While the standards are certainly more relaxed than those of conventional mortgages, people with truly bad credit won’t qualify. The reason is that in 2009, the minimum credit score to qualify for an FHA loan was raised to 620. While this certainly isn’t the only qualification, it is the one that has many people scrambling. If your score is less then this, you will need to get serious about credit restoration because there really isn’t any other option in today’s credit market. (Short of putting down a VERY large down payment and working with a hard money lender on a short term loan.) The best thing to do is learn how to repair your own credit and develop a plan that incorporates both establishing good new credit and cleaning up old credit.