Homebuyers must pick loan programs based on their credit history. Because of an influx of new home loans creating more financing options, many people are buying or refinancing homes with poor credit. Hence, low credit scores, bankruptcy, self-employment, or loss of job will not prevent some from qualifying for a mortgage loan.

Who Qualifies for Bad Credit Home Financing?

Credit scores range form 300 to 850. Those who achieve a high credit rating are considered prime loan applicants and have a world of options available to them. Of course, a high credit score is not required when applying for a mortgage loan.

Understandably, situations occur that make it difficult to maintain a high rating. These may include excessive debts, loss of employment, foreclosure, bankruptcy, and so forth.

Because bad credit is widespread, several lenders have chosen to concentrate on these sorts of mortgage loans. To qualify for a prime rate mortgage, most lenders require a credit score of at least 680.

On the other hand, bad credit or subprime mortgage lenders will approve loan applicants with lower scores. Thus, a bad credit history does not necessary mean an automatic loan rejection.

Mortgage Loans Available to Bad Credit Applicants

Many loan programs are available to individuals with bad credit. However, these are not without limitations. For example, various lenders offer 100% financing to bad credit applicants. Unfortunately, 100% financing is only available to homebuyers with FICO scores of 540 and higher. If your credit score is lower than 540, lenders may require a down payment.

Bad credit homebuyers may also be able to secure 103% financing to assist with closing costs. Yet, these applicants will not qualify for a "no doc mortgage loan." No documentation loans are ideal for self-employed persons or those who prefer their privacy.

Stated-income mortgage loans are also very attractive. This loan appeals more to self-employed homebuyers who write off a large portion of their income on taxes. Sub prime lenders will offer 100% financing on stated-income loans. To qualify for this loan, credit scores cannot fall below 620.

Researching Various Bad Credit Loan Options

If you have bad credit, it is important to choose a mortgage broker or lender that is capable of offering information about bad credit home financing. Before selecting a lender, request quotes from brokers and inquire about different home loan programs. There are hundreds of mortgage loans available, which accommodate various incomes, credit types, and employment situations.