It is not always fun for people to shop for mortgage if the applicant has a bad credit history. Whether you have a past bankruptcy, foreclosure, late payments or just a low credit score, shopping for lenders can be challenging if you don’t start at the right website. HLABC was created to simplify the loan process so that people with a checkered credit history can find lenders that specialize in bad credit mortgage programs.
If you’re in the market for a home, you already know that finding a good home loan is one of the most important steps of the buying process. However, those with poor credit scores often discover that the quest for a good home loan isn’t always an easy one. Luckily, government backed loans like FHA can help make it easier for people to find the right loans – even when you have poor credit scores.
You’ll still need to remember a few different things, however. Understanding the right steps to finding the perfect loan is important. Since you’re still shopping for a loan, you’ll need to keep several points in mind to get the best loan, including the following:
- Shop Around – The most important thing to remember is simply to shop around for your loan. Comparing lenders that offer FHA loans for people with poor credit is the key to getting the right loan. Different lenders have different terms even though they’re offering FHA backed loans. Some may have their own credit score limits, some could have better rates, and more. In short, be prepared to shop around and compare.
- Know Your Limits – This is a factor that should be obvious, but that still needs to be mentioned. You should be realistic when comparing different lenders. That’s because your poor credit score means you’ll still have a less than perfect interest rate on your loan. Don’t assume you’ll get a 3% rate with bad credit, or else you’ll end up very disappointed.
- Look At Closing Costs – Different lenders may have different fees and closing costs. Pay attention to these and even consider negotiating different closing costs in order to reduce your total home cost. You might be able to convince the seller to pay closing costs, but if not, it’s certainly worth taking a closer look at all the fees offered by different lenders. This way you can save money while still getting a good loan.
- Understand Down Payments – With an FHA loan, you will likely only need 3.5% down. However, remember that you can make a larger down payment and receive a better loan. When shopping different lenders, be sure to look at just how much your down payment will impact the loan. It could help you get a better deal.
- The Total Package – Finally, take a look at the total package when it comes to the loan. Look at all the points above and more. Consider interest rates, terms, closing costs, and more. Then, consider your situation and what you need from a loan. By doing this, you should be able to compare your options and find the perfect one for you.
Getting a good FHA loan is important, and there are steps that can make it much easier. Shopping different bad credit mortgage lenders that offer FHA loans is the best idea you can have when it comes to getting a loan when you have poor credit. The points above can help you find the right one for you.
Once you’ve gone through the process of finding that perfect dream home, you’ll need to figure out your overall budget and the price you’ll have to pay. While it’s easy enough to take a look at the list price of the property and assume that it’s the total price you’ll pay, there’s a lot more to it than that. Interest rates and closing costs need to be figured up as well since they’ll have a tremendous impact on the overall amount that you’ll end up paying for your home.
Closing costs alone can cost a significant amount, and can increase the total price of your new home by thousands of dollars. And the higher the interest rates, the more you’ll end up paying for your home over the long run. As a result, you’ll want to work on keeping both of these things as low as possible. There are a few steps you can take to help with the process.
In terms of lower rates, negotiation only takes you so far. You can choose 15 year mortgages over 30 year ones, lower your credit score, and come up with more of a down payment to start with. Those things will help drop interest rates, and will do so much more effectively than trying to negotiate with a lender.
However, it is indeed possible to negotiate lower closing costs for your home, and as such you need to consider them carefully. A few simple steps could end up saving you thousands. Here’s a look at some tips that could help you negotiate reduced closing costs.
How to Negotiate Lower Rates and Closing Costs on a Mortgage
- Look for motivated sellers. Those who are ready to sell fast are much more likely to agree to things like covering some or even all of your closing costs. It doesn’t hurt to ask, and by offering to pay the full home amount if they’ll cover closing costs you could save.
- Work on finding loans that eliminate some of the more expensive and sometimes avoidable fees. In particular, if you can negotiate a deal where you don’t pay for origination or funding fees, you’ll save thousands. In order to do so you’ll need to have a solid down payment and good credit, but it could make a big difference.
- Another area to focus on is in getting processing, underwriting, and the title and escrow fees waived. If you can’t get them waived entirely, you may at least be able to have them reduced.
- Try several lenders. If the first one doesn’t make you the kind of arrangement you want, you can try heading to another one. Just by knowing that you can attempt to get a loan from several lenders, you won’t fall into the trap of feeling like you have no other options or choices.
These tips could help you negotiate reduced closing costs. While some of the costs are unavoidable, you’ll find that depending on the situation it’s more than possible to save significant money on your closing costs – you just have to know what to ask for.