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Poor Credit Home Loan - What to Know About
It's a fact that the economy, especially when it comes to the housing market, has been taking a series of body blows since at least October of 2008. People have been put into tightened financial straits, and they may have had to put off paying a few bills on time, though they still get paid in the end. If this sort of circumstance has occurred, but a home is still desired, then this could be the time when a poor credit home loan is a possibility.
Home loans that revolve around poor credit go by a few names. Besides the one named in this article, the most common term for what they are is "subprime loan." Simply put, these are loans given in which the interest rate is at least 1 or more points above the prime rate, which is what people with good, excellent and outstanding credit are offered. These subprime loans, in fact, contributed to late 2008's housing crash, because many lenders had too many of these loans in their portfolios.
There's nothing structurally wrong with such a thing as a subprime loan, and there are many prospective buyers who might not be able to buy a home without one. After all, buyers with a few "slow pays" are vastly different than buyers who don't pay on anything and yet still expect to be able to get a home loan. For the most part, currently, the latter just won't be able to swing a mortgage loan at all.
People with poor, though not fatally poor, credit still don't have a hugely difficult time in getting such things as poor credit home loans, and that's a comforting thought. Normally, though, the interest rates on such loans range from 1 to 4 or more points greater than the standard (or "prime") rates offered to people with excellent credit histories.
People with poor credit today (at least as it applies to home loans) can be defined as those having what are called "FICO" scores ranging from 699 down to 500 points. Above 700 (and up to the max of 850), and your credit is considered to be good, excellent, or outstanding. Regardless, always make sure any delinquent payments are caught up, in order to persuade the lender to extend a mortgage loan.
fixing up the credit report should be a priority, anyway, even if there's going to be a poor credit home loan in the offing. Oftentimes, it can lead to a savings of at least one percentage point off the interest rate, which can lead to the saving of thousands of dollars over the life of a mortgage loan.
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