Having bad credit can make it almost impossible to get a
home loan but there are lenders that offer programs for Arizona mortgages for bad credit.
There are different options available to help subprime borrowers that can also
be taken advantage of by borrowers with good credit.
Close to 42 million Americans have bad credit, which is about 25% of
all adults with active credit accounts. Bad credit is a FICO score of less than
640 and can make it difficult to qualify for a car loan, home loan, credit
cards, and even store accounts. Some individuals with bad credit scores may
even find that they have trouble getting and keeping a job due to credit checks
by their employer. For many individuals with bad credit, buying a home seems
impossible. However, many mortgage brokers offer Arizona mortgages for bad credit
programs to help Arizona residents
qualify for home loans.
One type of loan that is available for people with bad
credit is an adjustable rate mortgage or ARM. An ARM is offered to subprime
borrowers who would not qualify for a traditional loan. It offers a low
interest rate at first but then resets to a high interest rate after a
specified period, usually 1 to 7 years. Once the rate adjusts your mortgage
payment will increase due to the higher interest rate. This can be a good
option if you only plan on owning the property short term or if you know you
will be able to qualify to refinance your loan at the end of your low rate
period. Although an ARM is a type of Arizona
mortgages for bad credit, it can also be beneficial for borrowers with good
A second type of Arizona
mortgages for bad credit that is available is a type of FHA loan. An FHA
loan is backed by the government and will allow you to borrow about 96.5% of
the value of the home you are purchasing. This means that you won’t have to
come up with a large chunk for a down payment. In addition, the government
backing means that you will be more likely to qualify, even with less than
stellar credit. You will pay monthly insurance on your loan. In addition to you
principle and interest payments, you will also pay a PMI insurance payment.
This will increase the amount of your monthly mortgage payments until you pay
off 20% of the loan amount. You can also couple FHA loans with different
federal programs that offer down payment assistance or cash back at closing
like Home in 5. These programs are constantly evolving and changing, so make
sure to talk with a mortgage broker about what you may qualify for.
A third type of loan is a hard money loan. A hard money loan
is secured through a mortgage broker but is backed by investors instead of a
bank. This is especially beneficial for people looking to do a fix and flip or
short term purchase. Depending on the merit of the property you are purchasing
as well as potential for income, investors will often invest capital, even if
your credit score is lower than what is ideal. It should be noted that hard
money loans are short term loans only. They cannot be used to purchase a home
you plan to live in for any significant amount of time. These are designed
primarily for real estate investors.
In addition to these three loan types there are a variety of
other types of loans offered by private lenders, hedge funds, and equity funds.
For these loans the terms will vary significantly by the lender. Interest rates
can be anywhere between 6 and 9 percent and you will need to have a down
payment of up to 20% as well as proof of income. The requirements for these
loans an usually much less stringent than bank loans and the lenders are
usually willing to consider extraneous factors and reasons for bad credit.
For some borrowers, an Arizona
mortgages for bad credit program is the only option they have to purchase a
home. However, some of these bad credit loans can benefit traditional borrowers
as well. Specifically, an adjustable rate mortgage. An ARM can save you
thousands of dollars in interest over the life of your loan and makes sense in
certain lending situations. Here are five situations that could benefit from an
adjustable rate mortgage:
You have bad credit, but you are working on it.
An ARM is a fantastic option to help rebuild your credit score. If you know you
will be able to qualify to refinance before the rate adjusts, it is a good way
to get into a home and start rebuilding your credit score.
You expect your income to increase. If the loan
resets, you will be able to pay the higher interest payments because you will
be earning more money.
You plan to fix up the home and sell it for a
profit. If you are not planning a long term investment, an ARM can save you
money while you are renovating. In addition, you may also want to look into a
hard money loan in this case as they can help investors with bad credit to fix
and flip various properties.
You plan to sell your home prior to the rate
raise. If you only plan on living in your home for a short period of time, an
adjustable rate can save you money. If you sell before the rate raises you will
never have to pay the higher interest rate.
Talk with a mortgage
broker to determine if an ARM or other bad credit loan is right for you.
Whether you need to rebuild your credit or are in a
situation where you could benefit by taking advantage of a bad credit loan, a
mortgage broker can help you determine the right product for you. A broker or
private equity investment firm can help you navigate the ins and outs of Arizona mortgages for bad credit and
determine the best next steps to qualify for a home loan.
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23335 N 18th Drive Suite 120
Phoenix AZ 85027