If you have bad credit, you have probably been turned away by a bank if you applied for a home loan. You may think that owning a home is impossible. However, there are a number of programs that can help you qualify for a home loan. The best first step is to ditch the bank and find a company that specializes in helping individuals and families figure out How to buy a house with bad credit in Arizona. A good first stop is a mortgage broker. Unlike a bank, the broker does not actually loan out the money for a home loan. Instead he shops different banks to help you find the best loan for your purchase and credit situation. This allows more flexibility in terms of the types of loans that the broker can find as well as lenders. A mortgage broker or mortgage company can act as your intermediary and usually get you better loans and better terms than you could get by going straight to a bank, especially if you have bad credit.

Once you have found a mortgage broker or private mortgage company, you will begin to figure out How to buy a house with bad credit in Arizona. Your mortgage professional will give you a variety of options including conventional loans, FHA loans, and adjustable rate mortgages. It is important that you understand the differences in the types of loans as well as the terms of the loans to help you make the best decision for how to purchase your home.

One type of loan you mortgage investor will most likely discuss with you is a conventional loan. A conventional loan is a traditional 30 year mortgage with a fixed interest rates. Most current programs require at least at 5% down payment. This is the loan most often given out by banks and is usually the hardest to qualify for with bad credit. However, your broker may know of private equity companies and investors that give out conventional mortgages for sub-prime borrowers. You will usually end up paying a higher interest rate based on your low credit score, but the interest rate is fixed for the life of the loan. Also, if you plan on using on time mortgage payments as a way to rebuild your credit, you can refinance later when interest rates are low.

Another type of loan that is offered to bad credit borrowers is an FHA loan. An FHA loan is a government backed loan. Each month you pay extra insurance against default. The loan is secured by the Federal government so lenders are more likely to give them to borrowers with bad credit. In order to qualify for an FHA loan you will need to have 3.5% of the purchase price to put down. You will also pay extra for monthly mortgage insurance which can vary based on the amount of your loan. For many bad credit borrowers an FHA loan is a good path for home ownership.

A third type of loan your mortgage professional will discuss is an adjustable rate mortgage or ARM. An ARM is a mortgage that has a fixed interest rate for a set period of 1 to 7 years. During that period you will pay a relatively low interest rate, usually lower than the prime rate. After the initial fixed period, the rate will reset to a higher rate and your mortgage payment will increase. Borrowers with bad credit can take advantage of this program as a way to own a home because the initial payments are low due to the low interest rates. Keep in mind that after the rate resets your payment will increase significantly. An ARM is a good option for borrowers who plan on either selling or refinancing before the rate resets.

Although these are a few types of loan available for bad credit borrowers in Arizona, there are many other options like private and hard money loans. In addition, state and federal programs change frequently so there are always new paths to homeownership. Stop letting your credit score stand in the way of owning your dream home. Contact a mortgage broker or investment firm to take the next steps in find the perfect home for your family, and the perfect home loan for your wallet.

Dennis Dahlberg
Broker/RI/CEO/MLO