Taking a Look at Arizona Homes – loans for bad credit

Bad credit is one of the deciding factors whether an institution will grant you a home loan or not. A bad credit rating is an indication of an individual’s credit history, which specifies that the borrower is carrying a higher credit risk. This can be identified by the low credit score based on the credit history of an individual. The credit history of a person depends on several factors such as the amount borrowed, the availability of the credit amount remaining and the borrower’s punctuality in payments. An individual will only gain bad credit if they’re unable to make payments on regular basis or fail to pay a loan for a specified length of time. And if you have a bad credit that most likely means you will have a hard time dealing with payments and have a difficult time obtaining loans from financial agencies.

Although an individual had already filed for bankruptcy or have gone through a foreclosure, most cannot deny the fact that a home is a basic necessity. This thinking pushes people to look for ways to retrieve a home loan just to secure a shelter for their family, no matter how costly the downsides. Downsides such as the number of years and odd jobs prospective homeowners must obtain to take to afford a new home. However the best option to consider would be to look for Arizona homes loans with bad credit using from various agencies. Specifically loan agencies that offer subprime mortgage options.

A subprime mortgage is a type of mortgage that is usually provided to borrowers that have higher risk because of a poor credit score. Individuals with credit score lower than 640 are most likely entitled to a subprime mortgage. Yet with the great risk lenders assume from borrowers, the interest rate is expected to be slightly higher. And though many critics find interest rates on subprime mortgages to be unfair, many borrowers defend this notion for the reason that it is the best option available to qualify for a home loan.

Aside from this, borrowers can choose from several different types of subprime mortgages available. Each type of loan has strong and weak points, especially if new homeowners plan to apply for Arizona homes loans for bad credit such as:

Adjustable Rate Mortgage (ARM) – This type of mortgage starts at a low-interest rate that is typically in a lower prime rate of 2-3%. This will be adjusted after 1 to 5 years to a much higher rate, with 10-20% depending on market conditions. However an ARM is the good choice if you are in the process of rebuilding your credit score. You will be able to refinance a traditional loan even before the period of adjustment. In addition an ARM is considered a smart alternative if you are planning to buy a short-term home, whether as a ‘fix and flip’ real estate investment or if you have plans to move out on short notice.
Hard money loan – This type of loan is offered through a group of investors to borrowers, not through a traditional bank. This short-term loan is designed specifically for ‘fix and flip’ real estate. A hard money loan only lasts for a couple of years.
FHA insured loan – This loan is backed by the federal government and offers low interests rates for borrowers. A FHA insurance loan also provides options for low down payment. It only requires 3.5% down payment, which makes this loan a great option for borrowers with little to no amount of liquid cash resources. Borrowers should also consider this type of loan if the first home is sold and a second home is purchased with no down payment in hand. Also since the government insures the loan, the borrower will only pay the primary mortgage insurance (PMI). The payment ranges between 80 and a few hundred dollars that could increase your monthly mortgage dues dramatically. And the payment is done until you had paid the 20% of your home loan.

Provided that there are many options available for Arizona homes loans for bad credit is to talk with a mortgage broker. Specifically, the friendly professionals at Level 4 Funding are very knowledgeable about the current trends in housing loans and mortgages. We will dissect your individual financial situation and help you qualify for the loan of your choice.