Types of Bad Credit Mortgages in Arizona

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Types of Bad Credit Mortgages in Arizona

There are a variety of circumstances that can lead to a low credit score. Learn how you can get a bad credit mortgage Arizona and qualify for a home loan, even if your credit is less than perfect.
If you have bad credit, you can still use a variety of programs to purchase a home. Once you have

decided to seek a home loan, there are several different programs and types of loans available to you. You will need to do your research and choose a loan based on your goals (both short term and long term), and unique credit and money situation.

One type of bad credit mortgage in Arizona that is available 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.  
Another type of loan that is available for people with bad credit 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 can be helpful to many buyers because coming up with 5 to 20 percent of the home’s value can effectively keep some buyers from being able to purchase a home. In addition, the government backing means that you will be more likely to qualify, even with less than stellar credit. One important note is that you will pay monthly insurance on your loan. In additional to you principle and interest payments, you will also pay a PMI insurance payment. This is basically extra money you pay to help insure against default. PMI payments can range from $80 to over $200 each month, depending on the amount of the loan.
A third type of home loan that may be available as a bad credit mortgage in Arizona is a subprime loan. A subprime loan refers to a loan given to a borrower that represents a greater financial risk due to his/her credit score. A subprime loan is funded by a bank but does not have to meet the same underwriting guidelines as a prime loan. Subprime loans allow access to groups that would normally not have access to the credit market like people with low FICO scores. Subprime loans often have higher interest rates than conventional loans to compensate for their higher credit risk. The most common type of subprime loan is an adjustable rate mortgage.

Why Bad Credit Loans Exist

There are a variety of factors that can lead to a lower credit score. Job loss, divorce, a sudden change in income, or even an old credit card you forgot about can cause your credit score to suffer. Recent statistics released from FICO Inc. show that 25% of the 170 million Americans with active credit accounts have a FICO score of less than 600. This is considered a low credit score and if you have a low score, you can have trouble getting credit cards, car loans, and even store credit accounts.
If you are one of the 42.5 million Americans with a low credit score, you probably assume that home ownership is beyond your reach. However, with new bad credit mortgage Arizona programs as well as federal programs, borrowers can qualify with low FICO scores.
As with any mortgage it is important to analyze the risks and benefits of a low credit mortgage. Once you have decided to stop letting your FICO score hold you back, it is important to know your options. Most likely you will not qualify for a bad credit mortgage through a bank, so it is important to find a reputable mortgage broker. A broker has more flexibility in terms of types of loans that can be offered so you are more likely to qualify via a broker than a bank.
Find mortgage broker that specializes in bad credit mortgage Arizona will ensure that you are receiving all the options to make owning a home a reality. A mortgage broker will help you understand the ins and outs of each type of loan in more depth and help you find the best loan for your financial situation. A broker will also be able to give you the most up to date information about new state and federal programs that will help put home ownership within your reach. Government programs and incentives change almost daily so make sure that you are working with a broker who knows about any and all bad credit loan opportunities. Don’t let your FICO score stand in the way of owning a home. Reach out to a licensed mortgage broker today.
Level 4 Funding LLC
Dennis Dahlberg, Broker/RI/CEO
NMLS 1058389 AZMB 0923961
23335 N 18th Drive Suite 120
Phoenix AZ 85027

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