Getting Home Loans For Poor Credit, And Why You Shouldn’t

In the old days men and women with poor credit had no options. Getting home loans with poor credit was impossible as a matter of fact. Things have definitely changed, but not for the better. Getting home loans for people with poor credit is easy, but it’s not wise. Home loans with bad credit pose a lot of problems for both vendors and for borrowers.

A bad credit home loan has insanely high interest rates; the kinds of interest rates that people have on their credit cards. Essentially, a poor credit home loan is buying a house with a credit card. I suppose if you’re Donald Trump your American Express card can hold the house with no problems. But Donald Trump didn’t get rich putting houses on credit cards, and neither will you. What’s more likely to happen is a poor credit loan will drive you further in debt and cause even worse credit problems.

So you want to buy a house and you have poor credit? There are options, but should you take them? If you want to pay three or four times the interest rates, then it might be the right choice. The interest 10% rate on a poor credit loan for a house at just $150,000 would be $323,883.14 over the course of the loan. That’s another house. For the interest rate of 10% on a 30 year mortgage with poor credit you could buy two houses at $150,000, and that’s just at 10% interest. Usually a poor credit home loan is around 15%-24%. 15% interest is $532,775.73. How many houses can you buy with $532,775.73? Not to mention the payments on the house would be nearly $2000.

What other options are there for anyone who wishes to buy a home with poor credit? There are many options, if they are willing to wait. Repairing their credit is the absolute best option. You can also get a co-signer on the loan.

Repairing your credit can take about 1-2 years but the difference in interest payments is astounding. Where a 10% loan with bad credit is, a good credit loan is only 7%. That is to say that the $323,000 now becomes only $209,000. That’s just by saving 3% interest. If saving $123,000 is worth a year or two of waiting and rebuilding credit, then a bad credit home loan isn’t the right option for you. A co-signer can also reduce the interest rate of a home loan.

Choosing to wait for the home of your dreams can mean saving more than $100,000. In some cases, where the house is around $250,000-$300,000 the savings could total near a million dollars. Be sure to check into your options before opting for a home loan with poor credit.

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