Mortgage for First Time Home Buyers with Bad Credit
This Article Cover Mortgage for First Time Home Buyers with Bad Credit:
Homebuyers do not need perfect credit to qualify for a mortgage. Prior collections and charged-off accounts do not have to be paid. However, timely payments in the past 12 months is key in getting an approve/eligible per automated underwriting system.
We will cover the following key topic in this article:
- Who can purchase a home?
- Can you qualify for a mortgage with bad credit?
- Benefits of being a homeowner versus a renter.
- How much does it cost to purchase a home?
- Becoming a first-time homebuyer.
In this article, we will cover the above five bullet points in buying your first home.
Who Can Qualify to Purchase a Home
Mortgage For First Time Home Buyers with bad credit who are thinking of purchasing a first home is possible. Home Buyers can have bad prior credit to qualify for FHA Loans. Borrowers can qualify for FHA Loans with outstanding collections and charged-off accounts without having to pay them off. However, the key is that they need to have re-established their credit. Borrowers need to be timely on all of their payments in the past 12 months to get an approve/eligible per Automated Underwriting System Approval.
There are many questions that they may face.
Home Loan For First Time Home Buyers With Bad Credit
Mortgage for first-time homebuyers with bad credit is possible. They may get many feedbacks and opinions from friends, family, and co-workers about the advantages and disadvantages of buying a home.
There are many questions on being a homeowner for people who never purchased a home before. They may also hear the horror stories in the press about the skyrocketing foreclosure rates and homeowners owning homes that are underwater. Underwater mortgages are where their mortgage balances are higher than the market value of their homes.
Biggest Benefits Of Being Homeowner Versus Renter
Many renters do not realize that sometimes owning a home cost less than renting in many cases. Many renters think that they need stellar credit and a large down payment in order to become homeowners. This is not the case either.
Renters with credit issues may be required to put two or three months security deposit to rent. Many times the down payment on a home purchase is either equivalent to the security deposit or less.
Down Payment And Closing Costs Required For First Time Home Buyers With Bad Credit
To qualify for an FHA home purchase, first-time homebuyers with bad credit only need a 3.5% down payment. Many times, first-time homebuyers with bad credit only need to show the 3.5% down payment. They do not come up with the full 3.5% down payment on an FHA Home Purchase. Homebuyers in Illinois can use the seller’s property tax proration credits towards the down payment.
How about closing costs?
All home purchase and refinance transactions come with closing costs. Closing costs are any costs and fees associated with the home purchase and/or refinance transaction. This may include lender’s costs and all other third-party costs. Home Buyers do not have to pay for closing costs. This holds true as long as they can get a seller’s concession towards a buyer’s closing costs and/or a lender’s credit towards closing costs.
Benefits of Going From Renter To Homeowner
The benefits outweigh the disadvantages of being a homeowner for first-time home buyers. Yes, there are disadvantages to being a homeowner. Homeowners are responsible for maintenance, repairs. Lack of mobility in moving whenever they want and needing to sell your home in order to make a move elsewhere.
The pride of homeownership outweighs the cons. For example, homeowners can paint and decorate their homes without having to get permission from the landlord. Homeowners can have a pet or pets without asking for permission or having to put in an additional security deposit.
Security of Homeownership
As a homeowner, they will be secure in their home where they do not have to fear the landlord threatening them that he will not renew the lease. Homeowners will no longer have annual rental increases. The advantage of being a homeowner is mortgage payments will be fixed for the 30 years of the loan term. Property taxes and increases might increase. But mortgage payment will remain constant for the life of a mortgage loan with a 30 year fixed rate mortgage loan. Being a homeowner comes with tax benefits. Mortgage interest is fully tax-deductible on annual tax returns. Mortgage interest is the largest portion of monthly mortgage payments.
Appreciation Potential For First Time Home Buyers
First-time homebuyers are in a situation now where there are many homes that are selling below replacement value due to the real estate and mortgage collapse of 2008. Homeowners have an opportunity to get on the ground floor on their home purchase and realize potential capital appreciation on their home purchase.
There are risks with real estate investments. The 2008 financial crisis drop home values like never before in history. Millions of homeowners are still hanging on their homes that are worth less than the mortgage balance they owe. Nobody can predict the future. Homeowners have excellent odds that their home purchase will appreciate in value.
Homebuyers Can Qualify for a Mortgage With Little to No Money Down and Bad Credit
Remember that you do not need perfect credit or high credit scores to qualify for a mortgage. Homebuyers can qualify for a mortgage with as little as a 3.0% down payment on conventional loans. Homebuyers will lower credit scores can qualify for an FHA loan with a 3.5% down payment. VA and USDA loans do not require any down payment.
Closing costs can be paid for by getting a seller concession from the home seller. One of our veteran experienced mortgage professionals at Gustan Cho Associates can guide you on how to purchase a home with very little or no money down. First Time Home Buyers with bad credit who need to qualify for a mortgage with a mortgage company licensed in multiple states with no lender overlays on government and/or conventional loans can contact us at Gustan Cho Associates at 262-716-8151. Or text us for a faster response. Borrowers can also email us at [email protected]