Low Credit Home Loans

Having a low credit shouldn’t deter anybody from seeking a home loan. Many lenders are willing to make home loans to people with low credit scores because home loans are secured loans. In a secured loan a piece of property is put up as collateral on the loan, if the loan is not paid the lender can take possession of the collateral.

In a home loan, a second mortgage is taken out on the house as collateral. The lender simply forecloses on the mortgage if the loan is not repaid. 

Risks of low credit home loans

There are some risks to taking out low credit home loans; the biggest risk is that of foreclosure. If a homeowner isn’t able to pay off all the home loans they take out, the lender can foreclose on the house and throw the owner out.

Another drawback is that a homeowner may exhaust their equity or ability to borrow money on the home. Equity is the value of the house above the amount of the mortgage. The more the home is mortgaged for, the less equity the homeowner will have available. Taking out home loans now will reduce the amount of money a person will be able to borrow on the home in the future.

Home loans can affect your credit score

A person can hurt their credit score by applying for a home loan. The credit bureaus that maintain credit scores will sometimes reduce a credit score when somebody applies for a loan. Applying for several home loans can greatly reduce a person’s credit score.

A person with a low credit score should be careful when applying for home loans because it make a bad credit score worse.

Where to seek a home loan

One way to get a home loan without affecting your credit score is to contact the company that holds the mortgage on your home. The mortgage company might be willing to make a home loan to a person who has a record of making their mortgage payments on time. They might even be willing to waive the credit report in the case of a person with a really good record of making payments.

If the mortgage company won’t give good terms the next place to look is online. There are many companies that make home loans online and many of them will make home loans to people who have low credit scores.