Bad Credit Central  >>  Home Loans in 2009

Few Home Loans for People With Bad Credit - 2009 Update

by Brandon Cornett, 6/15/09

Summary: These days, there are very few home loan options for people with bad credit scores. So instead of wasting your time trying to find one, you should spend your time improving your credit situation.

Let's kick things off with a quick definition:

A bad credit score is one that prevents you from getting a mortgage loan, or limits you to a loan with an unusually high interest rate. In the current post-recession economy, I would say any FICO score below 620 would fall into this category.

A few years ago, people with bad credit could have found a lender willing to give them a home loan. In fact, a lot of lenders specialized in these so-called subprime loans. But those days are long gone. Today, in the wake of our economic recession, home loans for people with bad credit are a thing of the past. And this is a good thing. Subprime lending was one of the major causes of our housing crisis and recession, so I say good riddance.

If you have poor credit, but you would like to buy a home in the future, here's the strategy I recommend:

Focus on Credit Score First, and Home Loan Second

First of all, you should forget about subprime lending altogether (home loans for people with bad credit scores). This lending practice has practically become extinct, which is a good thing. It wrecked our economy when it was here, so I hope it never comes back.

See also: Bad credit mortgage lenders are dangerous

So instead of hunting for a subprime lender -- most of which have disappeared, anyway -- you should put your time and energy into boosting your credit score. In other words, you should cure the disease instead of treating the symptoms. People with bad credit should only pursue home loans after improving their scores.

How to Improve Your Score

You are the only one who can improve your credit score, because it requires a certain level of discipline on your part. You must pay all of your bills on time, reduce your credit card balances, and correct any errors that occur on your credit reports. When combined, these three actions will improve your score faster than anything else.

See also: How long does it take to improve a credit score?

If you can boost your score into the 650-or-higher range, you'll have a much easier time finding a home loan. Better still, if you can get your score above 750, you'll probably qualify for the best interest rates the lender has to offer. This translates into a smaller mortgage payment each month -- and who doesn't want that?

So let's sum up the key points we have covered so far:

• Home loans for people with bad credit are hard to come by these days.
• If you have credit problems, you should focus your energy on that first.
• If you can improve your score, you'll have a much easier time getting a loan.
• If you can get your score above 750, you'll qualify for a great interest rate.
• Our website offers plenty of information to help you achieve these things.

I hope this article helps you improve your credit situation in order to get a home loan, and I wish you well in your real estate ventures.