Understand that your damaged Credit Score can cost you big money in higher monthly installment payments on your home mortgage loan. With a bad credit home loan, even a couple of points on your credit report score could mean the difference between thousands of dollars. Know that this home buying guide is for informational purposes only, it is only to help inform you, not to advise you about whether to buy a home or not. If you have time, fixing your credit with something like Smart Money Secret before applying for a home loan can save you thousands of dollars.
But please understand that you may be able to get a home mortgage loan even with bad credit. Many lenders are willing to take on the risk, because it’s not without reward — they’re going to charge you very high rates.
Your credit score can be improved.
Sometimes, only a few extra points on your credit scores could save thousands of dollars.
Already paying too much? Fix your credit report, and it could help you to refinance at a lower rate, and that means you pay less for your monthly mortgage bill.
Buying a home is easily the most expensive purchase most people will ever make in their life. Your FICO score is a primary factor in determining the amount of money you will pay for your house. Your Credit Score is determined by your credit report, so once your credit report is improved, your credit score will go up. (Your Credit Score or FICO Score, as it is called when it is determined by the Fair Isaac Company, to learn more please see our section on Credit Scoring.) The better your credit, the less you pay. This is true whether getting a home loan, a cell phone, a car loan, or signing up for credit cards. And it’s even more true when it comes to buying a home.
Fixing your credit score could equal big bucks for you and your family. Use the following charts to calculate how much your monthly mortgage payments will be for your home based on your FICO credit score. Find your score, then look to the right side of the chart to find the APR (annual percentage rate) that you will be charged, and then you can estimate what your monthly payments will be. Please note that the chart should be taken as a guideline. Each lender will have its own criteria for determining your creditworthiness. But after learning more about the high cost of buying a home with bad credit, you may decide to make your first call to a credit repair specialist instead of a real estate broker.
A TALE OF TWO HOME LOANS – HAVING GOOD CREDIT VS. BAD CREDIT HOME LOAN
Buying a home with bad credit could be the worst buy you ever make, just look at the difference improving your credit score by only a few points can make. Let’s say, two families the same house right next door to each other in the same neighborhood, and let’s say they both pay the exact same selling price and get their mortgages from the same bank, let’s call them A and B. Family A will pay $414,245 but Family B will only pay $489,215. A whopping $74,970 difference! How can that happen? Very easily.
If these two houses look a lot alike, it’s because they’re identical.
The only difference is how much more buying a home costs with bad credit.
House “A” House “B”
Selling price: $200,000 Selling price: $200,000
Price paid at end of 30-year loan= $414,245 Price paid at end of 30-year loan= $489,215
Why would anyone pay $74,970 more for the same house? Unfortunately, people with bad credit. are doing it every day. How much more you’re going to pay will depend on how bad your credit problems are. Use the below charts to help you calculate how much more you will have to pay for a house depending on your FICO credit score.
FICO Score/Mortgage Calculator for a $150,000 30-year, fixed-rate mortgage*
FICO SCORE —> YOUR APR
760 – 850 5.41% = YOUR MONTHLY PAYMENT OF $843
700 – 759 5.63% = YOUR MONTHLY PAYMENT OF $864
680 – 699 5.81% = YOUR MONTHLY PAYMENT OF $881
660 – 679 6.02% = YOUR MONTHLY PAYMENT OF $901
640 – 659 6.45% = YOUR MONTHLY PAYMENT OF $943
620 – 639 7.00% = YOUR MONTHLY PAYMENT OF $998
FICO Score/Mortgage Calculator for a $300,000 30-year, fixed-rate mortgage*
FICO SCORE —> YOUR APR
760 – 850 5.41% = YOUR MONTHLY PAYMENT OF $1,686
700 – 759 5.63% = YOUR MONTHLY PAYMENT OF $1,728
680 – 699 5.81% = YOUR MONTHLY PAYMENT OF $1,762
660 – 679 6.02% = YOUR MONTHLY PAYMENT OF $1,802
640 – 659 6.45% = YOUR MONTHLY PAYMENT OF $1,886
620 – 639 7.00% = YOUR MONTHLY PAYMENT OF $1,996