It’s so easy to get discouraged about buying a new home when you have bad credit or not enough income. You see other people buying houses all the time and wonder “how do they do it?” Do not fall into the trap of thinking that everyone has a perfect credit score or a well-paying job, because that is simply not the case.
Those with less-than-ideal circumstances for a conventional loan should know that there are other options available, such as an unconventional mortgage. It all comes down to knowing where to turn and who to turn to. This can mean the difference between being a homeowner or not.
Ready to get your dream home in the new year? Option Funding, Inc. can help make it a reality with an unconventional mortgage.
What is an Unconventional Mortgage?
Conventional loans are the most well-known type of home mortgage for homebuyers. These loans come with requirements that must be met to be approved, such as having the proper credit score, enough money for a down payment, and proof of steady employment.
These loans can either be a fixed rate, meaning they won’t change over time, or an adjustable rate, which means they come with an interest rate that changes at predetermined times, such as once a year. The rate can go up or down depending on economic factors. There are not many other options for these types of mortgages which is what makes it tough for everyone to buy a home.
Unconventional mortgages are different. These loans potentially allow people to purchase a new home due to their less stringent approval requirements. Those with lower credit scores and less income may be able to obtain an unconventional mortgage. It is important to keep in mind that some of these loans may require a larger down payment.
Types of Unconventional Mortgages
Unconventional mortgages are backed by government programs, including FHA, USDA, and VA loans. Let’s take a closer look.
FHA loans are those secured by the Federal Housing Administration. This is, by far, the most used unconventional loan and has a lower credit score and down payment requirement than most conventional loans. It is a mortgage that is insured by the FHA and issued by a bank or other approved lender.
USDA loans are secured by the U.S. Department of Agriculture. These are used to help build rural areas. There are a few restrictions when it comes to credit score, the size of the town, and it must be the primary residence of the borrower.
VA loans allow active-duty service members, veterans, and eligible surviving spouses to finance a home with no down payment, no mortgage insurance and lenient credit requirements. They are backed by the U.S. Department of Veterans Affairs.
While these may be the most popular types of unconventional mortgages, they aren’t the only options. Non-QM, stated income loans, private money mortgages, hard money lenders, and seller financing all fall into the category of unconventional mortgages.
Some Advantages of an Unconventional Mortgage:
Less stringent requirements. Not everyone fits the mold for a traditional mortgage. So having options means that everyone gets a chance at owning a home, including those who have been rejected for a conventional loan. This includes those who are self-employed, someone that may have an unstable employment history or doesn’t have a lot of savings, those with bad credit, have previously filed for bankruptcy, and so on.
Greater equity upfront. Another thing that sets unconventional mortgages apart is the fact that depending on the type of loan, they may require you to have a larger down payment. And while this may seem like a disadvantage, it really isn’t. By doing this, you are lowering your monthly mortgage payment and creating equity in your home before you even move in.
Greater flexibility. There is not much flexibility to be had when it comes to traditional mortgages, aside from choosing whether you want a 15 or a 30-year fixed-rate term loan. With an unconventional loan, you have more choices, such as a balloon loan or an adjustable-rate mortgage.
Unconventional Loans at Option Funding, Inc.
Don’t give up on your hope of becoming a homeowner without first discussing your options with Option Funding, Inc. As our name suggests, we have the options you are looking for to qualify for financing and get the loan you need to finally make your move. We have been helping future homeowners just like you for over 20 years.
Falling on hard times, having bad credit, or having a lower income should not keep you from being able to put down roots in a community you love. All you need is the right team of loan advisors to help guide you along the way.
Questions? Contact Ahmad Azizi at Option Funding, Inc. in Westlake Village to secure a mortgage option just for you.