Poor Credit Home Loan - What to Know About

Let's face it: The economy's on the rocks and it doesn't show any signs of improvement in the near future. People are struggling to pay bills, in certain instances, and though they may be late paying them, they're still being paid. If this is the case, and buying a home is just on the horizon, what to know about a poor credit home loan might be something worthwhile to take the time to learn.

To begin with, the term "poor credit home loan, " can go by different names. In the mortgage and real estate business these are called "subprime loans, " for the most part. This term, especially, has been the subject of much debate since about October of 2008, when the housing market began to fall apart, somewhat due to the effect of too many of these loans being held in too many lenders' portfolios.

Now, it's not that there's anything inherently wrong with a poor credit home loan being extended, when the conditions - and the buyer - are a good risk. There's a world of difference between a buyer who may have had a few slow payments on some credit cards and one who's just went into - or just emerged from -- a major bankruptcy. These days, it's almost a certainty that the latter buyers will have a difficult time in getting a loan.

But many other buyers won't have a huge amount of difficulty in getting a loan based on poor credit, though it's also a certainty that the interest rates are going to be anywhere from 1 to 4 or more points above what's called the prime lending rate. It's a good thing for many that these sorts of loans are still being extended, even in these troubled economic times.

Prime rates, for a fact, are generally reserved for buyers nowadays with credit scores (called FICOs) ranging from 700 to 800 or better. Almost nobody below 700 will score a prime loan in the current lending environment. And keep this in mind: Any delinquencies on the credit report the mortgage lender or broker will pull will have to be cleared up before any lending decision is made.

In fact, clearing up a credit report should be the goal of anybody prior to applying for even a poor credit home loan. In many cases, this can mean saving a full percentage point on the cost of any home loan, sometimes resulting in the savings of at least 100 dollars a month, and thousands over the life of the mortgage.