As the U.S. economy struggles, more and more people are searching for bank loans and mortgages for bad credit. The average credit scores of consumers have declined significantly in recent years as late payments and unemployment numbers have surged.
What You Need to Meet the Requirements for Bad Credit Bank Loans: Borrowers must demonstrate that they have overcome an isolate incident with respect to qualifying for a FHA loan. The Federal Housing Administration requires borrowers to have at least a 500 credit score, but most government lenders are looking to approve refinancing when borrowers have at least a 580 middle credit score. Conventional bank loans for bad credit are non-existent in today's lending climate. In most cases, the "bad credit home loan" has disappeared beyond the government mortgage programs. Military vets like VA bank loans and American 1st time house buyers typically choose FHA bank loans for bad credit.
Will the Obama Administration Mandate Bank Loans for
Bad Credit and No Equity?
The government led by the Obama Administration is striving to extend aid to struggling homeowners. It seems that "bad credit refinancing" has become important again as many politicians prefer relief for a home refinance over the foreclosure crisis. The Obama administration believes that if they can require bank loans for bad credit borrowers that the housing sector may be able to rebound quicker than without help. In an election year it is easy to see just how important the HARP mortgage program is to Obama to shore up his base of voters. It is proposed that the FHA pay closing costs to encourage them, which would result in an additional average savings of about $3,000.
This refinance expansion was announced last week in the President's State of the Union address. Obama announced he was launching another refinance program that could save borrowers thousands of dollars a year by allowing them to refinance into loans at current low interest rates. Obama claimed the HARP plan would stimulate the housing market. The Obama Administration claims that the new HARP program would target approximately 3.5 million homeowners that are presently not in default with their bank loan.
Obama proposed allowing all homeowners who are current on their home loans even those who do not have liens owned by Fannie, Freddie or FHA and even those who are underwater on their mortgage - to also refinance more easily. The administration says the average homeowner would save $3,000 a year.
Get Connected with a Bank that Specializes in Solutions for Bad Credit Financing
For those who meet the loan criteria, the administration proposes a more streamlined refinance process in which lenders would only be required to confirm that a homeowner has a job and the subject property would not have to be appraised.
According to Mark Zandi, chief economist at Moody's, "The macroeconomic benefit could be significant." Zandi continued, "If, half of these eligible homeowners refinance in the next six months, then this would save homeowners over $20 billion in home loan payments this year and double that next year. The Obama Administration is banking on the fact that increased cash flow will in turn stimulate the economy because borrowers will have more money to spend from their refinancing savings."
Another part of Obama's mortgage relief proposal would enable Freddie Mac and Fannie Mae to sell houses that they own through foreclosure to investors who would then agree to rent them out. The Federal Housing Finance Administration also known as the FHFA would be the government entity that will oversee the home sales from this program.
Once again, the President announced significant changes to the Home Affordable Program that was created to help underwater homeowners another chance to refinance. The revisions called for lenders to completely ignore the 125% loan to value restrictions connected to the program. The Administration believes that these bold moves on bank loans will help thousands of people keep their homes because the new payments will save them enough money. In most cases, qualifying will be based on; loan to value, income and liabilities. Not all consumers will meet the requirements on bank loans for bad credit.