Saturday, May 29th, 2010 at
2:59 pm
Bad credit loan mortgages or non-status mortgages are purposely intended to serve people with a bad credit history. According to a recent survey, one fifth of all adults are not able to qualify for a standard mortgage as a result of a previous or current bad financial situation.
Credit history is based on information retrieved from sources including Public records such as electoral roll information, court judgments and bankruptcies; and Information provided by financial institutions and other lenders such as banks that provide credit accounts and lending facilities.
In order to calculate the potential risk in providing loans to the person, most lenders use independent credit reference agencies to gather and assemble this information since they are permitted by law to review a mortgagee’s credit report before granting approval.
Bad credit rating usually results from failure to pay off outstanding debts or other credit payments on time, due to factors such as outstanding rent or mortgage arrears, county court judgments (CCJ) or bankruptcy. There are also other reasons that can result in a bad credit record which include:
1. Foreclosure
2. Heavy medical bills
3. Settlements arising due to Judgments /divorce
4. Multiple credit cards
5. IRS debt
Bad credit mortgage is designed for people who are unable to take out a mortgage from high-end mortgage providers. However, there are several providers who are willing to take a risk and provide loans for individuals with bad credit ratings, but at a higher rate or lower maximum amount.
Normally, a bad credit mortgage loan has an introductory interest rate that is fixed for 2-3 years, which is substantially higher that the rate pertaining to a conventional 30 year fixed rate loan. This is due to the extra risk the lender has to take, because with a bad credit, the borrower’s probability of default on the home load is higher than someone with good credit. However, after the initial period, the interest rate on a bad credit mortgage will adjust periodically.
There are also a few factors that most lenders of bad credit loan mortgages will look into, before granting the loan mortgage to people with bad credit history. This includes:
1. Employment history and income stability
2. Current monthly debt
3. Value of the property and
4. Down payment
Since loan requests from people with bad credit do not fit under the standard underwriting guidelines, fees charged by lenders on bad credit mortgage loans are also significantly higher than those charged in a conventional or standard home loan. This can range from 1% to 6% of the total loan amount.
Since individuals who get a bad credit mortgage usually do so mainly because they want to put their credit back into good standing, or as an opportunity to clean up credit history, the higher interest rate need not necessarily lasts for 30 years. Additionally, if the monthly loan payments are in time for two consecutive years, the bad credit mortgage can be refinanced with a conventional loan at a much lower interest rate.
By: Andrew Green
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Sunday, May 23rd, 2010 at
3:26 pm
In recent years bad credit mortgages have been readily available, however in 2009 that is no longer the case. With the housing market on the decline, so are the bad credit mortgage operations. Once easily obtained bad credit mortgages are now on a rapid decline and looks to not improve in the year 2009.
If you have bad credit, meaning a credit score of less than 700 obtaining a mortgage might be extremely difficult for you. Some smaller banks and credit unions will still offer a bad credit mortgage before the large nationwide banks will. A bad credit mortgage loan may be attainable as an adjustable rate mortgage and open up the possibility of a refinance in the future, when your credit score has increased. The adjustable rate mortgage might entail a balloon payment, private mortgage insurance and or higher interest rate than the prime rate.
If you are searching for a bad credit mortgage first you should view your credit report. An inaccurate credit report is often the culprit of low credit scores you can work with the credit bureaus to repair or remove any inaccurate information located in your personal file. Next prepare your documents that will be required to obtain a bad credit mortgage, typically it is 2 years worth of tax returns, discharged bankruptcy papers, marriage certificates and/ or divorce decrees, your current liabilities and income verification.
Contact a professional mortgage broker he or she will be on your side during your entire loan process from finding the right lender, filling in the paperwork and letting you know if a bad credit mortgage is an option for you and your situation. Be prepared to be turned down, but you really won’t know unless out try. Research your location, your current income and your credit worthiness take steps to improve your credit scores to ensure that you have the option in the future to obtain a home mortgage at a lower interest rate.
By: Derek Farley
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Thursday, May 20th, 2010 at
12:17 am
Apartment dwellers and homeowners with bad or poor credit who are looking for a mortgage with 100% financing may be surprised to discover, that due to today’s more lenient lending practices, it is almost as easy to get approved for a new home loan or to refinance your current mortgage with a poor credit rating than it is if you had good a credit rating.
Tip – This type of bad credit mortgage loan normally doesn’t translate into lower interest rate loans. You may qualify for a 100% mortgage but the terms of the loan and interest rate won’t be a favorable as if you had great credit.
Bad credit (i.e. also known as Subprime) mortgage lenders offer a variety of 100% mortgage packages for borrowers and in some instances even 103% mortgage loans are available which also include your closing costs. You have several options when it comes to this type of financing. Below are few things that should help you get started on the right track.
100% Mortgage Loans – The Good and the Bad
The primary benefit of a home loan that offers 100% financing, especially if you have less than perfect credit, is that you can purchase a home with little or no cash down. Rather than continuing to throw money down the rat hole of monthly rent you can begin to build equity in a home of your own.
On the other hand, the primary disadvantage of 100% financing is that you will pay more for financing through a higher interest rate and in many instances higher closing costs and rather than having a 15 or 30 year fixed loan you will normally get an adjustable rate mortgage than will go up after 2 or 3 years. Another risk for the homeowner is that because you are purchasing a home with no money down you will have zero equity. If the housing market goes into a slump and the value of your home declines, you could end up with a mortgage for more than your home is worth.
Tip – To find out further information about how to purchase a home with bad credit or no credit visit your local real estate company and they might be able to refer you to a bad credit mortgage specialist. Another option is to simply do research on the internet or use your local phone book but shop around because like any business the mortgage business is very competitive and more options you have the better position you will be in to get the best deal possible.
Another advantage to this type of financing is that you are generally not required to pay for private mortgage insurance because private mortgage insurance is included in the higher rate that you automatically receive due to having poor credit.
Tip – For options in finding the best lender for you, check out the links below.
By: Shelby Ryan
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