You Can Get A Bad Credit Mortgage
Even if your credit score is less than desirable, (that’s the politically correct way of saying is stinks) you can still qualify for a bad credit mortgage. It all depends on exactly what you are trying to accomplish. If you are a first time home buyer and are looking at mortgages for people with bad credit, there may be obstacles to overcome that a person with great credit wouldn’t have to face. If you are looking at a bad credit mortgage refinance there will also be conditions attached that others might not have to contend with. The economy is in a slump and the housing market is suffering as a result. Consequently, if at all possible, lenders WANT to do business with you. But understandably, before they take a risk they will do everything in their power to protect their investment.
Poor credit loans are risky during the best of times, but at the moment they are even riskier. Banks are failing, the unemployment rate is sky high and record numbers of foreclosures are being filed throughout the country. Now then, understand that lenders are in the business of making money through the interest and finance charges you pay when you take a loan from them. If you want to buy a new home and you need a bad credit mortgage my number one piece of advice would be to have a sizeable down payment. A typical down payment for a piece of property is generally 20%. That is for someone with an acceptable credit rating. If you are able to come up with 30% or more your chances of obtaining the loan are considerably higher. The lender will look at it like this. If they need to foreclose on the house they will at least get their investment back because they are only lending 70% of the value of the property.
Similarly, if you are trying for a bad credit mortgage refinance, understand the same principles apply here. The lender will look at how much equity you have in the property. In very, very simple terms it’s like this. If you own a home that is valued at $200,000 and only owe a first mortgage of $100,000 you have approximately $100,000 of equity built in the property. So hypothetically you want to refinance an amount to net you $50,000 to use as a bad credit debt consolidation loan. The lender may very well be inclined to make that loan because you have enough equity to secure (guarantee) his investment. That is an ultra simplistic explanation, but you get the point. Now you owe $150,000 on a home that is valued at $200,000. Even should you default the lender feels safe that he will get his money back.
Should you be concerned with paying high interest rates, look at the flip side of the coin. If it is a poor credit loan for a new home you will now have the opportunity to reestablish good credit by making timely payments on your property. If it is a bad credit mortgage refinance to be used for home improvements then not only will the property increase in value but you will be building your credit as well. Once you have reestablished yourself you can always apply for a new loan with lower interest rates. It just might be in your best interest to take advantage of this loan. Use it to build a better future.
