So, what is a bad credit mortgage? A bad credit mortgage is one which does not allow you to obtain a mortgage, only requires a higher down payment or requires a much larger down payment to qualify for a normal mortgage. The reason is that a lender views a bad credit rating as risky. Therefore, they require a higher down payment or require you to have a large portfolio of assets to compensate in the event you default. These assets could be in the form of stocks or mutual funds. A good income, a reasonable amount of debt and a large enough down payment will help you obtain a mortgage even with a bad credit rating.
Lenders do not view those with bad credit scores as “risky” lenders. This is why many subprime lenders exist. Sub prime lenders are willing to lend money to those with bad credit scores, but at higher interest rates than normal. This is due to the higher risk to the lender when it comes to lending money to those with bad credit scores.
If you have had some financial difficulties in the past, such as bankruptcy, foreclosure or repossession, then you should expect your credit score to be lower than those with a good credit score. However, this does not mean that it is impossible to obtain a home loan. You should first check with your local lenders to see if they offer such loans. Most lenders have programs which can provide rapid rescore options to borrowers who qualify.
Some lenders do not offer such loan credit score requirements. Usually, you will find that the lenders that do not require a high credit score will be those who specialize in offering loans for those with a poor score. It is also worth shopping around a little bit before applying to various lenders to see if you can get better terms or better interest rates. Generally, this requires contacting several different lenders to compare their rates and terms. Also, be sure to ask each lender about their loan credit score requirements. Find out what they are so you know what to expect.
You should understand that these loan credit score requirements are based upon the FICO scores of all applicants. If your credit score is low, then the lender may require a larger deposit to start with and a higher interest rate. The lender may also charge a higher monthly payment amount and require you to make larger regular payments. In many cases, the lender’s decision will be based on the applicant’s credit worthiness. The applicant with the lowest FICO will be assigned the highest credit worthiness score by the lender.
There are also some lenders that specialize in loans for people with bad credit scores. In most instances, you can find these lenders by doing an online search. One of the first things you need to do when shopping around for these lenders is to compare their interest rates. These can vary quite a bit based on the lender. Most offer competitive interest rates, but some lenders are much more aggressive. If this is the case, it is a good idea to spend a decent amount of time online researching the lenders and their interest rates.
When you do find a lender that meets your loan credit score requirements, be sure to shop around. Each lender will have different loan credit score requirements. Be sure you understand them before applying. While many of these lenders may charge a higher interest rate, some may have higher minimum credit scores and lower loan credit scores.
In short, getting a mortgage with bad credit scores can often be done if borrowers do the proper research beforehand. Lenders are competing for your business and this can often mean a better deal or a lower interest rate. If you are willing to take the time to shop around, you should be able to find a lender who will work with you. Don’t let your bad credit lead you to believe there is no way out!
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