Home buyers with bad credit profiles need to be realistic with the type of home loans they can qualify for. They should not expect to be charged the same interest rates as homeowners with good credit history. Lenders who make bad credit home loans always charge a higher interest rate to justify the higher risks associated with this type of mortgage loans. Homeowners with bad credit can always refinance and enjoy a lower interest rate loan once they have a chance to improve their credit profile.
Depending on the current housing market condition and lending climate, most mortgage brokers have access to 100% financing for borrowers with credit scores 580 and above, provided that the loan applicants' other qualifying factors are sound.
Many people feel that financial problems they've experience in the past will prevent them from obtaining a mortgage today. In today's world that is just not true. Bad credit lending otherwise known as sub-prime lending is bigger and more readily available than ever before. Mortgage programs that ignore collections, judgements, medical bills, basically any trade line that doesn't affect title can be ignored by many of today's lenders. Mortgage brokers make these programs available to people who are consistantly turned down by their local bank. A mortgage broker can turn a decline into an approval more often than not.
There are actually programs now that will go down to 520 FICO score and allow you to get 100% financing with higher scores and no other negative entries in the credit report. Yes there are stipulations on these programs but check with your mortgage broker to see if you might be able to qualify for one. In addition you may have a high DTI or debt-to-income ratio around 50 - 55%. This would throw you into the same category. Mortgage brokers, unlike banks, have the ability to source out these specialty programs and make them available to you.
With the the resources mortgage brokers have for finding the right loan for your home purchase or refinance, credit issues should not stop you from speaking with a broker. Brokers work directly with you and the lender in order to overcome all sorts of credit issues that have been keeping you from the financing you want. Do not let a No from a bank stop you from achieving your goal of home ownership.
Bad credit home loans may offer those with poor credit history the chance to own their dream home. In the past, only those with stellar credit ratings were able to apply for quality home loans, but this is no longer true. Bad credit home loans are offered to those who have earned a poor credit rating but are still considered responsible enough to undertake a mortgage. If your credit score has suffered from some temporary setbacks, and you are trying to establish a responsible credit history from this point forward, then a bad credit home loan may be your prime opportunity. This is a great way to get financing until you can work on your credit, bring up your score and get more traditional financing with even better rates.
Mortgage brokers have a greater ability to assist client with poor credit obtain high LTV loans as they have the resources to be able to assist. Although underwriting guidelines change with the housing market and the general economy, many sub-prime banks have done 95% financing down to a 580 and 100% financing down 10 a 600. Many of these non-prime banks do not operate in all 50 states due to individual state regulations. Consult a local mortgage broker to see if some of these bad credit home loans are available in your area.
Bad Credit Refinancing - Pre-payment penalties may be one of the biggest obstacles to refinancing when you have bad credit. These penalties vary from state to state but the main purpose is to protect the lender from losing money when taking on higher risk mortgages.
When speaking with one of our mortgage professionals, please be sure to mention if your credit score is at or below 500, because we have very specialized programs which may be able to provide you with a unique opportunity to refinance and take cash out.
Sub prime lenders are another great alternative. Because these lenders specialize in high risk loans, they have various loan programs for individuals with poor credit. Submitting an application online is the quickest and easiest method for obtaining a quote.
One of the biggest causes of bad credit is if you are making a habit of late credit card payments. Late credit card payments are like a huge red buzzer to lenders. It alerts them that you have been irresponsible in the past with making payments, and statistically speaking, you will be irresponsible again. That makes you a serious risk to their lending institution.
Depending on the lender you may be able to buy out or buy down the prepayment pentalty. Your interest rate will usually increase when you buy out or buy down you prepayment pentalty.
In addition to pre-payment penalties lenders often charge higher interest rates for borrowers with bad credit to offset the higher risk.
Bad credit, no credit or good credit. If you are thinking about refinancing you should check with your loan officer or mortgage broker to see what you qualify for. Never count yourself out of the game because you just might be suprised. With the new subprime lender programs that have hit the market in the last few years your chances have substantially increased to get qualified.
Because banks charge high interest rates on loans made to homeowners with bad credit, these homeowners often have no intention of keeping the loan for more than a year or two. They plan on refinancing their mortgages to a lower rate at least once more when they have repaired their credit profile. Therefore, homeowners with bad credit often opt for Adjustable Rate Mortgages or a Hybrid Loan with a fixed interest rate for the initial 2 years followed by an adjustable rate for the remainder 28 years. These ARM's and Hybrids tend to have lower starting rates than the 30-year fixed rate mortgages.
Bad credit refinancing may help some borrowers improve their credit rating if the money from loan proceeds are used to pay off debts. This can improve monthly cash flow helping them make all monthly payments on time.