Mortgage Loan with Bad Credit
Bad credit can be caused by many more factors than just defaulting on your payments. There are many factors in determining your credit score, such as how much debt you have in relation to your income, how many credit cards you have and another thing to remember is that every time there is a credit check done on you , it will contribute to lowering your credit score as well. So just because you pay all of your credit cards and bills on time, your credit score may still suffer do to some or all of these factors.
Ok so you want to get a mortgage , but your credit score is not were you would like it to be. With the recent housing crisis, banks have become much more stringent when it comes to lending. Lenders are generally not accepting loan applications from borrowers that have a credit score below 650. So is it still possible to get a mortgage loan with bad credit ?
bad credit mortgage loan
The answer to that question is yes, it is possible to get a mortgage with bad credit . If you are looking to refinance your home with bad credit there are mortgage brokers out there that specialize in this. However, you will most likely be subjected to higher fees and higher interest rates, such is the price we pay for not having a perfect credit score.
One of the benefits of refinancing your mortgage with bad credit, is that once you are approved , you can use that money to pay off other debts, such as credit cards or car loans and this will help improve your credit score immensely. It is even possible to refinance your home for the sole purpose of paying off your credit cards and other debts. Since a refinance is considered a secured loan in where your house is put up for collateral it is not that difficult to find a lender.
The most important thing you can do when trying to get a mortgage with bad credit , is to shop around as much as possible, get quotes from at least 3-4 brokers and let them know you are talking with other mortgage brokers as well. Do your homework and research online to try to find out as much as possible in regards to bad credit mortgage lending practices. You will notice that many lenders and brokers have different mortgage packages and rates, so it is definitely in your best interest to get as much information as you possibly can.
Another thing is that you will want to avoid the banks when looking to refinance, especially if you have bad credit. Unlike brokers, banks are exempt from RESPA laws that govern the obligations for transparency to their customers. Remember that when you are trying to get a mortgage loan with bad credit, you will most likely be paying a higher rate by default so you certainly don’t want to pay any higher rates than you have too.
It is a standard practice between banks and loan originators to mark up the mortgage rate by a half point or so, which may not seem like a large amount, yet if we are looking at 250,000 mortgage at 6.0 , then they add another .05%, that could lead to thousands of dollars more that you will have to pay. Brokers on the other hand, may still try to mark up the loan using deceptive language, yet you can let them know you are aware of RESPA laws and what is considered unethical practices and this will certainly help you with getting a much better deal on your mortgage loan or refinance.
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