Bad Credit Mortgage Loans

Bad Credit Mortgage Loans



Bad Credit Mortgage Loans
Credit ratings are a​ very influential factor when a​ person has to​ buy a​ mortgage .​
Good credit ratings improve the​ chances of​ getting a​ mortgage; while poor credit ratings may destroy the​ chances .​
However,​ today there are many options for people with bad credit ratings to​ get their mortgages .​
In fact,​ some mortgage companies specialize in​ selling mortgages to​ people with bad credit ratings .​
These mortgage companies are also called sub-prime lenders.
The creditworthiness of​ a​ person is​ rated according to​ FICO scores .​
The range of​ a​ FICO score lies between 300 and 850 .​
Scores above 720 are considered to​ be good,​ while scores below 620 are considered to​ be bad .​
These people come under the​ category called sub-primes .​
People may have bad credit due to​ a​ number of​ reasons .​
It may be due to​ loss in​ business,​ leading to​ delinquency of​ payments or​ even bankruptcy .​
There may be a​ medical disability or​ physical problem due to​ any other factor .​
People apprehended in​ criminal cases also attain bad credit status,​ as​ they cannot keep up their payments .​
However,​ bad credit no longer deters people from getting their mortgages.
One of​ the​ ways is​ to​ go for a​ home equity loan .​
If the​ person has been paying some installments on​ his or​ her home for a​ certain period of​ time,​ then equity on​ the​ home gets built up .​
This equity can be used as​ collateral to​ buy a​ second mortgage .​
Home refinancing is​ another option; a​ person can exchange his or​ her first mortgage with a​ newer mortgage which may possibly have lower interest rates.
Sub-prime loans have the​ disadvantage of​ high interest rates .​
Higher interest rates allow the​ lenders to​ acquire more payments from the​ borrowers and hence reduce their losses in​ case of​ default .​
There may be other stringent restrictions like shorter repayment times and the​ necessity of​ a​ down payment to​ be paid upfront .​
In fact,​ the​ down payment becomes a​ blessing in​ disguise .​
If the​ mortgage borrower has saved enough for a​ down payment,​ then it​ reduces the​ liabilities on​ the​ mortgage,​ which can be paid off faster .​
Though it​ is​ difficult for people with bad credit to​ get mortgages,​ it​ is​ not impossible .​
Bad credit borrowers must shop around for mortgages and scout for lower interest rates and other incentives .​
Prepayment is​ generally not allowed on​ a​ bad credit mortgage,​ as​ lenders do not allow bad credit borrowers to​ wrangle out of​ their loans that easily .​
Hence,​ a​ market survey to​ find out who provides the​ lowest prepayment penalties would be beneficial.
However,​ the​ best option for a​ person with bad credit is​ to​ improve their credit score .​
This is​ a​ long,​ arduous process,​ often achievable with patience and a​ sense of​ responsibility .​
Credit scores can be improved by making timely payments,​ and removing delinquencies by arranging for their payments.




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