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Bad Credit Mortgage Lending
A bad credit mortgage may be just what the doctor ordered
A bad credit mortgage gives borrowers with a poor credit history opportunity to not only buy a home or refinance their current mortgage but the best opportunity to raise their credit rating over time. In most cases, when you use any kind of financial product like a mortgage, the lending institution will pull your credit report.
In a nutshell, your credit rating a collection of your story on how timely you've paid your bills. Anytime money is borrowed it is used because it is the best way for a lender to hedge the risk for a particular borrower.
Tip – The online lending industry is very competitive. You will find many lenders who specialize in bad credit Mortgages services.
Making the decision to issue or approve a bad credit mortgage is primarily determined by credit score of borrower (E). Credit scores can vary from 400 to 800 with anything lower than a 620 poor and anything over a 720 very well. On the other hand, even if you have a credit score as low as 580 there are many lenders with mortgage programs to fund up to 100% of the loan. Of course you can lower your credit score the higher interest rate will pay, and in most cases you will only be offered an ARM (Adjustable Rate Mortgage) that has a 2 or 3 year fixed rate and then it goes up.
Tip – Most states have lending laws, State a lender can only charge interest rates a certain percentage of retail or normal market interest rate for borrowers with bad credit. Normally this rate is 5% – 8% higher, but even there in many cases extreme.
A myth about credit reports is that each time your credit report is pulled it negatively affects your credit score. This is only true if you apply for credit products like credit cards and only if you are looking for a large number of them in a short period. But this does not apply in case of Mortgage Lenders, unless you have applied for a loan from a very large number (ie 15 or 20) of the lenders within 30 or 45 days. Only then will it be a little influence, but generally when a lender pulls your credit report will not be adversely affected.
Tip – For options in finding the best lender for you, check out the links below.
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