Receiving a Mortgage with Bad Credit
Many financial lenders deal specifically with those who have bad credit. These types of people are called “sub-prime lenders” but even though there are many of these lenders which are legitimate there are some which take advantage of people who do not have good credit. They take advantage of people with bad credit by offering loan consolidation that can make the situation worse instead of better. They can also offer a mortgage with bad terms within the fine print of the mortgage. If dealing with sub-prime lenders make sure to do your research and make sure they are reputable, by getting references, before dealing with them on an important issue such as purchasing a home.
If you are applying for the process of getting a mortgage it is the same process of anyone with good credit appling for a mortgage. The financial lender will take a look at areas such as your credit report, employment history, yearly income, and the amount of debt you have.
Available cash is what financial lenders will look at closely. This aspect is where someone looking for a mortgage with bad credit can have an advantage. Even if your credit rating is low a large amount available cash can compensate for the low credit score. If you have a regular income and have some reserves of cash available you will have the ability to put a down payment which is higher, many times in the range of 20 – 25%. With putting down a higher down payment it shows the financial lender that you have a lot already invested in the property and therefore pose less of a financial risk. If you have a lot already invested in the property than the chances of defaulting on the loan will be less likely.
The payment history that you have will also make a difference along with cash reserves and the assets that you have. The fact that you have cash reserves does not prove to the lender that you will pay them back on time. One way to help in establishing a loan is to put together a credit history that is not traditional. You can do this by getting copied cancelled checks which can show that you can pay back in a timely manner. Good background information is needed on paper to prove that you pay your bills on time. To establish this process, much like a regualr credit history, can take time.
Make sure you look yourself at your credit history information and where you satnd in terms of your credit score. Request your reports from the credit companies in which you deal with and look over them thoroughly for errors and contact the company if you do find any. The credit score can have a lot to do with getting a mortgage so by correcting mistakes with your credit history you can save a significant amount of money over the life of your loan for your mortgage.
