Bad Credit Home Loans Explained

Bad Credit Mortgages

Bad Credit Mortgage Loans

Each type of bad credit item is viewed differently and ranked by the order of most damaging to least damaging when viewed by mortgage lenders and calculated by the three credit reporting agencies. In the following paragraphs we will take the most damaging negative credit item to the least damaging and summarize on how lenders view them when qualifying a mortgage loan candidate for a bad credit home loan.

Bankruptcy

A personal bankruptcy will definitely have devastating affects on your credit score and you can bank that your credit scores will drop over 150 points to 200 or more points.  However, a bankruptcy will get a person a fresh start on life and you will be debt free.  There are bad credit home loan specialists like myself that can help mortgage loan borrowers with a prior bankruptcy get a bad credit home loan just after 2 years from the date of the bankruptcy discharge.  Another great news with someone who has just filed bankruptcy is that their credit scores will not remain low forever.  Your credit scores will naturally improve as months pass by.  It is like recovering from a hangover.  As time passes, you eventually will heal especially if you start reestablishing your credit right away.  A mortgage lender will not have any problems giving a mortgage loan borrower a mortgage loan approval after a bankruptcy after 2 years as well as there are no late payments or collections on his or her credit report.  A bankruptcy will be on a person’s credit report for 10 years.

Foreclosure

A foreclosure will have the second most devastating affect on your credit score.  A mortgage loan borrower will qualify to purchase a home after 3 years from the date of the sheriff sale or the date when their names were transferred out of the deed of the house to the mortgage lender’s name.  As with bankruptcy, the drop in credit scores is temporary and a person who has had a foreclosure can get high credit scores as time passes and they reestablish their credit.  A foreclosure will be on a person’s credit report for a period of 7 years.

Judgments

A judgment has devastating affect on a person’s credit score plus many mortgage lenders will not approve a person for a mortgage loan if they have unsatisfied judgments on their record.  A judgment is active for at least 10 years, depending on the state the judgment was issued.  The judgment creditor can renew a civil judgment for another 10 years once the first 10 years statute of limitations is up.  To get rid of a civil judgment, the person either has to file bankruptcy, pay the judgment off, or get the judgment vacated.  There are mortgage lenders like myself that can get folks with judgments approved for a mortgage loan.  You can settle with the judgment creditor and pay the judgment off prior to or at closing or you need to make payment arrangements with the judgment creditor for a least two months

Collections

If you have unpaid collections that are aged, do not pay them.  Paying an old collections accounts will have devastating negative credit impact on your credit score.  You can get a mortgage loan with open collection accounts.  Collection accounts that are over 2 years old will have little or no impact on your credit scores.

Late Payments

Late payments will definitely drop your credit scores by at least 40 or more points.  If you accidently paid an item 30 days or more late, contact the creditor and see if they can give you a one time chance and see if they will remove your late payment from the credit reporting agencies.  If they don’t, your credit scores will naturally improve as the late payment on your credit report ages.

Credit inquiries

Credit inquiries will drop your score if the creditor did a hard credit pull.  Each hard credit pull will drop your credit scores by at least 2 points.  Try not to apply for credit all at once.  One or two credit inquiries in a six month period is alright.

There are mortgage lenders like myself who specialize in bad credit home loan programs.  If you have had prior bad credit and are looking for a bad credit home loan in California, Illinois or Florida, please contact me at  262-716-8151 or email me at gcho@gustancho.com.  You can also subscribe to our mortgage and real estate newsletter at www.gustancho.com .

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The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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