Bad Credit Mortgage
Your credit score is what determines whether you can even qualify for a mortgage loan. If your credit scores do not meet the minimum required, your mortgage application process cannot start. Mortgage lenders view anyone who have credit scores under 620 FICO as having bad credit or poor credit scores. The chances are if you have credit scores of 620 FICO or under, most mortgage lenders such as institutional mortgage lenders, banks, and credit unions will not qualify you for a mortgage loan because they do not deal with bad credit mortgage borrowers. Just because you are told that you do not qualify for a mortgage loan because you have bad credit by these lenders does not mean that you do not qualify for a mortgage with a bad credit mortgage lender.
Bad Credit Mortgage Borrowers
Home buyers with bad credit can get mortgages. There may be some obstacles that they need to go through but if you have a creative, hard working, bad credit mortgage loan officer on your side, you will get a bad credit mortgage loan. Just because you are getting a bad credit mortgage loan does not mean that you will be paying ridiculous high mortgage rates either. Bad credit mortgage loans are FHA insured mortgage loans and there are rules and regulations on how high or a mortgage rate a mortgage lender can charge you. Mortgage rates for borrowers with credit scores under 600 FICO will be slightly higher than those with credit scores higher than 600 FICO. Depending on the bad credit mortgage lender you go with, borrowers with bad credit normally get charged a 0.50% to 1.5% higher mortgage rate than those with higher credit score. You have the choice of waiting to get a better rate by going through a credit repair program or purchase your new home with the higher mortgage rate and refinance your home after your close on it and after you have better credit. The choice is up to you.
FHA is not credit sensitive when it comes to credit scores. For example, whether your credit score is 640 FICO or 700 FICO, you will get the same FHA mortgage rate. However, your mortgage rate will be higher on FHA loans if your credit scores go below 620 FICO. Your mortgage rate will even be higher if your credit scores fall below 600 FICO.
How Can I Get Bad Credit Mortgage Loan?
The Money Store is a full service mortgage banker and correspondent lender headquartered in Florham Park, New Jersey and licensed in most of the 50 states. The Money Store also specializes in bad credit mortgages. If you are a borrower in any one of these states, contact us so we can help you. If not, contact us anyways and we can refer you to a mortgage professional who is licensed in your particular state who specializes in bad credit mortgages.
The type of mortgage lender you want to consult is a mortgage lender that does not have any lender overlays. Lender overlays are additional guidelines set by the individual mortgage lender on top of the minimum mortgage lending guidelines set by HUD and/or Fannie Mae and/or Freddie Mac, and/or VA, and/or USDA. If a mortgage lender tells you that you do not qualify, ask them why you do not qualify. Is it because of their lender overlay? Is it because of federal guidelines? If it is because of federal guidelines, there might be an issue. Federal lending guidelines require that if you want a 3.5% down payment home purchase mortgage loan, you need a minimum of a 580 FICO credit score. Open collections are fine and old collection accounts do not have to be paid off. However, federal lending guidelines do require that you have been timely on your payments for the past 12 months. There are guidelines with regards to debt to income ratios too.
What Is Bad Credit And How Bad Can My Credit Be To Qualify For Bad Credit Mortgage?
Bad credit mortgage lenders do not qualify and approve everyone with bad credit. You can have had prior bad credit but you need to show that you have re-established your credit and financial profile. Everyone can have had a streak of bad credit history due to a loss of job, medical issues, loss of a business, death of a spouse, or other extenuating circumstances. When a bad credit mortgage lender reviews your credit report, the underwriter will look at your overall credit history and see the periods of bad credit your credit report reflects. If you had good credit for five years and had a two year period of bad credit due to a loss of a job and your have re-established your credit after you regained employment, then you are an ideal candidate for a bad credit mortgage. However, if you had a ten year credit history and all of those ten years you had late payment history, collection accounts, charge offs, judgments, and other derogatory credit items and you were fully employed, then there is an issue. If this is the case, the underwriter will come to conclusion that you have total disregard for credit and the chances of you getting a loan approval will not be good. Most mortgage lenders will want to see a timely payment history for at least 12 months and do not want to see any late payments after a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale.