Bad Credit Mortgages
Everyone knows that you need good credit to get a loan for anything – a car or a house especially, right?
Actually, that is no longer true. Car dealerships offer “second-chance auto loans” and mortgage lenders now have products for people with less-than-perfect credit. If you are among them, and you have a steady income that proves your ability to repay a loan, read on.
The Kris Lindahl Team with Kris Lindahl Real Estate is working with lenders who can help folks like you get approved for a home loan, even if your credit isn’t that great. With our network of lenders your chances of approval are much greater than if you go it alone.
You’ve most likely heard the term “sub-prime loan” on the news. Sub-prime loans are just a nice way of saying “bad credit loans.” These loans are considered high-risk for lenders so they typically carry a higher interest rate than loans for folks with good credit.
The rate you’ll be offered is partially based on your credit score but the lender will also take a look at your past payment history, your late payments, how many delinquent accounts are on your credit reports and then the amount of money you have for a down payment.
The mortgages that our lending partners have been able to grant to our clients have more reasonable rates than the typical sky-high interest charged for most sub-prime loans.
If this is your first foray into the world of mortgage lending we understand that you might be a bit confused. Let’s see if we can break it down for you.
Your credit score, commonly compiled by Fair Isaac Corporation (also known as FICO), is a three digit number from 300 (the lowest) to 850 (the highest). Of course the higher your FICO score, the better you’ll look to a lender.
FICO will take a look at your credit reports from what are known as the “big three” credit reporting agencies: Trans Union, Experian, and Equifax. They use a complicated algorithm in performing their calculations, but basically, FICO will look at the following data:
- New Credit – 10 percent of your FICO score.
- Length of Credit History – accounts for 15 percent of your FICO score.
- Total Debt – this category makes up 30 percent of your score.
- Payment History – this category accounts for 35 percent of your FICO score.
- Age of your credit (older accounts are worth more)
- Types of Credit (revolving, installment) – makes up 10 percent of your FICO score.
So, what is considered a “good” score? It’s hard to answer that question since the score that gets the best rates and terms varies by lender. Generally speaking, if your score is 750 and above you’ll be in good shape to receive an attractive offer. If, on the other hand, your score is less than 620, you may be considered a sub-prime borrower.
Candidates for Bad Credit Mortgages
Our lending partners are in the best position to analyze your credit data and determine whether you qualify for a bad credit mortgage. The following can be used as a rough guide. Determine if you have:
- A credit score of 620 or lower.
- Two 30-day late mortgage payments within the past year.
- One 60-day late payment on a mortgage in the preceding 12 months.
- Foreclosure within the past 24 months.
- Bankruptcy within the past 24 months.
- A high debt-to-income ratio.
We’d be happy to introduce you to our lender partners and get you on the road to home ownership, so please contact us, or fill out the form below. We may just be able to help your realize your dream.