A low credit score mortgage is specifically designed to help someone with an adverse credit history to buy or refinance a house. Whilst there is little doubt that it is easier to borrow money with a high credit score, receiving approval for a mortgage with bad credit isn’t an insurmountable obstacle. It is important to appreciate that the cost of borrowing will be higher. However, subject to the tie-in period, it may be possible to refinance in order to secure a more favorable rate of interest.
Approval for a Low Credit Score Mortgage
A mortgage for poor credit can be achieved, but the lending criteria are more stringent in order to offset the likelihood of the borrower defaulting. A bad credit mortgage lender will seek to protect its legitimate business interests by ensuring that the repayments are affordable to the customer and that they will be able to recover their money should the borrower default on the arrangement.
Poor Credit Mortgage Lenders Expect a Stable Employment History
The longer the applicant has been in the same job, the more likely they are to get an adverse credit mortgage loan approved. Lenders will not look kindly on those who are in temporary employment or are still in their probationary period. The other thing that the lender will check is the borrower’s income to debt ratio. A high percentage of income consumed by the repayment of debt increases the likelihood of default. Personal debt needs to be kept to an absolute minimum.
Provide a Sufficient House Deposit
The higher the deposit, the greater the likelihood of receiving approval for a low credit score mortgage. Most banks will want to see how committed the customer is to the home buying process and will gauge this by specifying a 75% LTV. Whilst this protects the borrower in the event of negative equity, the reason banks seek this level of contribution from a homeowner is that it means that they can recover their money in the event of mortgage repossession.
Mortgage with Bad Credit Applications
A careful assessment of the lending criteria is fundamentally important because there is no point in applying for credit when acceptance is unlikely. Making unnecessary credit applications will seriously reduce the likelihood of an adverse credit mortgage loan being approved. This is because it gives poor credit mortgage lenders the impression that the borrower is desperate and likely to default. Each credit search will show on a personal credit report for a period of not less than 12 months.
How a Bad Credit Mortgage Broker Can Help
A bad credit mortgage broker can help a homeowner to identify the most affordable bad credit home mortgage loans. Poor credit is caused by the borrower’s inability to make punctual repayment on credit agreements. A survey by the National Foundation for Credit Counseling in April 2009 revealed that 58 million Americans failed to pay their bills on time. This makes borrowing money more difficult, but certainly not impossible.
Bad Credit Mortgage Broker
An intermediary is a seasoned financial professional who knows all the ins and outs of the lending industry. They are a particularly useful source of advice and guidance for inexperienced first-time buyers and those with an adverse credit history. It is important to choose an intermediary who is friendly, helpful and trustworthy in order to get the most out of the arrangement.
Bad Credit Home Mortgage Loan Industry Contacts
Over the years, bad credit mortgage brokers develop some extremely useful contacts at banks and financial institutions. This means that they are more likely to be aware of the emergence of a new deal. They may also be able to sway a lending decision in the client’s favor. Time won’t be wasted making applications that the borrower has little chance of being accepted for. Each credit search will show on a personal credit report for a period of 12 months.
Lower Home Mortgage Repayments
Many homeowners make the mistake of agreeing to a loan from the first bank they approach. Whilst this may provide the best adverse credit mortgage deal, this is unlikely. A broker will trawl the entire market in order to find a loan that offers the most favorable terms. This is fundamental to reducing the amount spent on loan repayments each month.
Advice, Paperwork and Administration
Busy professionals will discover that their bad credit mortgage loan application is completed for them. This not only saves personal time, but it will also reduce the scope for personal error. They know exactly what lenders are looking for; disguising certain points can help to increase the likelihood of acceptance. The client is also free to contact an intermediary with questions at any realistic time.
Utilizing the services of a bad credit mortgage broker can help to keep monthly repayments as low as possible. Whilst their services aren’t free, the cost is normally outstripped by the saving that they help clients to realize. As well as being a valuable source of advice and information, they eliminate many of the less enjoyable facets of refinancing a home loan.