Gone are the days when if you had a credit score less than 600 you could not even dream of getting a mortgage. Today times have changed and for the better. Imperfect credit scores are not proof of an individual’s credit worthiness. Bad financial times can happen at any time to anyone. This one cannot stop anyone from getting a house. Bad Credit Mortgages come in various forms:
Sub-prime mortgage loans
B, C, D, E mortgage loans
No-documentation mortgage loans
Credit-challenged mortgage loans, etc.
It was once considered degrading to opt for a bad credit mortgage earlier and there were certain factors which made borrowers leery of this concept as well. There are many myths associated with bad credit loans. First, the interest rates are sky high. Actually today the mortgage rates have become affordable. But then they are comparatively higher than the conventional mortgages. After all you are credit risk to the lender. Second, too many points are charged. This is absolutely false, as people with credit scores as low as 580 are getting loans with no points upfront. Some mortgage brokers charge five to ten points extra, but all of them do not reach the lenders. The mortgage brokers sometimes pocket some amount of it. You should bear in mind that if the amount borrowed is less, even ten points is very less an amount. Third, you might require a huge down payment. It depends on the lender who is processing your loan. You might very well get a lender who will write the mortgage loan for you with just 20% down or even less. The underwriting guidelines for sub-prime loans are expanding to cover more people.
Last, you will not be able to cash-out. In case of a home purchase chances are one in a hundred say. But if your aim is to refinance a mortgage, then you can get through. With a bad credit mortgage you get an opportunity to clean up your bad credit. Even if you have filed for bankruptcy, you can still get a mortgage and at an affordable price too. The interest rates can be limited to suit your present financial condition by introducing a rate lock. Some lenders even give you an opportunity to finance 100% without any down payment. With sub-prime loans being processed by the lenders who write A- paper loans and the Alt-A market really coming up; more and more people with a flawed credit can get respit.