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Your Mortgage and Your Poor Credit Rating

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Bad credit is become an epidemic in America. More and more people carry high balances on their credit cards, make late payments, or even default on their loans. As a result, individual credit ratings in the United States have dropped dramatically. The problem for many homeowners is once you have bad credit it can be difficult to clean it up.

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The bad credit epidemic has not suppressed lending however. Mortgage companies are always looking for untapped markets and the subprime lending market is booming. Subprime lenders and mortgage companies that specialize in lending to homeowner with poor credit ratings. These lenders allow individuals that would not qualify otherwise to borrow at a premium interest rate.

Traditional mortgage companies are referred to as “Prime” mortgage lenders. These lenders categorize their loans as “Grade A” loans; meaning borrows have high credit ratings posing low risk to the lenders. Subprime lenders categorize loans as “Grade D,” “Grade C,” and “Grade B” loans. These loans have much higher risk thresholds for homeowners with poor to lousy credit ratings. The higher the risk to the lender, the more likely the homeowner is to be delinquent in their payments or default on the loan.

If you fall into this “Subprime” borrower category you don’t have to settle for lousy terms and interest rates. The subprime market is just as competitive as the traditional lender’s market. As a result you can still find decent interest rates and terms for your business. As a homeowner with poor credit you need to carefully shop around from a variety of lenders and brokers to find the best mortgage for your circumstance. You also need to learn the basics of the mortgage industry; then you will know what a good deal looks like when you see it.

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