If you have less than perfect credit, there may still be mortgage options available to you. Whether you are looking to purchase or simply refinance your existing mortgage, their are ways to work around poor credit and credit services that can help you boost your credit score.
If you have poor credit, you should get a copy of your credit report to make sure there are no inaccuracies. Sometimes accounts that have gone to collections and have been paid of or have a negotiated settlement will still show a balance due on your credit report. Getting errors like this corrected will improve your credit score.
Poor credit borrowers can also expect to pay more in up front fees. This is do to the fact that your file will require alot more attention and work from the mortgage broker in order for it to close.
Good mortgage history will do wonders for your score. This is why it's important to obtain a mortgage and home ownership as soon as possbile. If you find yourself in a situation where you just can not obtain a mortgage now then hire someone to restore your credit. These programs can usually get scores up enough to get you financed in relatively short period of time. Then once you obtain a mortgage even if it's a short term 2 year fixed you will notice another big jump in your scores after about 6 - 12 months history.
Even if you have poor credit there are loan programs available for you. You will be able to obtain a mortgage but at a rate that is worse than someone with good credit. Having a mortgage and making timely payments can help you improve your poor credit.
A Poor Credit mortgage is also called a Sub-Prime Mortgage Loan.
Often times people with poor credit can still get mortgages. These mortgages are often geared towards paying off debt. Often after getting a mortgage with poor credit the borrowers credit score increases. This places them in better position for their next loan.
Many loans that are designed for people with poor credit are designed with the idea of working to fix the poor credit up within a year or 2 so that you are able to refinance again within a couple of years to obtain much better financing. With this in mind that is why it is very common and probably in your best interest to obtain a short term 2 or 3 year fixed rate loan (commonly referred to as a 2/28 or a 3/27) instead of a 30 year fixed rate loan. A 2/28 is a 2 year fixed rate that is adjustable for the next 28 years and a 3/27 is the same except 3 years fixed instead of 2. The rate on these ARM (adjustable rate mortgage) loans will be considerably lower than on a 30 year fixed rate.
Home buyers with bad credit history should be realistic when shopping for a mortgage. They should not expect to get the lowest interest rates advertised on local newspapers. Depending on how bad is the credit profile, the size of downpayment, Debt-to-Income ratio, property type, and other underwriting factors, home buyers with bad credit history usually have interest rates 1.5% to 2.5% higher than that of the lowest conforming loans.
Understanding that the mortgage you will qualify for will not be as good as someone with great credit. You should always look at the long term benefits as getting a mortgage now will put you on the path to a better financial future in terms of your credit and credit score. Maintaining a perfect payment history will help you refinance the mortgage into a better term mortgage down the road.
Regardless of your credit status, home ownership will give the opportunity to accrue equity and establish new credit with clean history.
There are many poor credit mortgage programs. Also, your mortgage broker can get you into a credit repair program and refinance you down the road to give you better terms.
A Poor Credit borrower is often referred to as a subprime borrower and is one who cannot qualify for prime financing terms but can qualify for subprime financing terms. The failure to qualify for prime financing is due primarily to low credit scores. This is good news for those with slow credit as they too can qualify to purchase a home despite a slow paying history.