Mortgage loans for bad credit are available - if you know where to look.
The secret of getting a mortgage with bad credit is to try. Most people report that because they cannot qualify for a credit card or car loan because of bad credit, they presume they will be declined for a mortgage because of bad credit. We find that this is untrue, in fact the opposite is true: it is easier to qualify for a mortgage with bad credit than car loan or major credit card.
The top 3 reasons people with bad credit believe they will not qualify for a mortgage:
- The amount of the loan. If they cannot even be approved for a $5,000 credit card because of bad credit, how can they be approved for a $250,000 mortgage?
- The application process is complex. If the simple credit card application that requires no documentation results in disqualification due to bad credit, how can the complex home mortgage application possibly be approved?
- The emotional nature of the purchase. The purchase of a home represents a huge emotional step for many people and the prospect of rejection because of bad credit keeps many people from even attempting to qualify for a mortgage.
Ironically these are the very three reasons many people with bad credit qualify for mortgages.
Mortgages are secured by real estate: Real Estate is considered very secure collateral. Because of this, mortgage lenders are more comfortable making home loans to people with bad credit then unsecured credit lines, credit cards, or a vehicle that depreciates every day. Because of the size of the loan there are thousands of institutions that can make money servicing the mortgage and investors seek real estate based security resulting in a competitive marketplace that contains thousands of mortgage programs attempting to meet the needs of every potential borrower - even those with bad credit.
The complex mortgage application enables lenders to look beyond the individual's bad credit rating and take into account factors such as job security, debt to income ratio, value of the property and ability to make the monthly payment. The consumer credit report represents a lesser role in mortgage approval.
The emotional nature of the collateral adds security to the lender. The mortgage payment is proven to be the first priority when it comes to making monthly payments. Statistics show that people will beg and borrow to keep their home as opposed to unsecured credit cards that once delinquent have a relatively high likelihood of being charged off.
With the variety of mortgage programs available to consumers, we find that if a consumer wants to purchase or refinance a home they should contact a lender or broker that specializes in bad credit mortgages. The professionals we consulted were extremely knowledgeable and more than willing to explain the process. Those people who did not qualify for mortgage left with a clear understanding of what they could do over the next few months to improve their bad credit and qualify for a mortgage that meets their needs.
So, as with many things in life, if you need a bad credit mortgage - you need to take the first step...ask.
