Regardless of bad credit, you can get approved for a mortgage loan.
Credit ratings vary person-to-person. A high credit rating will make you a
good candidate for a prime mortgage. On the other hand, if your score
falls below a traditional lender's minimum requirement, you must choose
a subprime mortgage loan.
How Credit Rating Affects Loan Approval
Mortgage lenders are more eager to approve a loan application if your
credit rating is high. Individuals with high credit scores are less
likely to jeopardize their rating. Thus, late mortgage payments and
foreclosures are low among this group.
Those with a low credit rating may pay more for their mortgage. This
includes higher finance fees, which increases mortgage payments. Each
lender has different criteria for determining high credit and low credit
ratings.
Traditional lenders are very strict when it comes to mortgage loans.
Some lenders establish high credit score minimums, which disqualifies
many homebuyers. When selecting a mortgage loan, it is essential to
choose a lender that specializes in loans for your credit category.
What Does a Bad Credit Rating Mean?
Lenders use different wording to term bad credit ratings. Some simply
refer to these applicants as having a low or negative rating, whereas
others assign alphabet letters. In this case, those who qualify for prime
rates have A-credit and B-credit. Meanwhile, individuals with a lower
score have C-credit or D-credit.
Individuals with C-credit or D-credit will pay a higher interest rate
for their mortgage. This is because those in this category have more
credit problems. Homebuyers with C-credit have up to six 30-day late
payments, three 60-day late payments, open collection accounts, and
bankruptcy or foreclosure within the last twelve months.
Sadly, some homebuyers have credit situations that place them in a
different category. The lowest credit category is D-credit. This groups
includes homebuyers with charge-offs, judgments, open collection accounts,
and bankruptcy or foreclosure within the last 6 months.
Getting Approved for a Mortgage Loan with Low Credit Rating
Although many lenders offer subprime loans to those with C or D credit,
it may be favorable to defer buying a home until credit improves. This
opens the door for better rates, and lower mortgage payments. If
deciding to buy a home with bad credit, shop around and compare mortgage
quotes. By doing so, you can review many financing options before choosing
a lender.
Carrie Reeder is the owner of http://www.abcloanguide.com. View her recommended sources for a subprime mortgage loan.
View her recommended subprime mortgage lenders online. Also, view her recommended online companies to help you with debt problems.
