Getting a mortgage can be a difficult task for those with less than perfect credit and not a lot of assets. Unfortunately, people make mistakes when they are young by overextending their credit lines, putting themselves up to their ears in debt, living beyond their means, and not making enough income to cover all those extra expenses we all love to enjoy.
I hate to be so blunt, but this is the truth for many people living in the Unites States. Others do not like to admit such responsibility, but someone has to. It is not always the person's fault either. Many times it is a lack of education by both parents and the government. There should be more educational avenues for young people and adults so they do not make these common mistakes. Even in higher education personal financial management is lacking.
Do to this educational down fall there are many segments of the mortgage industry for the less than credit worthy applicants. As hard as this is to accept, there is actually an upside to these lenders known as sub-prime lenders. I will discuss the upside later. But first, let's discuss what makes an applicant fall in the sub-prime segment of the mortgage industry.
The mortgage industry can be separated by two basic segments, the prime and sub-prime. The prime segment is generally those with good credit, credit scores above 600, a few assets, a steady income, and control over their expenses. They can afford a monthly mortgage payment without too much trouble and are in a good financial position.
The sub-prime segment is characterized by bankruptcy, foreclosures, heavy debt, defaulting credit payments, repossessions, unsteady income, expenses greater than income, a credit score less than 500, and any other financial downfall that could negatively affect your situation. If you have any of these characterizations, then you are a poor mortgage candidate.
As a poor mortgage candidate, you will most likely have to pay a higher interest rate or extra insurance. This serves as payment to the lender for taking on a high risk account. A high risk account is one that is more likely to default than a normal risk account.
Ok, with all this information, you are probably wondering where there is an upside for poor mortgage candidates.
Sub-prime lenders allow for poor mortgage candidates to rebuild their credit by not only allowing them to make an investment which could possibly appreciate and be worth more than when first purchased, but the payments towards the mortgage can help bring their credit score up, in turn affecting their entire financial environment for the better. Mistakes that were once made can be corrected, or at least steps can be taken to make things better for the mortgage applicant.
Although the sub-prime mortgage applicant may have to pay more in interest, they are really getting an opportunity to repair what damage had been done in the past. I am not saying all the applicant's problems will just disappear, but if the applicant chooses to change financial habits and work toward better financial management, then a mortgage can assist in creating a better credit score and standing with financial professionals.
If you are a poor mortgage candidate, don't worry. There are many government programs as well as private or commercial lending programs by sub-prime lenders that help people get into homes and experience the benefits of owning their own home. If you are serious about changing your personal financial habits, look to these programs for help and talk to a financial advisor. Success is right around the corner.
John R Blakefield is a mortgage and real estate specialist. For more information, articles, news, tools and valuable resources on home mortgages or investment loans, refinancing, debt solutions, visit this site: http://www.scourtheweb.com/mortgage/.
