In recent years, the credit crunch and overall poor economy has made it more difficult than in years past to obtain a traditional mortgage. For many people, the only option to purchase a home or refinance a loan is to get a bad credit mortgage. There are many factors which could impact whether you need a bad credit home loan.
Poor Credit History
The first situation when you may need to get a bad credit mortgage as opposed to a traditional mortgage is when you have a poor credit history. Bad credit home loans are designed for people with bad credit history and cannot obtain a traditional mortgage loan. For those people with credit scores below 650, the only option for getting a mortgage may be a bad credit loan.
Insufficient Or Unreliable Income
The second situation when you may need to get a bad credit mortgage as opposed to a traditional mortgage is when you have insufficient or unreliable income. One of the most significant underwriting factors for banks is your income. If your income is not large enough, or it is inconsistent, then you may not be able to qualify for a traditional loan. In these situations, your only option may to get a bad credit home loan.
No Down Payment
The third situation when you may need to get a bad credit mortgage as opposed to a traditional mortgage is when you have no down payment. Traditional lenders now require their borrowers to have a down payment of 10% or more. Those who have less than that will often not qualify for traditional loans and will need a bad credit mortgage instead.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
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