Poor Credit Mortgage Loans
How is your credit history?
There are many mortgage lenders who will not consider lending a mortgage loan to poor credit applicants. This is because homeowners or first time buyers who have a poor credit history are seen as high risk, even if the person is question has improved his or her financial situation and can now comfortably afford a mortgage. The problem is that there are very few mortgage lenders who would offer these people a mortgage without levying massive interest rates and charges. Although these people can prove that they now have sufficient income to cover mortgage payments, companies are still dubious of the unstable financial history.
What do lenders class as a poor credit history? Well it could be from something as simple as missed payments of credit cards to having been made bankrupt. Each mortgage company has their own set of underwriting guidelines and different credit scoring levels. Some are more relaxed than others; equally some are exceptionally strict. Homebuyers with excessive existing debt are also likely to be declined following routine credit checks and underwriting procedures.
There are however some companies that will lend money to homebuyers with a poor credit history. As long as these people can provide documentation to support their monthly income and have at least two problem-free credit accounts, their chances of being considered for a loan are relatively good. Of course, to reflect the level of risk, the lender may charge higher interest rates. This may be difficult for a while, but once the homebuyer has run their accounts and paid their mortgage without any problems for a few years, they can build up a healthy credit history. It should then be possible to refinance the mortgage loan with more favorable interest rates.
To maintain a healthy credit history, it is important to make sure that you do not miss any monthly payments; the fewer late payments, the better your credit will be. It is also important to avoid having too many accounts with high balances; the higher the balance, the worse your credit score will be. Opening new credit card or loan accounts will also have a negative effect on your credit rating. Those with a good credit background are more likely to achieve the best rates. It may be worth bearing this in mind if you are considering applying for a mortgage.