Will a Mortgage Lender Work with Me if I Have Bad Credit?
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Posted On :
Jan-29-2010
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Article Word Count :
831
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Most credit commercials and news stories would have homeowners believe that only those with pristine credit scores are able to take advantage of the benefits of refinancing, or to purchase the home of their dreams.
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With mortgage interest rates near historic lows, the news is full of stories of homeowners refinancing their homes to save money and provide some relief for strained budgets. But for the literally millions of homeowners whose credit has been damaged during the recent economic downturn, refinancing an existing mortgage or obtaining a mortgage for a new home purchase may seem out of the question. Luckily for these homeowners and home buyers, many lenders are sensitive to the effects of the poor economy, and have developed multiple lending programs to help even those with bad credit obtain new mortgages and refinance their existing loans.
Most credit commercials and news stories would have homeowners believe that only those with pristine credit scores are able to take advantage of the benefits of refinancing, or to purchase the home of their dreams. But in reality, there are many programs available today to help even those with tarnished credit get the money they need through refinancing, or to buy a home. While it is true that the lowest interest rates are generally available only to those with the highest credit scores, many programs offer attractive terms to individuals with less than perfect credit.
In most cases, when credit is poor potential borrowers will benefit most from speaking with a mortgage broker or major lender, both of which have a wider range of loan programs to offer than local banks and financial institutions. That doesn’t mean those with poor credit shouldn’t consider loans with smaller lenders – it simply means that these lenders shouldn’t be disappointed or discouraged if there are no loans available from these lenders to suit their unique needs.
In the eyes of the lending industry, those with lower credit scores are considered to be a much greater risk for failure to repay loans. Even a single late payment on a credit card or other loan can significantly damage credit scores, so it’s no surprise that the number of individuals with poor credit scores is growing, especially in li8ght of the recent downturn in the economy. National or large banks and financial institutions, including many large credit unions, are usually in a better position to assume the greater risk that is generally associated with poor-credit loans. This ability generally makes them a better option for mortgage loans and refinancing programs for those with poor credit. Likewise, mortgage brokerage firms typically draw from a huge pool of investors and investment entities, many of which have been established solely to loan money to men and women with bad credit or low credit scores. With a wider range of lenders and investors from which to choose, these brokerages are ideal sources for loans of all types, for all lenders.
Like a traditional mortgage, loans for men and women with poor credit should be closely examined before signing documents, in order to ensure the terms and payments will fit in with the borrower’s monthly budget. Loans for poor credit borrowers may have more extensive late payment fees and other penalties attached to them; in addition, many brokerages sell poor credit mortgages to other institutions, and it’s important to understand that if you sign with one lender, you may eventually end up paying your mortgage to a second lender who buys your loan from the first lender. Selling mortgages is a typical practice, even within the so-called traditional “good credit” lending industry, and should not necessarily have an impact on the overall soundness of the loan. However, poor credit loans are more frequently sold, and borrowers should understand that this is a possibility. The terms for the sale of your loan will be described in the loan document, and should indicate that any purchaser will need to adhere to the terms in the original contract.
As with any mortgage, borrowers should research a number of lenders before settling on a specific bank of lender. Many websites are devoted to comparing lenders side-by-side to make comparison simple.
Finally, when considering using refinancing to obtain equity from a home, borrowers need to be sure they will be able to handle the new payments. Any conditions that caused credit to be damaged initially should be dealt with prior to refinancing. Refinancing can be a great way to obtain equity to repay existing debts that may have caused credit damage to being with; however, borrowers need to be prepared to resist the temptation to spend refinancing proceeds on anything other than debt repayment, to avoid falling behind in mortgage payments and risk additional credit damage.
As the name implies, lenders are in the business of loaning money. Today, many lenders understand that even those with poor credit can be good risks when it comes to mortgages, and an entire industry has grown that is devoted to serving the mortgage needs of poor credit borrowers. By doing your homework, you can choose a lender who is committed to helping you achieve your financial goals.
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Article Source :
http://www.articleseen.com/Article_Will a Mortgage Lender Work with Me if I Have Bad Credit?_9731.aspx
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Author Resource :
Karen Zabel is a freelance writer who writes about real estate and working with a mortgage lender.
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Keywords :
Mortgage Lender, Real Estate, Mortgage Quote, Adjustable Rate Mortgage, Credit, Line of Credit, Home Equity, Mortgage Rate,
Category :
Finance
:
Mortgage
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