If you have a bad credit history, you may think it’s quite difficult to get a good mortgage. Most people have this belief that since lenders do not feel comfortable offering loans to people with bad credit history, it is hard to get a mortgage or at least one with a proper interest rate. In this article we want to tell you how your bad credit history can actually benefit you and it is not actually a big wall preventing you from getting a mortgage.
We want to talk about how lenders can sometimes actually like your bad credit history for some reasons. When there is a problem for a lot of people, there are always some solutions offered. So even if you have a bad credit history, there are lots of lenders who offer deals for people just like you. Of course it is going to have quite a high risk for lenders to offer loans to people with bad credit history because they are not sure if they will be able to pay their payments on time or not, but on the other hand, lenders know that if the borrower is not able to pay the whole loan, a default will happen end the lender won’t hate it that much after all. This is because by a default, the lender actually gets most of their money back.
A lender will base their decision towards offering you a loan or not mostly on your credit score, not credit history. Your approved credit history by FICO is a good indication of how well you’re doing and it is a valid number for every lender. Lenders can access this score by digging through your credit file.
If your credit score is 710 and above, you have nothing to worry about since you have a great credit score and every lender is completely willing to offer you good mortgages. If your credit score is between 620 – 700, it may be a little harder for you to get a great deal but still you don’t have a bad credit score in the eyes of lenders. But if your credit score is below 500, then you’re called a borrower with a bad credit score who has to look into bad credit mortgage options.
So if you are a borrower with a bad credit, you probably want to purchase or build a house. As we said before, your options may be more limited compared to people with good credit. In the case of people with bad credit, lenders usually ask for a deposit so they can make sure if the borrower is not able to pay their payments on time, they can take away the deposit and do not lose their money. Usually deposits for people with good or average credit score is 27%, but if you have a bad credit, the deposit percentage will be much higher.
If you have been in the market searching for a good mortgage and you have been rejected by a lot of lenders, you may be willing to accept any offer from any lender even if it has an unreasonably high interest rate. Of course this is not good for you. So if you want to learn if you are becoming a pray for these lenders or not, you can easily check out what kind of interest rates are charged by principal lending banks or other financial institutions. This way you can act more wisely and make a better decision. Of course you shouldn’t expect to get an interest rate as low as the one for someone with a good credit score.
We cannot emphasize how comparing different deals and different lenders is important. When you are in the market looking for a good mortgage, especially when you have a bad credit score, it is essential for you to look through different options offered by different lenders so that you will be able to find the one which fits your perfectly. If you don’t do this, you may regret it big time in the future and not browsing through different lenders can cost you thousands of dollars more compared to if you did the research.