In the real world today, circumstances may put someone who normally pays bills on time into arrears on those payments. A lost job could put people into the hole financially. The longer they are unemployed, the deeper the hole. The number of those people classified as having 'adverse credit histories' has risen dramatically and mortgage lenders have a responsibility to try and make things easier for these people to get buy or save their homes.
However, most mortgage lenders take into account whatever evidence there is in a poor credit history. This means that some will not be prepared to offer you a mortgage if you have a bad credit record.
What is a Poor or Bad Credit Mortgage?
By being approved and granted a poor or bad credit home loan, you now have an opportunity to rebuild and repair your credit history.
Many mortgage lenders who specialize in poor and bad credit cases will consider lending to you, even if you have a history of arrears, defaults or even bankruptcy. You may have to pay a slightly higher rate than someone with good credit history, because the mortgage lender sees you as a higher risk. Obtaining such poor credit/bad credit home mortgages may be the only option for many people.
The very stringent terms set forth in these home mortgage loans means they can help develop a more disciplined repayment habit for those who have had trouble with more lenient programs in the past. In some cases, repossession of a property can be prevented with careful negotiation onto a credit repair mortgage.
As stated, there are very stringent terms and higher interest rates in a bad credit mortgage than in a conventional mortgage. The mortgage lenders are taking a bigger risk. There is also very little flexibility, and that means you do not miss a payment or make a payment later than the time stipulated in the bad credit mortgage.
What is the Cost of a Poor or Bad Credit Home Mortgage?
Any failure to adhere to the restrictive terms and conditions of a bad credit home mortgage can carry high penalties and quite possibly, extensive fees.
The conditions and considerations that apply to standard mortgages, such as interest rates and fees also apply to the poor or bad credit home loan.
Another cost is the higher rate of interest charged by a bad credit or repair mortgage. But it is possible to find better deals through research and by shopping around. Independent financial advisers can also help you decide on appropriate products and different lenders will supply different rates of interest.
How do you find a bad credit mortgage company?
There are several specializing mortgage companies and not all handle the poor or bad credit home mortgage loan. However, every mortgage lender generally knows of a company that does specialize and can offer you a number to call.
Doing research on local mortgage companies by calling and visiting them, is the best way to get information of costs, services, availability and experience. You can do research on local mortgage companies by looking in a mortgage broker directory A company that deals with this type of home mortgage on a daily basis is the one you want to, at the very least, talk to.
How do you choose the best poor credit or bad credit mortgage?
There are a number of factors that can be used when deciding between different bad or poor credit mortgages:
- Interest rates – Trying to get the lowest rates possible
- Terms and conditions – These can be restrictive and stringent in a credit repair mortgage but that is no excuse for not shopping around for the best deal.
- Minimum term of the mortgage – As short as possible so that you can convert it later.
- The lender – Doing background research on the lender can be very important. Be sure that your lender is properly qualified
- Ability to remortgage – Make sure that your bad credit home mortgage loan will allow you to return to a conventional mortgage after a certain period of regular repayments. By that time, your credit history should be restored.