Can I Get A Mortgage If I Have Bad Credit?

Can I get a mortgage if I have bad credit? Find out ways to get home mortgages even with bad credit. "Bad credit is really a broad term," says Stephen Edwards, a consultant with Waterfield Financial, the...

"Bad credit is really a broad term," says Stephen Edwards, a consultant with Waterfield Financial, the largest privately owned mortgage company in the nation. Edwards notes that people have differing opinions as to what bad credit is. Typically, very bad credit means that the individual has a foreclosure or bankruptcy listed on their credit report. Less than perfect credit can result from making your payments on loans and other accounts in less than a timely fashion.


Edwards says, "Basically, it is up to research lenders." The best thing, Edwards says, for individuals to do is get their free credit report once a year. This way they can review their credit report. Reviewing your credit report annually is important to discovering any errors that can have a negative impact on your credit score. Dispute any potential errors immediately. Edwards notes, "Anything below 600 is questionable as far as credit score goes."




Edwards stipulates that "the best thing to do is get a credit report, and you should see what your credit is really like." Then he suggests that the borrower "contact the lenders to see what type of programs they have." The type of programs and the terms that are offered with them vary according to the lender, so it really is best to research a few.

Having a bad credit score no longer prevents an individual from obtaining a mortgage. Rather, it simply means that the borrower will have to pay more because the loans available to him will have less favorable terms. "Many lenders offer loan programs for less than perfect credit and even recent bankruptcies," maintains Edwards.

In fact, he says, "Most mainstream vendors (Waterfield, Bank of America, Washington Mutual) offer what is sometimes called 'A minus loans'. These carry a slightly higher interest rate and usually higher mortgage insurance to be able to offer a loan to people with bad credit."

Edwards cautions, "If your credit is really bad (maybe a full closure or bankruptcy in the last 24 months-12 months), the best way to get a loan is to go with the sub-prime vendor." Sub-prime vendor refers to lenders who offer mortgages with non-conventional terms. "Sub-prime lenders, also called BC lenders, cater to borrowers with bad credit. However, they do charge them accordingly," says Edwards.

A sub-prime lender typically charges more and offers less favorable terms to the bad credit borrower. Individuals with bad credit have fewer options when it comes to acquiring a mortgage. Traditional lenders, however, have joined the ranks of sub-prime vendors and offer agreeable terms that are often better than their counterpart's terms.

Edwards explains, "Where a mainstream vendor may offer rate of say 6% or 7%, the sub-prime lenders can charge 11%, 12%, or 13%. So, the mainstream lenders have really opened up themselves to a wider market by offering as 'A minus loans'. These A minus loans may offer a rate of 8 % or 7.5%. The rate is higher than that lender's normal rate, but it is still considerably lower than a sub prime lender's rate at 12 or 13%."

Summing up, borrowers with bad credit scores can obtain a mortgage. They may need to look around to obtain rates that are acceptable to them. However, they need to realize that their bad credit history necessitates paying a bit more than the borrower who has a good credit rating.

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