Inside a Bad Credit Mortgage
Do you think that the changes to the sub-prime mortgage industry have left you high and dry and without any hope of owning your own home? Think again. There is a sub-prime or bad credit mortgage to be had. You just have to know what to do in preparation for applying for a mortgage of this type. Here’s what goes on behind the scenes.
The first thing that lenders will assess is your FICO score. Then they look at your income as well as your debt load. A low credit score is not the end of the world. Bad credit mortgage rates are holding steady with some of the lowest numbers in years. That means that the loan might be easier to obtain than you think. You need to concern yourself with two aspects of your financial life — the amount of debt you carry and how much money you bring home monthly. If the one is too high and the other too low, the lenders will pass you by, even you are simply hoping for a bad credit refinancing.
There is little difference between mortgages and bad credit mortgage refinancing. It is a great time to try a re-fi, if you have the numbers to back it up. Lenders will work with you up to a certain point. While there is no limit to interest rates, per se, bad credit mortgage rates are only going to go so high before the lender decides to stop the deal. This is not the end of the world. In fact, now you know where you stand. You know what you need to do to position yourself for applying and getting a mortgage. Is it your debt to income ratio? The DTI does matter greatly to lenders, and it should. It is a very good indicator as to how well you will be able to make your monthly payments. Getting some debt paid off, or ditching the too expensive car in exchange for a cheaper one, will go a long way to making you look good in the eyes of the mortgage companies.
If you do the tough work of getting your financial life in order and you still get turned down, keep trying. The housing situation and your finances will continue to improve over time and when you are ready to apply for a home loan again, the landscape could look quite different.