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Getting Mortgages With Bad Credit Is Harder Than It Once Was, But It Is Not Impossible

Jes — Fri, 13 Nov 2009 20:45:53 +0000

Mortgages for people with bad credit used to be very commonplace. There were mortgage programs available for almost every unique situation. A mortgage with bad credit could be obtained for the purpose of refinancing, purchasing, home equity loans, and even purchasing investment properties. However, getting a mortgage with bad credit is not as easy as it once was, and it is just not possible to obtain bad credit financing on many of the programs that you once could.

It used to be that every major bank, while focusing on good credit borrowers as its prime customer base, still had entire divisions devoted to targeting customers who had mortgages with bad credit. The success of these arms of the larger banks brought a completely new level of competition to the sub-prime lending world, as it opened the door for many smaller banks to open up those only target borrowers with bad credit.

These non-conforming and sub-prime lenders found huge levels of success, and the volume of mortgages for bad credit borrowers was massive. The problem was that the banks were caught up in the frenzy of this lending process, and were not watching as closely as they should have been the overall performance of this sector. The result was that an alarming number of these bad credit borrowers began to default on their loans. There were so many that defaulted, in fact, that the majority of these lenders ended up going out of business, and the larger banks all shut down there divisions that were targeting bad credit borrowers.

This does not mean that it is now impossible to obtain a refinance mortgage with bad credit. Mortgage refinance has just turned to a different avenue for borrowers with bad credit. Instead of having a large number of different options, a bad credit borrower really only has one: the FHA program.

The FHA program does not allow for many of the different options that were once there. A bad credit borrower cannot get a home equity loan, and they cannot be approved to purchase investment properties. However, the option to refinance to a much better interest rate is still there, and the FHA program is still offering consolidation loans.

These loans require much more documentation and more work than the sub-prime loans from before. It is going to be the responsibility of the borrower to prove to an underwriter that despite the bad credit, the borrower still has willingness to and is able to make consistent on-time payments.

This is sometimes a very difficult task, but is always going to be worth the effort. While a borrower cannot get financing for the unique scenarios, unlike the sub-prime loans of the past, if they are approved on the FHA program, the interest rate that they get will be a highly competitive one. In today’s market, the average difference between the interest rate of a local bank’s conventional loan and that of an FHA loan is typically less than .125 percent. Today’s bad credit mortgage is a much better vehicle for financing, although a harder one to be approved for.

It Is Not Impossible To Get A Mortgage With Bad Credit

Now Is The Time To Refinance Your Bad Credit Home Mortgage

Jes — Fri, 13 Nov 2009 20:25:13 +0000

Contrary to popular belief, it is still possible to be approved for a bad credit home mortgage refinance. In fact, this is one of the best times in history to look into getting a bad credit home loan mortgage.

First, it is important to remember going into any search for a bad credit home mortgage loan that the world of bad credit home mortgage loans is nothing like it used to be. You will not be walking into a scenario where you have numerous different lenders competing over you. You are not going to be able to choose from the unique lending options that used to exist, like 40-year mortgages and interest only loans. However, you will be able to get into a conservative 30-year fixed interest rate, and you will likely be able to do it at a lower rate than you have ever had on a mortgage before.

All of the lenders that specialized only in bad credit home mortgages are gone. Most of them went out of business, but the rest switched their focus away from sub-prime and non-conventional lending. The record high foreclosure rate was simply too much for these companies either to stay in business or to maintain operation with the same business practices.

Therefore, instead of being able to shop around from program to program, a borrower now is only going to be able to choose from one program for home mortgage with bad credit. This, however, is not necessarily a bad thing.

The only real lending institution that is still actively lending to bad credit borrowers is the FHA program. Just because there is only one option left, however, do not assume that it is a worse scenario for getting a home mortgage with bad credit.

The one area that the FHA loans are definitely worse than the sub-prime loans of old is in the underwriting. A borrower is not counted out of the program simply because they have bad credit, but in order to be approved they are going to have to work a lot harder than they used to. It is going to be the responsibility of the borrower to prove to an underwriter that despite the bad credit, they are still both willing and able to maintain a good payment history on the new mortgage, and this can sometimes be a difficult task that requires a lot of work.

The result of these FHA loans is decidedly worth the effort, though. Unlike the wide variety of bad credit loans from the past, these loans do not have many options to choose from, in terms of different loan programs. A borrower can choose mainly from two different terms of fixed rates: the fifteen-year and the thirty-year. This is actually a good thing, though. Instead of finding themselves in terrible mortgages, years from now, FHA borrowers will be in fixed rate loans with some of the lowest interest rates in the business.

What Are Your Options For Getting A Bad Credit Home Mortgage Loan?

Jes — Fri, 13 Nov 2009 20:20:29 +0000

In the past two years, our economy has fallen into one of the worst recessions our generation has ever seen. Unemployment is at a record level of more than 10 percent. Home prices have fallen by almost 25% nationwide. The average American credit score has dropped dramatically. The median household income has decreased at an alarming rate. Financially speaking, our economy is in very dire straits.

Prior to all of these declines, getting approval for high-risk mortgage loans was not very difficult, even for borrowers with bad credit. Home equity loans and other types of home mortgage with large rates of default were regularly offered to borrowers with credit scores considerably less than perfect.

There are many arguments that say these loans themselves were a large contributing factor to the actual recession itself. This can be debated, but what cannot be argued is the fact that the majority of the companies that offered these loans have gone out of business. They found that offering high-risk loans to high-risk borrowers turned out to be a bad business move.

So does that mean that there are no options left to be approved for a bad credit home loan mortgage? It does not. However, it is certainly more difficult now than it has been in the past decade. It is just not like it once was, in terms of available products for a bad credit home loan, because these lenders simply do not exist anymore.

But, there is still one viable refinance program for borrowers with bad credit. The FHA mortgage loan program is a very powerful mortgage, offered by the United States Department of Housing and Urban Development. This loan program is not based on credit score, but on a borrower’s last twelve months’ worth of credit history.

If a borrower can show that they have been through a rough time, especially due to the economy, they have a chance of being approved on the very powerful mortgage refinance program of the FHA. The trick is that a borrower must be able to demonstrate not only their ability to properly manage mortgage debt, but also their willingness to do so.

If a picture can be painted of a good and willing borrower, an approval is possible. The idea here is that a bad credit borrower needs to express to an underwriter a scenario of unforeseeable circumstances having arisen that caused the bad credit in the first place. More importantly, they need to prove that they have taken steps to not only eliminate the problem that caused the bad credit, but also that they are actively taking even more steps to ensure that it doesn’t happen again.

In some scenarios, this can be a very difficult task. However, for many borrowers with large amounts of bad debt hanging over their head that has been on their credit for more than a year, this is not as hard as it sounds. If there are a large number of collections, but they are very old, they are not going to count against a borrower, and it is not a terribly difficult task to show a good year’s worth of improvement.

Mortgage rates on the FHA program are strong enough the guarantee that even bad credit borrowers who are willing to put the work in will be able to refinance into a much better financial scenario than the one they are currently in.

A Bad Credit Mortgage Refinance Loan Is Not As Dreadful A Loan As It Once Was

Jes — Fri, 13 Nov 2009 19:22:37 +0000

Homeowners with bad credit are likely holding onto mortgages with extremely high rates. Many of these borrowers also carry a large amount of personal debts, like credit cards and personal loans. These debts likely have higher interest rates than the bad credit mortgage loans than they have. Most borrowers assume that doing a refinance on their home mortgage is a terrible option, because they will just end up in another high interest adjustable rate home loan.

However, this is not the case. The home mortgage-lending world is a considerably different place than it was when these borrowers likely got the current mortgage. Mortgage rates for bad credit loans are lower than they have ever been before. In addition, more importantly, the rates available for bad credit borrowers are typically going to be thirty year or fifteen year fixed rate mortgage loans.

There are certainly limitations to bad credit loans now that were not there before. Borrowers are more limited to how much they can borrower, and the approval process is considerably more stringent than it once was. But, the loans are still there, and with the right amount of work, are available to almost anyone.

Where a borrower used to be able to borrow up to 125 percent of their home’s value, the limits have been lowered greatly. If someone is looking to consolidate credit cards, personal loans, or other consumer credit, they are going to be limited to 85 percent of the value of their home. This typically means that most borrowers are not going to be able to put every bit of their consumer credit together on one loan. Nevertheless, in many cases, a borrower will still be able to pay off at least a couple of the debts with the highest interest rates.

For borrowers who cannot fit within that 85 percent window, there are still good financing options available for refinancing only the home mortgage. In these instances, a borrower will obviously not be able to consolidate any of their debt, but there is a good likelihood that they can lower their mortgage payment, and will be allowed to borrow all the way up to 97 percent of their home’s value.

The best thing about the current state of mortgage financing for borrowers with bad credit is that mortgages today are much different from the ones that likely contributed to the touch financial positions of these borrowers. Before, if you had bad credit and were looking into mortgage financing, it was very likely that the loan that would be offered to you not only had a high interest rate, but also was only a fixed rate for a short initial period. Today, bad credit mortgage refinance loans are typically being serviced by the FHA loan program.

The FHA loan program not only offers incredibly low interest rates, but most are also either thirty year fixed rates or 15 year fixed rates. When a borrower who does not have the room to consolidate any of their consumer credit refinances on this program, they are likely able to get a thirty year fixed rate right around 5 percent. In most of these cases, the loans that they are refinancing out of not only have much higher interest rates, but are typically still moving upwards as well.

A Bad Credit Home Mortgage Refinance Is Still Attainable

Jes — Fri, 13 Nov 2009 01:59:52 +0000

Loans on mortgages have changed substantially in the last year and a half. The fallout of the mortgage crisis has caused the lenders that remain in business to be very skeptical of offering a home mortgage to any borrower, good credit, or bad. The record level of foreclosures did not happen solely because a person with bad credit was likely to have defaulted on their home mortgage; it happened because all borrowers became more likely to default on their home loans.

Lenders began to realize that it was not just their bad credit loans that were defaulting and causing them serious losses, but also their 700 score borrowers that they never assumed would default were foreclosing at the same rate. As we see unemployment rates top out at 10.2 percent this month, it is a reminder that everyone is at risk, and the lenders are aware of this.

The banks face a few problems in this type of economy. It is not just the high rates of default that have them scared. Many different factors have made it such a trying time to be a mortgage lender.

First of all, to compound the problem of foreclosures, and created by the same issue, is the problem that home values have also been falling at a very rapid rate. When a lender does refinancing for a client at the higher end of the available equity, they stand a good chance of both the house going to foreclosure, and of that house being worth considerably less than what it was when they did the refinance in the first place.

Secondarily, the banks are caught in a very tough place. These banks are businesses, and need to continue to operate in order to stay in business. However, the business that they do is to lend money for home loans. Therefore, despite the increasing level of concern and the increasing level of risk involved with offering mortgage loans, it is still a necessity for these banks to continue to do so. As much as they are afraid of borrowers going default, they are still in the need of lending them the money and giving them the chance to do so.

And, finally, to make matters as bad as possible for mortgage banks, the available pool of mortgage clients is nowhere near as good as it once was. Ideally, in a market like this one, mortgage banks would like to only lend to tier one borrower. But, due to the recession and the economy, there are fewer and fewer of these available. The average credit score in America has dropped by over 40 points over the last twelve months. The truth is that the majority of the pools of homeowners looking to refinance are actually going to be bad credit borrowers.

Therefore, mortgage banks everywhere are offering FHA loans as their primary form of mortgage finance. These loans are most effective as loans for bad credit, and the lenders know this, but they have no other option. They have to utilize this program and get as many borrowers as they can, or they will sink. As a result, they have implemented as many guideline changes as they can afford to, in order to try their best to weed out the worst borrowers

It Is Not Impossible To Get A Mortgage With Bad Credit

Jes — Fri, 13 Nov 2009 01:43:19 +0000

With all the upheavals in the mortgage-lending world, many people just assume that it has become impossible to for people to get mortgages with bad credit, but nothing is actually further from the truth.

It is true that the loans that most people came to associate with mortgage loans for people with bad credit are no longer available. When the housing market crashed, these were the first ones to go. The important thing become figuring out what kind of loans those were.

For years, is someone applied for mortgages with bad credit, there was a very large chance that they would end up being financed by a sub-prime lender. These companies were specialists at originating a mortgage for people with bad credit. It was their main source of revenue.

These companies actively pursued bad credit borrowers, and made it extremely easy to get mortgage loans with bad credit. They built massive lines of wholesale business based on these two facts.

In fact, they were so successful, that for the most part, the average homeowner began to associate these sub-prime loans as the only financing option for mortgages with bad credit. If a borrower had a bad credit score, they were conditioned to believe that a sub-prime loan was their only option.

These loans carried extremely high interest rates, and for the most part, they were adjustable rate mortgages, or ARMs. Homeowners who did not know how to get a mortgage with bad credit were invariably led down this path and assumed that those very high interest rates were their only option.

As these companies went out of business, most borrowers just assumed that it was an end to mortgages for bad credit borrowers. There was, throughout all of this, however, a less known option for bad credit borrowers, and it is still readily available.

The FHA program is not a new loan program. These loans are offered through the Federal Housing Administration and are insured by the Department of Housing and Urban Development. The FHA was created in 1933, and has been lending on homes ever since.

Throughout the peak of non-conforming and sub-prime lending, the FHA program was still offering mortgages for people with bad credit the whole time. Not only were they offering these loans, they were offering them at fixed interest rates well below any sub-prime rate available.

The loans are government loans, so they require a lot of paperwork, and strict adherence to certain underwriting guidelines. Because of this, most loan officers simply opted to take the easier route and go with the sub-prime loans. It was because of this that the FHA program was largely unaffected by the housing crisis. Most of the bad credit loans that went to foreclosure were held by the sub-prime and non-conventional lenders, as opposed to the Department of Housing and Urban Development.

For this reason, FHA loans are still being offered, and are still a very competitive financing option. Like before, they offer better interest rates than the loans they are competing against, but like before they still adhere to strict guidelines, and require a lot of work from prospective borrowers. For borrowers who are willing to work, however, FHA loans are still the best way for a person with bad credit to obtain a mortgage.

Now Is The Tight Time To Get A Mortgage For Bad Credit

Jes — Fri, 13 Nov 2009 01:39:15 +0000

It is much harder now to get mortgages for bad credit than it once was. However, if you do not act now, there is a very good chance that you will be too late to find any mortgage lenders for bad credit. If you are on the fence about refinancing, it may be time to rethink the idea.

Mortgage loans for bad credit used to be a much more common thing. It was very easy for you to be approved for a mortgage refinance, regardless of your credit scenario. The lenders had come to the realization that they were able to sell any mortgage on the secondary market. A mortgage company for people with bad credit was able to write loans to anyone and know that they would not have to hold on to them for very long at all.

But, as the investors that bought these loans started to lose money, they started buying less of the loans, and a mortgage company for bad credit was forced into the dilemma of having to service their own loans, which they soon found out was not a profitable endeavor.

This was the initial cause of the mortgage crisis. The result was that the majority of these companies went out of business. The rest stopped offering mortgage loans for people with bad credit and instead only focused on going after solid borrowers.

When this all happened, the only mortgage for people with bad credit left was the FHA loan program. This was a very effective way for people with less than perfect credit scores to refinance into lower interest rates. The FHA program effectively filled the void that sub-prime loans left in the mortgage-lending world.

Nevertheless, as was to be expected, the FHA program, and more specifically, the lenders that were offering the program, started to lose money as well, and began to rethink their underwriting guidelines. It started slowly, but over the past year, approval guidelines have continually gotten more and more strict. What was once a program with no credit score guidelines has gone from a 500 minimum score to a 580 minimum score to a 620 minimum score.

Last month, the FHA program approved the use of the HVCC, or the Home Valuation Code of Conduct. The goal of the code is to ensure that home appraisals are being done in a responsible manner. The problem, however, is that the rules require that the banks themselves use their own internal appraisal management companies and require that the borrower has no choice in the appraiser used. The result of this code is that the only appraisals being done are going to be done in favor of the bank, not the borrower. These changes go into effect January 1st.

It is really coming down to the last stretch in terms of finding a mortgage for people with bad credit. If you are hoping to refinance, you need to move forward now, before it is too late.

FHA Loans Are The Best Option For Mortgage Loans For Bad Credit

Jes — Fri, 13 Nov 2009 01:35:17 +0000

Mortgage loans for people with bad credit are hard to find anymore. The options that used to be there simply do not exist. In a time when everyone out there was being approved for mortgages, every major bank opened a division specifically tailored to offer mortgage loans for people with bad credit. On top of that, new banks sprang up very regularly that only focused on home equity loans and debt consolidation loans for bad credit borrowers.

These lenders were offering to refinance any home loan available, as long as the borrower was willing to suffer through a very high interest rate, and most of the time an adjustable rate to boot. However, as these options have left the marketplace, there has really only been one effective tool left to fill the void left behind by these lenders.

That tool is loans offered by the Federal Housing Administration, or FHA loans. These loans are very powerful programs. There are no credit score requirements for the program itself, which would tend to make you think that they must carry horrific terms. The terms that they do carry, however, are actually some of the best in the business. So much so, in fact, that while this loan is primarily focused toward first time homeowners and borrowers with bad credit scores, it is actually one of the better mortgage financing options available even for people with tier one credit ratings.

The program will allow a homeowner to borrow up to 97 percent of the value of their home. It does not matter if you have a 500 credit score or a 780 credit score. If you are approved for the FHA program, you can borrow practically the entire amount of equity that your home has.

On top of this, the program is actually very strong for cash out refinances and debt consolidation mortgage loans as well. While most banks have cut cash out programs down to only allow you to borrow against 80 percent of the value of your home, the FHA program will let you get cash out up to 85 percent.

But, more importantly, the interest rates on these loans are not affected by how much you are borrowing. If you go get a conventional loan from your local bank, the interest will not only be determined by your actual credit score, but the more you borrow, the higher your interest rate will be. On Conventional loans, the higher above 80 percent you go, the more drastically the interest rate will increase. Regardless of your loan to value, or how much you are borrowing compared to how much your home is worth, you will have the same interest rate as everyone else who gets an FHA mortgage on the same day.

When you compare a 30 year fixed rate mortgage from your local bank at 90 percent of your home’s value, you will see the significant difference. In this scenario, a borrower with a 700 credit score simply cannot get a mortgage rate on a thirty year fixed of less than 6.5 percent at the local bank. ON the FHA program, a borrower with a 530 credit score who is borrowing even all the way up to 97 percent of their home’s value will still be able to be financed at right around 5 percent on the thirty year fixed rate program.

Even in today’s turbulent lending world, the FHA program continues to thrive. Having the both the strongest interest rates and the most forgiving approval guidelines ensures that it will be around for some time.

It is Easy to Find Bad Credit Mortgage Refinancing

Jes — Mon, 09 Nov 2009 22:38:28 +0000

Bad credit mortgage refinancing has a few more guidelines than it used to, but is still easier to find than you may think.

In the past year, there have been drastic changes the process for approving home loans. A large part of the market for bad credit loans has simply disappeared, and the lenders that are left have tightened their guidelines. Nevertheless, despite what a lot of people are thinking and a lot have heard, refinancing mortgage with bad credit is not impossible.

It is well known throughout the industry that getting someone with bad credit approved for a mortgage refinance is much harder than it has been in a very long time. Sub-prime and non-conventional loans are completely gone. There used to be a bank somewhere out there that would finance any of your borrowers, as long as you looked hard enough. However, these banks were hit the absolute hardest by the mortgage crisis, and thus were the first to drop out of business.

The FHA program used to have no credit score requirements at all. As long as a borrower had less than two instances of being more than thirty days late on their mortgage payment within the last twelve months, there was a very good likelihood that you could get them approved. There was even an FHA program for borrowers who had more than the requisite 2 thirty day late payments within the last year, called the FHA secure program that allowed for people with adjustable rate mortgages to refinance regardless of how many late payments they had.

The mortgage rates were very different for all of these different loans, and in a lot of instances, the bad credit loans actually had terribly high interest rates that were adjustable rates to boot. However, the fact remained that these borrowers were easily able to get approved.

However, first we saw the fall of the sub-prime lending world. There simply are not any of these banks that are still offering those loans. Next came the fall of the FHA Secure program. In addition, finally, banks started instituting minimum credit scores in order to qualify for any FHA program at all. At first, it was a 500 credit score minimum, and it quickly rose to 540, then 580, then 620, and now 640 for most banks. This has caused most people to assume that there are no more options for bad credit loans on a home mortgage.

What people do not understand is that these minimum scores were not implemented by the Department of Housing and Urban Development itself, but by each of the individual banks that were offering FHA loans. In fact, the FHA program itself still has no credit score requirement. The banks simply put a limit to what they found was a comfortable credit score number to lend to. Despite this, there are still plenty of banks that will offer FHA mortgage refinancing with a credit score as low as 530.

While most of the bad credit lending world has dried up, there are still options. Finding a good mortgage lender that is offering FHA loans can still lead you to a much better fixed mortgage rate.

Even Without Sub-Prime Loans, There Are Still Bad Credit Mortgage Loans Available

Jes — Sun, 08 Nov 2009 00:41:24 +0000

It is a common misconception that there are no longer any home loans for people with bad credit. In fact, there are still quite a few options available; it just takes a little bit more looking around to find one.

When the mortgage market crashed, the first companies that were hit by the increase in foreclosures were the companies that were specializing in second mortgages, and they were directly followed by the sub-prime lenders. The result of the dramatic increase in foreclosures for both of these sectors was that almost of the banks offering these loans were forced out of business.

Prior to the crisis, a bad credit home loan was a very easy thing to acquire. It was possible to get approved for a bad credit home loan refinance regardless of your credit score. You could even get approved for bad credit home equity loans. Even getting approved for a purchase bad credit home loan mortgage was simple, regardless of how much money you had for down payment.

However, this was one of the factors that caused the housing crash in the first place, and as a result, the loans that used to be available were no longer there. However, that does not mean that there are no longer any home loans for bad credit. The FHA, VA, and USDA programs have become very good alternatives to sub-prime lending, and have remained a viable option for borrowers without tier one credit scores.

There is still no credit score required for government mortgage programs, but it will still fall on the individual banks as to what they set their own minimum credit score at. For the most part, FHA banks have universally accepted a 640 credit score as the minimum score. There are a few banks going down as far as 620, and some even lower.

For the most part, you will need to have at least a 530 credit score to get approved for the purchase of a home, but there are a couple of banks left that will still do refinances, regardless of the credit score. In all of these situations, you will need to have at least 3.5% equity in the home for approval, so you will need to have a small down payment for purchasing a home, but even 3.5% is very small for home loans with bad credit.

If you are already in the FHA program, it will be much easier to obtain a bad credit home loan refinance, however. If you have not missed any mouse payments in the last six months, there are a lot of banks that will allow you to do an FHA streamline refinance without taking in to account your credit score, or even your income.

The lending market is nowhere near as diverse as it was two years ago. Almost all of the options that were once there for bad credit loans have disappeared. However, that does not mean that they are all gone. If you just look a little harder, you will be able to find good financing at excellent terms, regardless of how bad your credit is.