Author: Agnes powel
Before you could visit the lender for a mortgage deal on your home, you were not very sure of the kind of deals that you could clinch. The primary obstacle, as you felt, was your bad credit history. To add to the fears, there were a few friends of yours who held that the deals offered to you will not be at par with the regular mortgages.
Nevertheless, before you decide not to mortgage in apprehension of bad deals, let us make it clear that mortgages generally do not give much importance to bad credit history. Through this article, we will inform borrowers of bad credit mortgages which are basically mortgages for the people with bad credit history.
Why does the loan provider ignore bad credit history while offering bad credit mortgage? Do they not fear for the non payment of the amount lent? Borrowers with bad credit history do pose a risk on the loan provider. It is difficult to say that an individual will not default this time, when there have been several instances of defaults in the past.
Therefore, how loan providers, who are considered astute financers, agree to lend to borrowers with bad credit is open to questions. However, it will be incorrect to term this as a generosity of the loan providers. The decision to lend bad credit mortgage is primarily influenced by the credit score of borrowers. Credit score is prepared by taking into account the borrowers' credit file. FICO score, which is accepted by the major credit reference agencies, are accepted by the lenders too.
Borrower with a credit score of 720 and above will have the loan providers running after them to take mortgage deals. Borrowers who have a credit score in the range of 600-700 too can get good deals in mortgages. However, borrowers who earn a score of 500 and below are the ones who form the customers of bad credit mortgage.
Through the proceeds of bad credit mortgage, the borrower will purchase or construct house. If the home purchased is his first home, the borrower can become eligible for the discounts available to a first time buyer in a first time buyer mortgage.
The amounts available under bad credit mortgage will not be as large as the regular mortgages. A larger deposit will be demanded from the borrower. While the deposit on regular mortgages ranges up to 25%, the percentage of deposits under bad credit mortgage may go much higher. Deposit shows that the borrower is committed towards the mortgage. If borrower fails to repay mortgage, he loses on the deposit too.
The issue of interest rate on bad credit mortgages is largely disputable. Many loan providers allege that their act of approving the borrower for mortgage was a rare event; the borrowers wouldn't have been able to mortgage their house had they not associated with them. Borrowers who have been refused loans for a few times will easily accept the statement. These borrowers fall prey to the lenders who charge a hefty sum as interest and fees on the bad credit mortgage.
However, determining the reasonable interest rate is not as difficult. The interest rate will not be similar to the interest that borrowers with good credit history have to pay. One can easily decipher the interest rate by making a comparison of interest rates charged by principal banks and financial institutions. Mortgage calculator has a record of the interest rates for several categories of mortgages. By looking into the bad credit mortgage category, you instantly know of the least rates prevalent for the category. To further confirm that the interest rates found are correct (loan calculator may not have been updated on a recent change in interest rates), one can use mortgage quotes. Mortgage quote is an offer by a lender to the borrower to accept bad credit mortgage with some stated terms. By going through the terms documents, one knows of the interest rate.
Another important use of mortgage quotes is to help borrowers in choosing a particular lender. If the terms, including interest rate, are alright with the borrower, and he finds that the terms offered by one particular lender are superior to all others, he can choose the bad credit mortgage deal offered by that lender.
Bad credit mortgages give borrowers a second chance to improve their credit history. Being disciplined in paying off the repayments on bad credit mortgage will give them a positive remark on their credit file and make them eligible for a better mortgage in the future. However, if they choose to follow the same approach as in the past defaulted debts, they will continue using the bad credit mortgages.
About the author: Agnes Powel is a financial analyst by profession. The academic qualification of MBA (Finance) from University of Central England matches his credentials. Years of experience in has given the field of lending him an insight into the various intricacies of the loans market. Through his articles, he tries to share this knowledge with the prospective borrowers.To find Mortgage,first time buyer mortgage,but to let mortgage that best suits y
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