Mortgage Loans Guide

How “bad” is bad credit? If you can pull your credit report yourself and get a copy of your FICO credit score, that will give you a good idea. Here is a general idea of the FICO score breakdown:

500 - 580 - Poor Credit - You should be able to get a home mortgage loan if you are willing to make a down payment, probably somewhere between 5-20%. You will probably need a sub-prime mortgage loan with a slightly higher interest rate.

580 - 620 - Fair Credit - You’re right on the edge. You may be able to get 100% financing or you may need a small down payment to make the loan work. Depending on how much money you put down, you may be able to get prime interest rate.

620 - 640 Average Credit -You should get a 100% home loan financing. You should not need to have a down payment. You should be able to get a low interest rate.

640 - 700 Good Credit - You should be able to be approved for a 100 - 125% home mortgage loan. You should be able to get a great interest rate.

700+ Excellent Credit - You’re in the drivers seat! You should be able to get an excellent rate with excellent terms. Of course, all of these factors vary with each borrower depending on the size of loan you want and on your income and other factors.

What is the FICO Score Based On? Most of the FICO score is dependent on amounts owed and payment history. So, the fastest and best way to increase your credit score will be to make payments on time and keep old accounts open.

What Should I Avoid To Keep My Score High? If you are in the process of getting a new mortgage loan, avoid applying for or opening any new credit accounts. This can drop your credit score very quickly and make it that much harder to get approved.



By: CL Haehl

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If you’re struggling with a poor credit rating, you’ve probably heard about sub-prime mortgage loans. While some people qualify for the ridiculously low interest rates advertised on bank billboards, those of us who aren’t so fortunate have to seek other means of getting financing. Fortunately, sub-prime mortgage loans allow even bad credit individuals to get approved for financing.

A sub-prime mortgage loan is a loan that’s offered for borrowers with poor credit. Because of their credit scores, these individuals don’t qualify for the typical interest rates. Instead, these individuals must look towards other loans to get financing.

That’s where a sub-prime loan comes into play. A sub-prime loan is a specialty loan for low-credit individuals. Usually these come with a higher interest rate, to make up for the statistically higher chance of the borrowers defaulting. The worst your credit rating is, the higher the rate will be. If you’ve got slightly below average credit, your interest rates will be closer to prime rates than someone who’s FICO score is closer to 500.

The best way to find a good sub-prime loan is to find a mortgage broker that specializes in bad credit. These lenders have access to dozens, if not hundreds, of different lenders who’re looking for people like you to lend money to.

When working with a broker, it’s important to make sure he’s clear on exactly what you want. Do you have bad credit, but you’re willing to put more money down? Or are you hoping to get 100% financing and wrap all closing costs in the loan? Every situation calls for a different loan, and the best way to find that perfect loan is to make sure your broker knows what you’re looking for.

A mortgage broker will usually not cost more than if you got your loan directly through a lender. As long as your broker is working ethically and not tacking on unnecessary extra costs, you’ll usually be saving money by working with a mortgage broker.



By: Josh Spaulding

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With all of the talk in the news lately about the decline of the United States economy and the real estate market many have been hearing the term “sub-prime mortgage.   But what is a sub-prime mortgage? And considering all of the negatives associated with such a mortgage product are there any benefits for someone to seek out and obtain a sub-prime mortgage?

A sub-prime mortgage is a loan to a borrower with less than perfect credit. This can happen to the borrower for many different reasons that put them in the position of needing a mortgage loan they may not otherwise be able to get.

A sub-prime borrower has either missed payments or been late on them. This forces the lender to view them as a higher risk on a new loan. They recognize they may have higher costs associated with this type of borrower so they charge a higher rate to compensate for potential losses.

Sub-prime loans can be structured in various ways. The most common loan of this type is the ARM loan. An adjustable rate mortgage can appear to the borrower as though they are getting a favorable rate at first when in reality it only starts out that way.

The major problem with this is when the loan adjusts to a higher rate many of the borrowers cannot make the payments, which causes their home to go into foreclosure. This only leads to more bad credit and financial problems for them.

Today you hear about the high foreclosure rates in America and much of it goes back to sub-prime loans. It reality the lender is partly to blame and some of them have been hit so hard they are going into bankruptcy themselves. These are usually smaller lending institutions that are having a hard time weathering the storm, however even the largest of lenders are hurting from all these bad loans.

It does not have to be all bad however. There are many benefits to both the borrower and lender on sub-prime mortgages. First of all this gives the borrower a chance to improve their credit score by making the payments on time. This can lead to you being able to qualify for a better interest rate which can be done by refinancing the sub-prime loan.

It can be good for people who have run into some bad luck financially. Things like job loss or divorce can really hurt a person’s credit, so can an unforeseen tragedy such as an illness or disaster caused by a storm. A sub-prime loan can help these people get back on their feet as well.

From the lenders point of view they charge high rates and can make high profits when sub-prime loans work out. This allows them to be part of helping a person get a new home they may not have been able to get and making a profit as well.

Hopefully this will answer your question on what a sub-prime mortgage is and if it applies to you will give you confidence to go in and apply for one yourself.



By: Veronica Key

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Excellent credit is not required to buy a home. Of course, a higher rating will qualify homebuyers for a low rate and better loan programs. Still, buying a home after bankruptcy is easy.

Although home loans following a bankruptcy discharge come with high rates, a home purchase is a great way to quickly boost a low credit rating. Here are a few tips on getting a low credit score mortgage loan.

Sub Prime Mortgage Loan Programs

There are many options available to homebuyers with a low credit rating. Credit scores below 680 do not qualify for prime home loans. Hence, these persons will need to speak with a sub prime mortgage broker or lender. Sub prime loans are intended to assist those who cannot obtain traditional mortgage financing. These lenders work with all types of people and credit situations. Furthermore, sub prime lenders have a multitude of different loan options.

Who Qualifies for a Sub Prim Mortgage Loan?

Anyone with a low credit score can get approved for a sub prime mortgage loan. However, there are certain limitations. Many lenders will not approve a mortgage loan if the borrower’s credit score is below 500. In this instance, the risks are too high. Homebuyers who fall into this group may consider improving their credit before applying for a home loan.

Having a chapter 7 bankruptcy, collection accounts, and judgments will not disqualify a buyer from obtaining a sub prime mortgage loan. Naturally, loans of this sort have higher interest rates. However, if the homebuyer maintains a good payment history, they will have the option of refinancing for a better rate in the future.

Other Loan Options Available after Bankruptcy

As mentioned, sub prime mortgage lenders offer a range of home loans for every need. Following a bankruptcy discharge, homebuyers have the option of obtaining a “no credit score home loan.” Because lenders do not offer 100% financing on these loans, buyers must be prepared to pay a 20% down payment.

Another loan option available is the zero down home loan. This loan is offered to buyers with good and bad credit. Zero down home loans include 100% financing, which is perfect for first time homebuyers and buyers with little cash savings. To qualify for a no money down home loan with bad credit, your credit score cannot fall below 580.



By: Carrie Reeder

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