Play Free Online Keno Games To Try Out Your Luck
February 10, 2021Gym outfit: how to prepare yourself for indoor training
February 10, 2021
People often believe they can’t get a mortgage with a bad credit history, especially if they were rejected for credit earlier. However, it is just one of many common misconceptions in the world of mortgages because there are options created to meet the needs of those with low credit scores. Although such deals come with higher interest rates, they still can serve well for a wide range of borrowers, of course, under one condition – they should be able to keep up with the monthly repayments.
If you are looking for a viable way to become a homeowner and thinking of applying for a mortgage but just not sure where to start to reach your goal, read on to find out everything you need to know about taking a bad credit mortgage.
What Is Bad Credit?
Before turning to how to get a mortgage with a poor credit history, let’s start with brushing up on what bad credit is. Lucky for you, there is no strict definition of the term or a fixed score requirement, which leaves plenty of space for maneuver when looking for options.
Generally speaking, lenders access applications in different ways, some opt for making their decision on affordability while others base their evaluation solely on the credit score of the would-be mortgagor. If you just as many other people ask yourself what credit score do I need to get a mortgage, then you should know how the UK’s largest CRAs (credit rating agencies) look at the subject. While Experian and TransUnion are pretty close in their definition of “very poor” with 0-560 and 0-550 respectively, Equifax definitely stands out from the crowd with 0-279.
When it comes to the “poor” category, Equifax again has a different opinion by placing it between 280 and 379 while TransUnion squeezes it in the tiny box 551-565. Experian seems to be more demanding and makes it 561-720. The “fair” level starts at 380, 566, and 721 at Equifax, TransUnion, and Experian respectively.
How To Get A Mortgage With Bad Credit
To start with, to get a mortgage with poor credit, you have to show the lender that your credit history is actually not that bad that it may seem at first glance. It is of utmost importance to understand that every lender wants to see a responsible borrower able to manage his or her finances in a sensible way.
What does it mean? Well, your ability to meet all regular payments in full and on time. If you are never late with paying your utility bills or credit card charges, then it is a good sign for moving forward with your application. However, the earnings/spendings ratio, which is definitely one of the most significant factors in the whole story, doesn’t cover just your regular expenses.
To make sure you will be able to keep pace with your monthly repayments in the case you get a mortgage, a lender has to look deeply at evaluating the possible effects of eventual decrease of your income or increase of interest rates. Does your current situation leave space for such often unpredictable changes? Will you still be able to meet all your financial duties on time?
As you have probably already guessed, before applying for a mortgage you will have to do your homework and brush on your budget to see how you can optimize your spendings in favor of savings. This is the only way to sign a viable deal and won’t be cornered by too high monthly rates and the risk to lose your house.
Specificities Of Bad Credit Mortgages
Even though at the core bad credit mortgages are no different from regular ones, there are a couple of things you should know before embarking on such a long journey. Apart from being subject to higher interest rates, bad credit mortgages usually have a lower limit on how much money a client can borrow and seek a heftier deposit. For instance, if for a regular mortgage people are usually asked to deposit 5-10% of the property value, you will have to give at least 20% or 25% in advance. Speaking of interest rates, these can vary depending on the provider and how long it will take you to repay.
Many people can’t brag about impeccable credit history but it doesn’t mean that their dream of becoming a homeowner will never come true. There are plenty of options to get a mortgage with poor credit but you always have to research the offering and carefully weigh all the pros and cons to make the right choice.
