Mortgages for people with poor credit

If I have bad credit can I still buy a home or can I refinance my home if my credit scores are low? These are two of the most asked questions by consumers with less than perfect credit. You can obtain a mortgage home loan even if your credit is not perfect. There are many mortgage programs available for borrowers with flaws in their credit.

If you have a low credit score, the interest rate you will qualify for will be higher than if you had good credit. The lower your score is, the higher the rate. In addition, the percentage of the home's value (Loan-To-Value or LTV) you can borrow may also be lower than if you had a high credit score.

A mortgage can be a great way to build a strong credit history and high credit scores. Many people with poor credit opt for a short term adjustable rate mortgage because it offers a low payment. After a few years of on time payments your credit score can be greatly increased allowing you to refinance into a longer term fixed rate mortgage. To achieve higher credit scores in the first few years you must make every payment on time and not take on a lot of new debt.

Mortgages for people with poor credit are available through many loan programs. These loan programs are offered through Fannie Mae and Sub-prime lenders. The programs allow lower credit scores and have more lenient guidelines. However, the programs come with higher rates and fees to help the lender offset the risk of the borrower defaulting on the mortgage.

Banks assess default risks on loan applications base on several criteria; credit history, sufficient income, stable employment, ample asset, owner's equity in the property, and a few other factors. As long as his other financial aspects are strong, a loan applicant with poor credit can usually obtain home financing, although at a higher interest rate.

If you have low credit scores you should carefully examine your credit report for errors. Many credit reports contain errors but there are ways to have the incorrect entries removed. If your score is holding you back from qualification by just a few points and you can prove some of the accounts are in error then ask your loan officer for advice on getting the mistakes corrected.

If your credit is damaged, then make sure you ask your mortgage professional about rapid rescoring. The process takes some time but it can end up saving you thousands.

It doens't take long to move your score up to get better financing. 45 - 60 days can do wonders when you have someone knowledgeable working for you. You can write letters to the bureaus yourself if you are inclined to do so. You may, however find your scores moving faster when you hire a professional company to do so. Make sure you have your broker recommend a reputable company to deal with.

» DISCLAIMER: The information contained in this article on 'Mortgages for people with poor credit' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.