Client: Dan Peterson
Copyright 2008 Dan Peterson
Bad Credit Home Loans: Who are they good for?
A non-conforming mortgage is one that does not adhere to lending standards. The typical mortgage loan involves a large down payment from the borrower and the mortgage paid by the lender.
To make mortgages available to a wider variety of borrowers, some lenders waive the down payment based on a great credit history. Generally there are two mortgages in this case. The first will cover a large percentage of the loan amount or purchase price. The second mortgage will cover the remaining amount and will have a much higher interest rate. In some cases, the second mortgage is issued by another lender.
The amount of the bad credit loan depends on the circumstances of the individual buyer. The more marks against them in terms of credit, the higher the lender generally charges in interest.
If the borrower has a low credit score, he will not qualify for a conventional loan. In this case, the lender will waive some requirements but charge a very high interest rate. This type of loan works for a buyer who has had some dents in past credit history. The difference is that the buyer now makes enough money to comfortably cover the loan.
Why do bad credit loans work?
� Low interest rates have caused the housing market to grow and be able to maintain the riskier loan agreements.
� More lending commitments exist now overall.
� Refinancing has been a key factor in the mortgage market.
� Lending commitments have increased while investment properties have stabilized.
� Property prices have risen steadily and quickly.
� Individuals not eligible for traditional loans are now investing more.
� The interest rates of bad-credit loans balance the credit risk involved.
Who applies for a bad credit loan?
� Self employed individuals
� Small business owners
� Casual work force
� People who are credit risks
� Bankruptcy filers wishing to start fresh
� Divorcees
Bad credit loans give individuals who are considered bad credit risks the opportunity to purchase and build credit. These non-conforming borrowers have an opportunity to clean up their credit and catch up on accounts in arrears. This provides a chance to obtain a new mortgage and begin building a new credit history.
The guidelines and terms deviate from standard loan agreements to accomodate for the non-typical or non-conforming situations of the buyers. Bad credit home lenders have existed for at least the last decade. Non-conforming lenders state that in general between six and twenty-five per cent of mainstream loan applications are rejected. Between twenty-five and thirty-five per cent of these rejected loans are then underwritten by non-conforming lenders.
Their popularity continues to increase every year. Most borrowers of bad credit home loans only maintain their loan for a two to four year period. At that time, they generally refinance for a traditional loan. But new individuals with bad credit are willing to step in and apply for new non-conforming loans all the time.
Can a bad credit loan help you?
If you have a questionable credit history and are struggling to find a lender who will work with you, consider a bad credit loan. There are legitimate companies out there who are in business to help you obtain the loan you seek. At the risk of paying a higher interest rate, wouldn�t you like to be able to purchase that home you have dreamed of? Perhaps you are desperate to pay off old debts that ruined your credit so you can start fresh. A non-conforming loan can help you in this situation as well.
For more information, contact a qualified non-conforming lender who can help you through your bad credit loan process. The time is right to begin rebuilding your credit and living your life without the burden of bad credit ruining all of your best laid plans.