When someone wants to get a mortgage, their credit score is a very important factor. If you have good credit, your chances of getting a mortgage go up. If you have bad credit, your chances may go down. But today, people with bad credit have a lot of options for getting mortgages. In fact, some mortgage companies focus on helping people with bad credit get mortgages. People also call these mortgage companies "sub-prime lenders."
FICO scores are used to figure out how creditworthy a person is. A FICO score can be anywhere from 300 to 850. Scores above 720 are good, and scores below 620 are bad. The people in this group are called "sub-primes."
There are many reasons why people might have bad credit. It could be because of a loss in business, which could cause people to miss payments or even go bankrupt. Any other factor could cause a medical disability or a physical problem. People who are arrested for crimes also have bad credit because they can't pay their bills on time. But people no longer can't get mortgages because they have bad credit.
One way is to get a loan against the value of your home. If a person has made payments on his or her home for a certain amount of time, equity builds up in the home. You can use this equity as security to get a second mortgage. Refinancing your home is another option. You can trade in your first mortgage for a newer one that may have lower interest rates.
The interest rates on sub-prime loans are high, which is not a good thing. Higher interest rates let the lenders get more money from the borrowers and reduce their losses if the borrowers don't pay back their loans. There may be other strict rules, like shorter time periods for paying back the loan and the need to pay a down payment up front. In fact, the down payment turns out to be a good thing. If the person taking out a mortgage has saved enough for a down payment, it lowers the amount owed on the mortgage and makes it possible to pay it off faster.
People with bad credit may find it hard to get a mortgage, but it is not impossible. Borrowers with bad credit have to look around for mortgages and look for lower interest rates and other perks. Most of the time, you can't pay off a bad credit mortgage early because lenders don't let people with bad credit get out of their loans that easily. So, it would be helpful to do a market survey to find out who has the lowest prepayment penalties.
But if someone has bad credit, the best thing they can do is work on raising their credit score. This is a long and hard process that can often be done with patience and a sense of duty. You can raise your credit score by making payments on time and getting behind on payments paid off.
