Having bad credit is not good, especially if you want to borrow money. But if you're looking for a mortgage, your chances of getting a loan are much higher, and many mortgage brokers have products for people with bad credit.
Why would loan providers give mortgages to people with bad credit? Don't loan companies worry that the person taking out the loan won't be able to pay it back? Even if a client has a good credit history, it's hard to know if they'll pay back their loan. Borrowers with a bad credit history have a history of not making their payments on time.
Many smart mortgage loan companies will lend to people with bad credit, not because they are nice, but because of their FICO credit scores.
Loan companies chase after borrowers with credit scores of 720 and above to give them mortgages. Borrowers with scores between 600 and 700 can also get good mortgage deals. People with credit scores of 500 or less are thought to have bad credit. Most loans for people with bad credit are used to buy or build homes. If the buyer is getting a home for the first time, they may be able to get a special loan for first-time buyers.
For the lender's safety, someone with bad credit can't borrow as much as they could with other mortgages. This makes it less likely that the borrower won't pay back the loan. The person who wants to borrow money will also have to put down a bigger deposit. For regular mortgages, the required deposit is about 25%, but for mortgages for people with bad credit, the deposit may be much higher to cover the risk of lending.
Some dishonest loan companies say that mortgages for people with bad credit are rarely approved and that the borrower wouldn't have been able to get a mortgage without the help of their special bad credit programme, for which they charge high interest rates and fees. Many people with bad credit believe them and pay much more than they should for broker services. If you have bad credit, shop around for a mortgage lender who won't use it against you.