Bad Credit Mortgage Lenders – Are They the Right Lenders For You?
Bad Credit Mortgage Lenders – Are They the Right Lenders For You?
Bad credit mortgage lenders are sometimes referred to as hard money lenders. Typically hard money lenders are not commercial banks.
Traditional Lenders
Traditional mortgage loans come from banks. Usually banks that are local to where the property is. Traditional funding requires a few things. A borrower has to have a decent credit score the bank uses this to review past spending habits and whether debts are paid on time. Debt to income ratio is also a factor, the lender looks at how much money is coming in and how much money is going out. The lender would like to see a decent amount of disposable income. If these factors do not meet the test than traditional funding is not an option.
Non Traditional Lenders
Non traditional funding is usually where bad credit mortgages come from. These lenders are typically set up for the sole purpose of lending money to people with bad credit for mortgages. The credit score is not counted as much as income and ability to repay the loan. These hard money lenders charge a much higher interest rate for the loans than a traditional lender does and may offer a shorter repayment period.
The down payment has to be larger because typically the loan is only written for around 60%-70% of the loan value of the property This all sounds pretty negative but the reality is non traditional lenders are willing to take a chance on someone with bad credit so they can buy a home when a traditional lender never would.
Bad credit mortgage lenders really seem to have a bad reputation but they can be a stepping stone to getting funding through a traditional lender over time with a good payment history. Get the facts before you use one of these mortgage lenders.
Category: Mortgage lenders
