BAD CREDIT LOANS
Home Loan
Mortgage Options For Bad Credit Borrowers
presented by Attorney Mory Brenner
Never again
obtaining a home mortgage loan consistently surfaces as the primary fear
of people considering bankruptcy. Luckily, those searching for a home
mortgage loan will find that within one day after their bankruptcy discharge
home loan financing will indeed be available to them. Within the mortgage
business lending to borrowers with very, very bad credit including bankruptcy
and foreclosure can go by several names including the sub-prime market,
b,c,d credit lending or simply bad credit home loans. The wonderful side
of this industry for debtors is the fact that it exists. On the other
hand individuals with bad credit must understand that what will be expected
from them and that what will be available for them in the sub-prime mortgage
market bares little resemblance to the type of home mortgage loan available
to a borrower with perfect credit.
Self Pre-Qualification
Credit Score
Before attempting
to obtain a home mortgage loan, borrowers should first understand exactly
where they stand from a credit point of view. Lenders categorize borrowers
using two systems. The first mirrors standard grades used in school. Borrowers'
credit will be evaluated and given a grade, where A is the best, B will
be credit showing a bit of tarnish, C represents fairly bad credit, D
means very bad credit, occasionally I've even seen some F's. I have included
a chart estimating where someone's credit will fit into this system. Remember
that humans evaluate most of these credit reports, with the result that
some credit evaluators will assign different grades to the same borrowers
and that some lenders may assign more or less importance to certain types
of negative items on a credit report.
|
|
The
next type of scoring model more closely resembles an SAT score, with
800 being near perfect and 400 approaching as bad as it gets. These
scores carry names such as FICO, Beacon or Empirica; each of these
names corresponds to one of the particular major credit reporting
agencies. The exact mathematical formulas used to calculate these
scores remain proprietary information of the credit bureaus, computers
use the formulas to establish a credit score. |
It is safe to say, however, that the same negative items which would
affect a letter grading system also negatively affects the numeric scoring
systems.
Pricing
for Good Credit Borrowers
Lenders charge more points and higher interest rates to those with bad
credit. Loans to borrowers with poor credit carry far more risk and lenders
deserve compensation for this risk. Borrowers with good credit should
not let themselves enter into a loan agreement where they pay points and
rates based on a bad credit loan. One national company recently filed
bankruptcy to protect themselves from litigation on fraudulent loan practices.
One of the
common fraudulent loan practices involved charging good credit borrowers
bad credit rates and points. If you have worked hard for good credit you
deserve the benefits. It may take some extra work depending on your geographic
area but don't allow yourself to pay more interest and fees than you have
to.
Pricing
for bad credit borrowers...
|
