Frequently asked Questions about Bad Credit Mortgage.

What is Bad Credit Mortgage?

Bad credit mortgage also referred to as a subprime mortgage, is mortgages given to an individual with low credit ratings. As a result of the low credit rating, lenders will not offer conventional mortgage was they lender consider the greater risk of you failing to follow through on the terms of the loan. If you have a bad credit rating, it will often include;

• Excessive debt; your known income may not be enough to make payments of the loan

• A history of late or missed payments

• A lack of assets for security

• Limited debt experience hence the lender is not able to tell for sure whether or not you are reliable when it comes to repayments.

  • Why are interest rates higher on Bad Credit loans?

When applying for a mortgage with a bad credit score, the lender chooses to lend to you at own risk. Many lenders will opt out of lending as having bad credit may exhibit poor management of money hence leading to doubt over your reliability as a payment risk. Those that do will insist on charging interest rates higher than those of conventional mortgages. This is to make up for the higher loan default risk that they are taking.

  • What is a bad credit score for a mortgage?

Credit scoring is the method of assessing credit risk. Your creditworthiness is mathematically determined based on your present credit accounts and your credit history. Credit scores range from 300 to 900 with a higher score or number indicating a better credit score. A credit score below 620 indicates that you have a bad credit score. This refers to a history of unpaid debts or faults in your history with credit. It builds up over time and can affect your mortgage application as lenders will view your bad credit history as a risk. They will consider the possibility of you failing to follow through on the terms of the loan.

  • Can high street banks help with bad credit mortgages?

When you apply for a mortgage, the lender will do a credit check. High street banks will be more reluctant to lend when it comes to bad credit. However, it is important to know that not all stains on your credit history carry the same weight and that the age of the default matters.   A default will remain on your credit file for 6 years only regardless of whether or not you settled the debt.

Your bankruptcy history or a couple of late mortgage or loan payments from three or four years ago is of little or no concern to Bad Credit Lenders. 

  • What is the difference between “adverse” and “bad” credit?

The difference is insignificant. For mortgage purposes, adverse and bad credit mean the same thing. “Bad” and “adverse” are just two ways of saying the same thing.

  • Can I get a mortgage with no credit history?

Having no credit history can be a positive thing for you. This is because there are no outstanding debts that you owe to credit companies. However, this can prove to be a little bit of a limitation for you as lenders being reluctant to offer you the mortgage.