Bad Credit Home Loans
So, you’re looking for bad credit home loans? The market is still there, but because of the current sub prime mortgage disaster, you find it hard to get funding for these types of loans. But, let’s discuss it anyway.
Within the mortgage business, lending to borrowers with 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. Understanding the approval process can greatly improve your odds of obtaining your financing.
Before attempting to get a mortgage, borrowers should first understand exactly where they stand from a credit point of view. Lenders categorize borrowers using grading 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. The only way to find this information out is to pull your credit score from each of the three leading bureaus. They are TransUnion, Equifax, and Experian.
The next important concept in calculating loan eligibility would be the ratio between the amount being borrowed and value of the property being placed as collateral. Mortgage lenders will only loan a percentage of the appraised value of a piece of property. The difference has to be made up by the borrower. Ask your mortgage broker what is the highest LTV that their lenders offer.
Debt-to-Income Ratio
Calculate the debt to income ratio by adding together all of the borrower’s debt payments, including not only the loan being applied for but also any auto loans, consumer debt, credit cards etc, etc; divide this number by the net cash available each month available to the borrower for living expenses as well as debt. During the wild west days of the sub prime lending days, lenders were accepting applicants with ratios as high as 55%! Now, most are coming back down and only accepting ratios up to around 35%.
Now that you understand the process, you’re ready to go and set the mortgage industry on fire! Wrong! You probably know enough to get burned. Let me ask you, if you know that maintaining a good credit score is paramount to surviving in this modern day financial jungle, then why not take responsibility for your destiny. Learn the secrets to credit repair..it can change your life.
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Christopher Wright, Financial Cancer Specialist
