There are several things you need to know before applying for bad credit mortgages. On the purchasing side, the biggest thing is that you have at least a 20% down payment available for the purchase of the home. Since the nature of bad credit mortgages is that they will not be insured by the default insurers, this down payment requirement is one that would eliminate the need for it since the size of the mortgage is under 80% of the value of the property.
In addition to the down payment requirement, there are also income and credit requirements that the applicant/s need to meet in order to qualify for the bad credit mortgages. Even though there are lenders that cater to individuals with bad credit, they too have considerations to “how bad” the credit can be. In a situation where the credit is really bad, the mortgage lenders may not entertain the application at all or if they do, they may scale back on the size of the loan or even increase the mortgage rate to mitigate the risk factors. If they decide to lower the size of the mortgage, then the applicants would have to bridge the deficit by increasing their down payment for the minimum 20% to whatever the respective lender approves for the bad credit mortgages. On the other hand, if they decide to increase the mortgage rate, this would not affect the loan size unless the mortgage lender decided to mitigate their risks with a combination of decreased mortgage and increased rate.
Another thing to consider with <a href=”/how-to-get-a-mortgage-with-bad-credit/”>bad credit mortgages</a> is that they are intended to be taken on shorter terms than those mortgages taken through traditional means. This is because, the higher payments with bad credit mortgages are usually not ideal to carry for long periods of time for obvious reasons. We advise that these types of bad credit mortgage be taken on a 1-2 year terms so that the credit issues can be repaired in the same of time. That way, when the existing bad credit mortgages matures, you would be able to migrate back to a type “A” or “good credit mortgage” solution.
If you would like to discuss your bad credit mortgages needs, please don’t hesitate to discuss your circumstances with us today 905.455.5005.