Bad Credit Loan Mortgages - 3 Vital Steps to Apply!

Monday, October 21, 2013

Bad credit loan mortgages, often referred to as bad credit mortgages are for people experiencing a problem in getting a loan or a mortgage to purchase a home due to a poor credit history. They are also known as sub-prime mortgages, adverse credit mortgages, or non-status mortgages and are intended for people who are not able to qualify for traditional mortgages.

Bad credit mortgages are for anyone having a problem re-mortgaging or getting a mortgage to buy a property due to bad credit issues such as credit arrears, perhaps even a previous foreclosure.

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Bad credit mortgages are not offered by all lending institutions because of their higher risk so a borrower has to find a specialist lender that is willing to look at each individual case. So how would you go about finding one of these specialist loans?

Step 1 - Research and Self Assessment

The first step is to do some research. It's a very big market and the best deal is not the first one that comes along!

The borrower must try to assess how the bad debt situation arose. Was it due to ill-health and subsequent unemployment? Has that life episode been corrected and is there evidence to substantiate that? Was it as a result of a divorce (it's amazing how many people slide into adverse credit just before or after a divorce!) and again has that been rectified or are steps being taken to reverse the situation.

When the borrower is 'armed' with valid reasons for the poor credit score then the next step can begin.

Step 2 - What is your current financial situation?

This is actually a very relevant question. If you already know what the personal circumstances are that have contributed to the acquisition of a poor credit history - you should know if your present financial circumstances are now stable or not. For example, if your adverse credit score arose through a long period of unemployment and you now have a job so that you can demonstrate your ability to repay a loan to a lender and you know that you could imminently lose the new job - then you should think again about your course of action or get a new job before you apply.

If you feel or know that you're in position to repair your credit and this is of extreme importance, and you are now in a 'stable' financial situation then you should consider the next step.

Step 3 - The Application process!

The application process differs according to the method of application you use. This stands to reason. If you apply online then it's often a case of filling in a form that 'pre-qualifies' your application. This means that the lender initially uses the information you have supplied to indicate whether your application will be 'potentially' successful. However, because of the recent credit squeeze this application process now usually requires an 'interview' usually with an employee or agent of the lender.

However applicants are usually more successful in obtaining a mortgage when using the specialist services of a broker or advisor. There is a very simple reason for this. A broker will generally not waste his or her time in dealing with your application if it's not going to be successful. You may have to pay a bit more - but then, depending on your circumstances, you are more likely to get that loan. It is worth enquiring, if you do engage a broker/advisor whether or not their fee is included in the loan package as some are.

It's important to consider if you are looking for bad credit loan mortgages that you, research, reflect and act. In that order. You must also remember that the cost of an adverse credit mortgage is going to be more than a mortgage based on a good credit score. So if you are looking to repair or improve your credit score and can afford for 2 to 3 years to take out an adverse credit mortgage then this can be a good way to repair your credit score. If not please be careful as most foreclosures and repossessions occur with people with a bad credit history!

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