Recent troubles in the sub-prime mortgage industry, featuring massive defaults and foreclosures, resulted in huge losses for sub-prime mortgage lenders. While it was their fault of this happening altogether, since the housing boom of the 21 century had caused irresponsible bank behavior in terms of loan underwriting, it affected nearly everybody: the house prices dropped and lending activities slowed down. While it seemed like everybody who walked into the door three years ago could get a mortgage, no matter what their income, credit score, and ability to repay it were, these days even people with good credit fear mortgage rejection.
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The Good News Is: Bad Credit Mortgage Market Is Still Alive!
Well, a lesson was learned. Government pumped billions into the banks to avoid financial chaos, so the things are getting back on track. High unemployment and loan defaults added to the list of bad credit borrowers, but the lending needs remained the same. As a matter of fact, most people have realized that post-crisis years with great deals on real estate are the best times to buy a house. Banks did as well: they realized that they have excellent opportunities for lending, with reserve rates being historically low and mortgage demand on the rise. They also have added protection in case of foreclosures, since it seems like house prices are not likely to fall anymore.
Therefore, a sub-prime mortgage market is back, ready to welcome people with bad credit. While more careful consideration is given to mortgage underwriting and stricter lending standards are enforced, credit scores are no longer a single proven path to obtaining a mortgage. Once repayment ability is established and documented, a mortgage will be provided, regardless of the credit rating of the borrower.
Enticing Mortgage Opportunities Are Within Short Reach
Information technology and competition do wonderful things. Besides being able to shop for real estate on the Internet, potential borrowers have wonderful opportunities for applying to mortgage online: hassle-free and easy. While a documented proof of income, expenses, and assets along with bank references is still required, a preliminary application and approval take place online. It is still important though, before applying, to check your credit and clear-up any discrepancies on the credit report, since it affects the interest rate and other mortgage terms. Another good idea is to pay off some small debts. By doing so one may not only improve a credit rating, but also lessen a debt-to-income ratio, that would allow taking on a bigger mortgage amount.
Still Have Doubts About Applying For Bad Credit Mortgage?
Many people wonder why banks would finance somebody with delinquencies or even bankruptcies, as they do not think it is possible. The answer is very simple: everybody needs a roof over a head. People have to pay for housing, no matter whether it is a rent payment or a mortgage payment. In case of a bad credit mortgage banks make money, since such mortgages typically feature higher rates.
Providing financing for people after bankruptcy is even better for the banks: such borrowers have learned their lesson the hard way, have no debt obligations, and will not be able to file another bankruptcy in the next seven years. They are a way lesser lending risk than one may think. So, without any doubt, mortgages are truly available to all borrowers, regardless of credit history.