Bad Credit - What Do Mortgage Lenders Expect?

Bad Credit - What Do Mortgage Lenders Expect? 

Bad credit loans may be used for anything the borrower wishes like house refurbishment, to contribute to the running costs of the family's home, a down-payment on a car, a vacation or any other pressing cause that requires an immediate injection of funds. Bad Credit Loans â€" Obtain Up To 00 in Unsecured Loans

The first step in preparing to purchase home or to refinance your current mortgage is to understand what a mortgage lender expects from you the borrower. Too often people just call a bank to see if they qualify for a bad credit mortgage without doing any research on their own about their own credit situation. There are many free ways to pull a credit report such as freecreditreport.com or you can pay 15 dollars and go to a bank that can pull your report. Make sure when you pull a credit report that it is a tri-merge report, meaning that all 3 credit bureaus are reporting on the credit report.
Now that we have that out of the way lets get down to the nitty gritty about what mortgage lenders want to see on a credit report and what they will accept.
The first thing an underwriter looks for is payment history. An underwriter does not want to see lates, collections, or judgments that have happened within the last 12 months.
They will however make an exception on a few bad things that have happened within the last 12 months ONLY if you have a high credit score. Why is that? The reason is that if the score is high it means you have a high probability of getting back on track to make your payments on time every month. If you have a credit score around 620 but have had lates within the last 12 months you will not be able to qualify for a bad credit mortgage loan product until 12 months have passed since the date of you most recent late. The second thing an underwriter looks at is the mid credit score. This score is calculated using special equations specific to each credit bureau such as the Fair Isaac model and beacon. FHA and VA loans require a minimum score of 620.
Conventional loans accept credit scores within the range of 680-740. If you have a score lower than a 680 absolutely look into a FHA or VA mortgage as they are amazing products that are usually much cheaper than a conventional mortgage loan. I cannot stress this enough, but buying a house is a process! If you can't qualify right now its OK! By researching your credit situation you can make a plan that can help you get to qualification status within the year. If you have had lates just work on getting on time and then just be on time for 12 months since the last late. Too many people just give up and think they'll never get into a house and ruin their credit even more. Don't get caught into this trap. Be proactive and work out a realistic plan to help you move to qualification material.
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