Bad credit is no longer a hurdle in getting a home loan. A few years ago a poor credit score or a bankruptcy or foreclosure would have meant you encountered difficulties obtaining a mortgage loan. In case you were able to get such a loan, you would have to agree to a very high rate of interest and to pay a large deposit.
Mortgage loans are now more easily available for people with bad credit. Note they are sometimes called ‘poor credit mortage’ loans.
Recommended Steps
1. If you have bad credit and you need a mortgage loan, you should first obtain free copies of your credit reports from all the three major credit agencies:
Equifax, Experian and TransUnion.
2. Check these reports. Make sure there are no mistakes in them. Find out whether the accounts regarding the bankruptcy and foreclosure are showing collection or charge-off. If you find any errors, aim to get them rectified.
If your report shows any foreclosure or bankruptcy, all the information regarding these should be listed under one item.
Note that your credit score will be affected each time your credit report is requested - so you should only apply to one mortgage agency who might approach many lenders with your application.
3. The deposit you have to pay as part of your bad credit mortage will depend upon your credit score. If you have been able to increase your rating to about 580 to 600 in a period of about two years since your bankruptcy, you might obtain 100% financing. Additionally, you might also be able to get a good interest rate in the region of 7% to 7.5%.
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