What Is A Bad Credit Mortgage Company?
A bad credit mortgage company provides loans to borrowers with less than perfect credit. Borrowers with poor credit may have been led astray by past trends. There wasn’t exactly a mortgage company that specifically provided people with bad credit loans. Nowadays, having subprime credit does not disable a borrower from getting approved for a mortgage loan.
As a borrower with poor credit, you will find that there are countless companies that cater to those with such a financial condition. In today’s market, bad credit mortgage loan companies are becoming mainstream.
Sub-prime Mortgage Companies
Bad credit mortgage companies, also referred to as sub-prime mortgage loan companies, use FICO scores to determine how worthy a borrower’s credit is. A FICO score below 620 is typically considered to be score belonging to a person with bad credit. Although bad credit loans and refinance loans are being issued more commonly by companies, the rule of thumb is that a FICO score of less than 500 will typically not be considered for loan approval.
The major drawback of a hard money mortgage loan is that they typically carry higher interest rates because they are riskier than a conventional loan. Also, borrowers with bad credit usually have to put money down (upwards of 20% of the loan amount) to prove that they are worthy of assuming the mortgage responsibilities.
A Changing Market – The Non-Status Group
Since bad credit mortgage loans are becoming increasingly popular, the market is as competitive as ever. Consequentially, the line between good and bad credit is less distinct, as interest rates are reaching new lows. The new term “non-status” refers to borrowers who are self-employed and this cannot prove they are not a negative liability. Interest rates for members of this group are just about the same as those for people who have good credit.
The increase in competition has also led to companies seeking other forms of media to attract customers. Numerous companies began advertising on the Internet, making loan application forms available online. These mortgage firms tend to be successful because they make the loan process easy on their clients.
As usual, however, a bad credit borrower must be careful. Unfortunately, there are companies that convince potential clients that no other institution would assume such risk. The borrower now thinks that this company is the only one that will grant him/her the loan, so he/she is sucked into paying higher rates than he/she should. Therefore, it is always wise to shop around and do your homework. Research various companies and compare rates and terms before making your final decision.