If you are an individual with a poor credit history, you may be interested in obtaining a no credit check mortgage loan. This may be an attractive option if you have been turned down for a more conventional home mortgage loan due to problems with your credit history such as bankruptcy, foreclosure or defaulting on another loan.
A no credit check mortgage loan may make it possible for you to obtain a home when you thought that you might never get someone to lend you money, but it does not come without its own risks and drawbacks that should be carefully weighed before searching for bad credit home lenders. Make sure you understand all that you need to know about obtaining a mortgage loan with no credit check to determine if this type of loan is right for you.
Understanding A No Credit Check Mortgage Loan
By definition, a no credit check mortgage loan is, as the name implies, a home mortgage loan that is not based on your credit worthiness. In fact, the lender will not even check your credit before offering you the loan. Obviously those looking for a mortgage loan with no credit check are people that have poor credit - if their credit was better, they'd be looking to obtain a more conventional loan, which comes with more attractive interest rates, fees and terms.
Where To Obtain No Check Mortgage Loans
To get a mortgage with no credit check, a person will need to go to a financial institution that is created with money from a private money lender, or he or she can go directly to a private lender. These individuals or institutions do not have to go through the same protocol that banks and other financial institutions do, so they are able to determine their own criteria and terms for offering loans. A no credit check mortgage loan is usually a last resort option, since it carries much higher interest rates and fees than other types of loans. This is because private investors are willing to take the risk and gamble on those who would not qualify for other types of loans in order to obtain a higher rate of interest and hopefully, a higher rate of return on their money.
Types of Properties That Can Be Purchased With a No Credit Check Mortgage Loan
Since a company funded by private monies or a private investor can determine its own criteria for lending money, it is up to the individual lender to decide what types of property they will or will not lend money to purchase. Overall however, you can usually get bad cedit loans, no credit check required, for single family homes, town homes and condominiums. It is more likely you'll get a no credit check mortgage loan on a home located on a small lot of land than a large one. Manufactured homes, those on stilts or in flood prone areas may not be easy to get loans for, no matter what type of lender you are seeking.
Drawbacks of a No Credit Check Mortgage Loan
The biggest drawback to this type of loan is the interest rate and fees associate with the loan. This is usually a last resort loan and will only be enticing to someone who can't borrow money some other way. Since investors take a great risk in lending to someone without first doing a credit check (and assuming that the person has no credit or very poor credit), the investor needs to offset their risk with an increased return in the form of high borrowing rates. Another drawback is that these last resort lenders typically require higher than usual down payments to help offset the risk, with down payment percentage requirements sometimes as high as 25% or more.
Applying For a No Credit Check Mortgage Loan
There is still an application process to go through before getting hard money loans, even if there is no credit check required. In many cases, the lender is interested in the debt to income ratio of the person applying for the loan. Factors that affect the debt to income ratio include credit card payments, auto loans, other personal loans, child support payments, payday loans and any type of revolving credit or open line of credit. Paying off another loan can help to reduce the debt to income ratio if it is too high, making it more likely that you will qualify for the loan.
California Bad Credit Loans