Bad Credit Mortgage Lenders – Make the Most from a Bad Situation
Many people claim that bad credit mortgage lenders are to blame for the myriad of problems related to the mortgage lending today. However, these bad credit mortgage companies probably provided a better service to their communities than did the more conventional banks and loan companies. A bad credit mortgage lender spends a lot more time working with their clients than do most traditional lenders. Attempting to help a family that has suffered from a credit collapse is a time consuming and frustrating task that requires patience and perseverance and a bad credit mortgage broker who has a high closed loan to application ratio is worth their weight in gold.
Bad Credit Mortgage Brokers – Look Local for Success
When searching for a bad credit mortgage company, it is best to keep your search limited to a local area. While this will significantly reduce the number of brokers from which to choose, the broker that you do choose will have a better idea of the local market and how to structure a loan that will be accepted by a lender. It will also provide you with the chance to meet with the broker in person and many times a broker can make a better determination of your ability to pay during a live interview than when they talk to someone over the phone or just see an application. Bad credit mortgage lenders are people who are willing to take a risk and while they are compensated for taking the extra risk, they have no desire to have loans they made go into foreclosure. A broker who consistently has loans that go into foreclosure will soon find no market for his clients and be out of business. Therefore, while they accept a higher risk they also spend more time looking at the person, and not only what is put down on a loan application.
Bad Credit Mortgage Lender Requirements
It usually requires two to three times as long to complete a loan for a client with credit issues than it does to complete one for someone who has never had any credit issues. This extra time is usually related to additional requirements that the mortgage lender will request. A loan with no credit issues usually requires a minimal amount of items from the borrower. These items include:
- Proof of current income (usually two months worth of paycheck stubs)
- Proof of employment (usually two years W-2 form from the same employer)
- Two or more years of continuous employment with the same employer
- Proof of on time payment of rent or mortgage for two years
- Acceptable Credit Report
Bad credit mortgage lenders may also require:
- Down payment assistance or proof of seasoning
- Letters of Explanation for credit issues
- Additional years of employment
- Signed copies of complete tax returns
- Payment of some delinquent items on your credit report
- Release of Liability for some items on your credit report
- A Cosigner
- Two or more mortgage payments held in escrow or in a qualified savings account
- Other items as requested by the lender
For some these additional requirements may seem like overkill and actually keep them from getting a loan, but as stated earlier lenders do not want to make a loan and then have it go bad. The intention of everyone involved in the mortgage loan process is to see the loan closed and then eventually paid off. This is the only way that everyone wins. The extra requirements help the lender make a good decision about a loan. It also helps a broker to counsel a borrower on what it takes to get a loan if they are turned down the first time.
Bad credit mortgage brokers are often accused of inflating fees in order to take advantage of those in need. Loan brokers are normally paid when a loan is closed and a broker who spends the majority of their time working with poor credit borrowers will have fewer closed loans and must make up for this by increasing their fees. A broker who works with the credit challenged will also pay for some required items for the client in anticipation of the loan closing. When using a bad credit mortgage broker make sure that you know exactly what fees are being charged and what you the borrower are responsible for from the beginning.
Attempting to get a home loan when you have had credit problems in the past is a challenge. Finding the right company to help you with the process is just as challenging. However, once you find a broker that you want to work with, remember that they are on your side and should be able to walk you through the entire process. Bad credit mortgage lenders have a place in the mortgage process and if you need one, make sure that know what the process entails before you get started.