Do you qualify for a bad credit mortgage?

Credit scoring is a way to evaluate your suitability for a serious financial commitment

. It's a principal part of mortgage application because lenders want to know what risk is involved in investing a significant amount of money in your loan. Come to think of it, if someone approached you asking for a loan it would only make sense to learn a bit about his financial situation.

So what happens if your credit score is really bad?

Bad credit score doesn't mean you will not be able to get a mortgage. It will certainly be more difficult to find a good deal and in most cases lenders will charge premium interest rates, but in the current economy the market for bad credit mortgages thrives more than ever. You may rest assured that as long as you are willing to pay a bit extra for the first couple of years nothing can stop you from acquiring a property.

Why are you expected to pay premium interest rates?

As I've explained above, credit score is a representation of the risk involved in lending money to cover for your purchase. Bad credit rating means that you're not an ideal candidate for a large loan, and higher interest charges reflect less trust bank places in your financial stability. It's true that if it comes down to the worst, repossession is always an option but it is not what banks are after - they just want you to repay the loan month after month and simply cash in on the interest. They don't want to be involved in eviction orders and reselling properties.

Will you be forced to pay extra until the mortgage is paid off completely?

Definitely not! The whole beauty of bad credit mortgages lies in the fact that you can qualify fairly easily and during the first couple of years of timely repayments you build up a healthy credit score. Once you're more confident in your lending ability nothing can stop you from refinancing your mortgage with different company or negotiating better terms with an existing one.

Is it worth it?

If you chose the interest only type of mortgage you may not accrue much equity over those first couple of years but improved credit score and increase of property market value should more than make up for it.

Before making a final decision, however, you do need to consider all the pros and cons of a mortgage. The truth is, you may end up spending more money than while renting an accommodation. You will need to pay for all the repairs around the house no matter how big or small they are and if you fail to repay the mortgage regularly your home may be repossessed. But there's also a bright side to bad credit mortgages.

It's great to know that all improvements you do to your house are in fact increasing it's overall value. How many times have you been considering redecorating but decided not to simply because you would not be reimbursed for it by the landlord? Now every monthly repayment will remind you of getting closer to owning something that will stay in the family maybe even for generations, instead of just filling someone's pockets.

Bad credit mortgages are certainly worth looking into. As long as you know what you're doing and shop around for the best deal you will definitely become a homeowner really soon.

Do you qualify for a bad credit mortgage?

By: Grist Lok

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