It was recently estimated that around 40% of Americans don’t know what their credit score is – and the number of individuals struggling with insufficient or ‘bad’ credit scores is thought to be higher still. For many, the issue of credit doesn’t even arise until it comes time to secure a loan – whether that’s for a new vehicle, or getting their foot on the first rung of the property ladder.
A mortgage is likely to represent the biggest loan you will ever take out and, as a result, our ability to put a roof over our heads (and own it) is largely determined by our viability as borrowers.
Read more below about how your credit score impacts your ability to take out a mortgage, and how to enter into the next stage of your life, even if your financial history features a few bumps in the road.
Do Bad Credit Mortgages Exist?
Although credit scores represent one of the most crucial factors for lenders to take into consideration, it is also common knowledge that many otherwise reliable borrowers have simply encountered a bad spell at some point in their lives, and that a bad credit score should not necessarily write-off anyone.
As a result, there exist plenty of options for bad credit mortgages, offering a great opportunity for you to get into the property market, and to work towards improving your credit score in the process. One such option is Vylla, who is considered by many as one of the best mortgage lenders for homebuyers with bad credit. Click the image below for a comprehensive breakdown of their offers.
While some mortgage lenders impose more restrictions on the type of borrower they accept than others, it is now easier than ever to find and compare multiple options for your loan, even if you have bad credit.
How Do Bad Credit Mortgages Differ from Regular Mortgages?
The calculations behind your credit score come from a number of factors, all of which relate to your ability to repay loans and utilize credit responsibly. This is then used by lenders to determine the level of risk you present as a borrower, and whether or not they are comfortable with offering you the loan.
When lenders offer bad credit loans, they will typically seek to mitigate the risk by raising interest rates. This means that you will need to pay more each month (and, as a result, overall) than a borrower with a clean credit history.
As a result, bad credit mortgages are not all that different to other mortgages. They will not be offer the most competitive rates on the market, and you will need to take the time to think carefully about your ability to make the meet the repayments every month, but they needn’t be any more complicated than they are for any other borrower.
As with any other loan, missed repayments will risk harming your credit score further, so ensure that you have taken the time to sit down, review your finances, and work out a sound budget that leaves you enough money to get you through each month.
Securing a mortgage and finding a home is a rite of passage for millions of Americans. The process can be complicated, but the same holds true for just about anyone – whether they have an impeccable credit score or not. If your score has taken a hit in the past, don’t allow yourself to feel restricted to renting – there are reliable and trustworthy lenders out there, with loans tailored to individuals seeking to instate better financial practices, and to take on the commitment of purchasing their own home.