Dissecting the Myth of Mortgage Acceptance Based on Credit Score
It is difficult enough getting on the property ladder with the rising cost of homes in the UK, but when you are just starting out, credit is going to be a huge concern! Whether you are a newly married couple looking to buy your first home or a person with some amount of history (employment and credit), there will always be myths you need to dissect before launching your search for a mortgage.
Let’s look at some of the most common ‘myths’ so that you don’t set yourself up for failure. Actually, the key to mortgage acceptance is understanding how your credit score may, or may not, affect qualifying for a mortgage.
A Word About Bad Credit Mortgages
To begin with, most people believe that they cannot possibly qualify for a mortgage loan when they have less than exemplary credit history and scores. Actually, this is not true! While you may not qualify for a conventional loan from banks and other such financial institutions, it doesn’t mean that there aren’t subprime mortgages you can qualify for.
The difference may be the cost of those loans, but if they can get you on the property ladder, the benefits of owning your own home could greatly outweigh that extra cost. Bad credit mortgages can be obtained but first, you need to understand the concept of using subprime lenders for bad credit mortgage application and acceptance.
Alternative Financing Solutions May Be Exactly What You Need
Someone with a bad credit score may be tempted to continue paying high rents because they feel doomed to be rejected by mortgage lenders. Actually, it is quite possible to qualify for alternative financing available through solutions such as bridging loans. Simply put, a bridging loan is a property-backed short-term loan usually for a period of one to three years. The cost of financing a bridging loan is calculated into the loan and many don’t even require monthly or annual repayments because the entire loan becomes due at the end of the term.
In other words, a bridging loan is secured with the property you intend to buy and this gives you time to work on that credit score so that you can qualify for a more conventional loan. When you get that mortgage, you pay the bridging loan in full and then go on to make mortgage repayments over terms like 10, 15, 20 or 30 years, as per the loan you qualified for.
A Key Takeaway Not Yet Mentioned!
The point in all this is the fact that with bad credit you can qualify for certain types of mortgages. There are subprime lenders willing to take the risk by lending you the money you need to buy that piece of property. Unfortunately, it isn’t always the first subprime lender that will take that chance so you need to search several before finding the right one. Your key takeaway here is that every time a lender runs your credit your score will take a hard hit and you will lose points. Why not apply through a financial site that works like a broker? Let them run your score once before matching you with a willing lender? The fewer times your credit is run the higher your score will remain. That along with the fact that there really are subprime lenders are what you should take away from all this. That said? Happy house hunting!
Article was provided by iConquer (https://www.iconquer.com)
