BRUISED CREDIT MORTGAGES
December 20, 2014 | Posted by: Dennis Street
Bruised credit mortgages, Credit problems, Credit challenged, Poor Credit, and Bad Credit call it what you want. In the Mortgage Industry it represents a financing issue! Can you get a Mortgage? Yes, but you have to be prepared for slightly higher interest rates and a larger down payment. Usually this will be 10% or higher down. At this time I see it as an opportunity to also help my client restore their Credit score by guiding them through various improvement tactics.
Credit scores can range from 350 (high risk) to 850 (low risk) and the scale is from 0-9. Then there is revolving credit “R” such as a credit card and Installment credit “I” such as an auto loan. A basic description is R1 or I1 is very good and a R2 / I2 is missing two payments and so on to R9 / I9 which means the credit granter has closed the account as being uncollectable. The higher you go in the scale the impact is a lower credit score and a very high risk to manage mortgage payments. That’s Bruised Credit!
There are a few factors in establishing a good credit score involving payment history, the dollar amount, and length of time for the credit, new credit and types of credit as well. When I see a very poor credit score it’s now time to work on improving the problem so that I get that person a mortgage. It may take a few months, 6 months or a year but you have to take it serious and commit to payment plan. This starts with making at least the minimal payment on all debts and selecting one of the bigger accounts which is probably at the limit to reduce the balancing owing as soon as possible. Then after accomplishing that, move on to the next account. Maxed out credit is viewed poorly. If it’s possible a consolidation loan might be advisable to reduce number of cards or loans you have. In the case where a client has a 1st mortgage already and needs to make some changes due to outstanding debts I will suggest using a private 2nd mortgage to accomplish paying the debts and letting the credit score climb back to the point it can be merged into a new 1st mortgage. A private 2nd mortgage is more expensive with rates and fees but sometimes it’s the best solution.