All hope is not lost. Not everyone can qualify for the A loan, with the best rates. Even people with good credit scores may have a reason for not qualifying. So don't feel bad if you have a bad credit rating. The goal is to get into a house of your own. There are many options for people with a bad credit rating. Even if you don't qualify for the A loan, you may still qualify for a B, C, or even D loan. While you're taking the time to build up your credit, you can benefit from a bad credit rating mortgage and get into a house.
What Is A Bad Credit Rating?
A bad credit rating comes from having several negative entries on your credit report such as late payments, high credit balances and judgments or bankruptcies. When getting ready to by a house, you need to get a credit report to see exactly what is in your file. You can get a free report from each of the major credit reporting agencies once a year. Don't get all your free reports at one time. Stagger ordering the reports and you can get a new report every four months. It is not uncommon to have errors on your credit report. Each report comes with the procedure to correct errors that you find.
If you do have legitimate bad credit, you still may be able to get a decent loan. If a health emergency, unemployment or something understandable is the cause of your problems, you can submit a letter that will go along with your credit report explaining your circumstances.
Money talks. Getting a good loan rate is all about credit risk. If you can reduce your credit risk, you may still qualify for an A loan. Having a large down payment may reduce your credit risk and prime lenders may take another look at you. If not, there is nothing wrong with getting a bad credit rating mortgage if it gets you in a house that you want.
Bad credit rating mortgage loans or B, C, and D loans are also based on your credit risk. Credit risk includes several factors such as your credit score, income, and potential down payment. Logically, a B loan will have higher rates than an A loan, but lower rates than a C or D loan. Your overall credit risk will determine what category you will fall in.
Use B, C, or D loans for short term financing. Subprime financing, which includes B, C, and D loans, offers a short term solution until you improve your credit score. If you believe your financial situation will improve and you plan to refinance to get better rates in the future, an adjustable rate mortgage (ARM) may be a better choice than a fixed rate mortgage. You need to fully understand the terms of the loan and when and how the rate will adjust. Get informed about the different types of loans before you decide on either type. Compare the risk levels and interest costs over the long term.
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