Sometimes bad things happen to good people in unfortunate circumstances such as medical situations and family emergencys. During these tough times its not uncommon to have some bills go unpaid and possibly even missed mortgage payments.
These events can have devastating effects on their credit profile as well and some people find themselves in a position where their credit scores have fallen below the 500 mark.
Individuals who have a FICO score below 500 will find that most mortgage companys are unable to help them. But there is hope.
Hard money lenders often base their lending decisions on the equity contained within the property versus the individuals credit scores and credit profile.
This can be a solution to some situations and its important that the applicant explore all possiblities before making a final decision.
A below 500 credit score is by far a deal killer...Pending on the LTV needed, many lenders will offer many program options!
This is another reason for borrowers to shop brokers, depending on the source the broker uses for their credit file, the scores could vary enough to be offered significantly different rates and programs...
There are many companies who offer credit repair services for relatively low costs. In the end, any dollars you spend to make significant credit repairs will come back to you in the dollars you save month to month with your newly improved scores and available interest rates.
If you do find yourself needing to get a mortgage loan with a credit score under 500 you will probably be seeking a hard money source. Most good mortgage brokers have access to these sources. With hard money you can expect to be charged an interest rate anywhere from 5 to 10 points above the prevailing rate. You also will probably have to pay several points to originate the loan. If you find yourself in a situation where you need to get such a loan always try to get one with no pre-payment penalty so that you can refinance out of it just as soon as your credit situation improves.
Lenders who are able to help with sub 500 scores are called equity based lenders. Hard money lenders are only one type of equity based lenders. Portfolio lenders is another type. Although hard money lenders can also be portfolio lenders. Portfolio lenders just means they lend their own money and usually keep the loan in house instead of selling the note. Most of the equity based lenders are not score driven at all. These types of lenders also help with foreclosure bailouts.
Another program available for refinances is the family deed transfer program. This program is a unique program used for refinances when you have sub 500 scores. If you have a family member with good credit you can deed the property to them for 12 months. If at the end of the 12 months you can show where you made the payments through canceled checks and they have been on time, you will be able to refinance back into your name.
You may also want to ask you mortgage broker if they have a Mortgage Only program. Even though you may have below 500 credit scores, with a good mortgage payment history you may be able to refinance and pay off some of the negative debt on your credit report.
A good mortgage broker can offer advice and may even be willing to assist you with your credit and trying to improve your credit scores. There are many different factors involved with credit scoring that the average consumer is not aware of. By getting your credit score back over 500, the door will be opened to be able to use many more lenders than with a credit score below 500.
A good way to start is by getting a copy of your credit report. Many people have errors on their credit report, and these errors can have a negative impact on your credit score. By disputing these erroneous items, you could raise your score back up over 500, which is typically the minimum credit score you'll need to get a mortgage.
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is not a commitment to lend. Restrictions may apply. Information
is subject to change without notice. All loans are subject
to credit approval. Equal Housing Opportunity.