To get a mortgage with bad credit, the primary thing you need to have in the property you are trying to finance is equity.
And when I say equity, I mean the difference between the market value of the property and any mortgages or property liens currently in place.
Most private mortgage lenders will not provide a mortgage that in combination with any existing property charges would exceed 85% of the fair value of the property.
And the more equity you have in a property, the more bad credit mortgage financing options you will have available to you.
This is because at lower loan to value levels there is less risk of loss to both institutional and private mortgage lenders. Therefore, more lenders will be interested in the mortgage financing opportunity which means more competition and potentially better rates and terms.
Conversely, as the loan to value ration increases, the interest rate on a mortgage with bad credit is going to go up with less potential lenders interested in the deal.
It will also be easier to secure either a first or second mortgage on a smaller amount of funds compared to a larger amount when you are holding a bad credit profile.
Most private mortgage lenders will not consider funding requests over $500,000, making it more difficult to secure larger amounts.
Another element of getting a mortgage with bad credit is whether you have any secondary security you can provide to the lender. Some bad credit mortgage lenders will consider other forms of security such as investments, vehicles, currency, works of art, and so on. These additional items can further reduce the lender’s risk of loss if the loan to value request is at or near the maximum the lender will consider.
When we speak of bad credit, there are also varying levels of credit. If someone has a low credit score, but has one or more years of never being late with a payment, there are going to be more lenders interested in that particular deal compared to someone who not only has a low credit score, but also has a near term credit history showing late payments and/or defaults.
Both institutional and private mortgage lenders can provide a mortgage with bad credit. And in some situations, their offerings can be very similar.
To better understand how to locate and secure a mortgage with bad credit, I recommend that you give me a call so that I can quickly go over you situation and provide bad credit mortgage options for your immediate consideration.