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Distressed creditHELPFUL INFORMATION ABOUT DISTRESSED CREDIT As a Maine based, Maine owned company, our goal is to serve as many customers looking for mortgage loans in Maine as possible. This includes customers with credit problems that might prevent them from getting a loan at the best rate because of credit issues. We have helped hundreds of customers purchase homes and refinance homes even though they have credit problems. Here is some information that might be helpful. What determines if someone has distressed credit and just how low can it be? A customer with Distressed Credit is someone generally who has a middle credit score (see below for more details on this) that is low enough, usually below 600, so that they do not qualify for loans at the best rates. They still, however, usually can obtain a loan. There are three companies that generate credit scores on a credit report (for more details , see below). Borrowers are usually rated by the “middle” of the three credit scores. The good news is that these customers are just as valuable to us as any others and can obtain a mortgage loan in most cases. The big difference is that rates are higher for people with credit scores in the 500 –600 range and the variety of loan programs is more limited. What if my credit score is below 500? If a credit score drops below 500, then the chances of obtaining a mortgage are very slim. Customers with this problem should contact us about steps to take to improve their credit score. Can a borrower with distressed credit obtain a mortgage to purchase or refinance? The answer is usually “yes.” Interest rates are usually higher. And many times we suggest customers obtain a loan that is at a fixed rate for the first two or three years, and then starts to adjust annually. By doing this, we can give them a lower rate. The goal for many people is to improve the credit score while paying on the mortgage for the first two years, and then refinance to a better interest rate using the newly improved credit score before the old rate starts to adjust. Can someone with distressed credit obtain a loan at 95% or 100% of the value of the property? Distressed credit does not prevent someone from getting a loan for 95% or 100% of the purchase price or value of the property, but it does make it more difficult. It really depends on just how low the credit score is and what positive factors there in the application, such as solid income or other assets.
Borrowers with distressed credit do not fall into any single category. The likelihood of getting a loan and the actual interest rate are determined by not only by your specific credit history and credit score but also by other factors:
Both of these factors, combined with your credit history, work to determine the risk level of the loan. Is it harder to get a distressed credit loan for a single wide mobile home than a double wide or a stick built home? The simple answer is that it almost impossible to obtain a mortgage for a customer with distressed credit when they are buying or refinancing a single wide mobile home. Double wide mobile homes are in a better category.
Can I get a mortgage which gives me money to pay off or pay down high interest rate credit card debt, home equity loans, or car loans? Absolutely, yes. Many of our customers come to us with credit card debt, car loans, and existing mortgage debt that is demanding monthly payments that are just too much for them to afford. Moreover, they have interest rates on some of this debt that is so high they may never get caught up. The solution for most of these customers is to take advantage of the new value in their homes that has come from the recent high increases in property values in Maine. They are taking out new mortgages at lower rates and with lower monthly payments than they have on their previous combined debt. In many cases there are credit issues, but we can offer loan products where the rates are still low enough to that is clearly makes sense to refinance. How do credit scores work? Most lending these days is underwritten using credit scores for consumers that are based on their credit history. These scores can range from 450 to just over 800. A score that is under 620 is one that begins to be a problem in terms of getting the best interest rates. Borrowers can obtain a loan with scores all the way down to 500. The rate on loans start going up as the middle credit scores drop from 600 to 500. A middle score less than 500, usually precludes obtaining a mortgage. What factors make up a credit score? Your credit score is generated by three private companies who obtain data from lenders and registry of deeds, and collection agencies around the country. These companies (Experian, Trans Union, and Equifax) use different scoring systems and data, but they usually come out quite close together. Each consumers credit report usually has three credit scores, one from each company. Decisions by lenders are usually made based on the middle score of the three scores. The following factors weigh on the credit score:
How do I repair my credit and remove any errors? The professionals at Maine Home Mortgage can give you guidance in this area. There are strict state and federal laws to assist in this area that help protect the consumer. Please give us a call at 1-800-471-5730, or 1-800-LOW-RATE. Can I get a Credit Report for FREE? Under state and federal law you have a right to a free credit report every 12 months. For more information call the Maine Office of Consumer Credit Regulation
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Maine Home Mortgage, your experienced, statewide mortgage lender and mortgage broker, offering the lowest rates for all kinds of home loans, whether for purchase or refinance. Check rates and apply on-line, or call 1-800-471-5730. It only takes a five minutes, so apply now.
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