When in search of a home mortgage lender, homebuyers should remain up-to-date on the latest real estate trends, and familiarize themselves with different mortgage lenders. Mortgage companies or lenders service specific types of clients. Whereas some lenders offer a range of home loan options for many different credit scenarios, other lenders prefer a certain type of cliental. For this reason, choosing the right mortgage company is essential. Before doing so, homebuyers must be knowledgeable about their credit standing.
How Credit Influences Mortgage Loan Options?
With the variety of home loan programs, the number of people getting approved for mortgages with bad credit has risen. Still, there are certain disadvantages to accepting a bad credit mortgage loan. For starters, only a few number of mortgage companies are willing to offer these loans. Additionally, bad credit mortgages commonly offer unfavorable loan terms and rates.
Credit rating greatly affects the mortgage companies you can apply with. When consulting a mortgage broker or mortgage expert, these individuals will suggests suitable mortgage companies. If not, take time and educate yourself on the various types of mortgage lenders, and choose the company that matches your credit profile.
Prime Mortgage Companies
Prime mortgage lenders are companies that work with ideal loan candidates. In other words, persons applying for these sorts of loans have an excellent credit history, which is usually reflected in their high credit score. Qualifying for a prime mortgage loan is difficult. These loans are commonly offered by traditional mortgage companies, banks, and credit unions. Nonetheless, individuals who match the criteria of a prime borrower are offered the lowest rate and best mortgage loan options. Typically, prime mortgage borrowers will need a credit score of 680 or higher. Furthermore, these borrowers generally have the recommended 20% down payment.
Sub Prime Mortgage Companies
Unfortunately, the majority of homebuyers applying for mortgage loans will not qualify for a prime loan. Instead, these persons will have to settle on home loans offered by sub prime mortgage companies. Sub prime lenders service a range of home loans. These consist of loans for people with recent foreclosures, bankruptcies, no credit, and bad credit. Furthermore, sub prime lenders offer no money down home loans, affordable housing programs, and stated income loans for self-employed homebuyers.
Sub prime lenders have diverse lending requirements. A large percentage of sub prime lenders will not approve a home loan application if the borrower's credit score is lower than 580. Yet, some mortgage lenders market home loan approvals with credit scores as low as 500.
Deciding on the Right Mortgage Lender
Homebuyers have two options: either select a direct lender or use a mortgage broker. There are advantages to both alternatives. Direct lenders offer in-house financing. In this case, the loan application and approval process is fast. Unfortunately, this option closes the door on comparison shopping. Mortgage brokers are ideal for individuals preferring multiple lending options. As mentioned earlier, brokers act as mediators. Their task entails finding a choice of mortgage companies and home loan programs, from which their clients can choose between.