A mortgage is one of the most important investments you will ever make. It gives you a home, place of business, or allows for a major source of cash for an important project. Despite this level of importance, some people fear that they might not be able to get a mortgage loan due to poor credit.
If you have made mistakes but need a mortgage regardless of those past errors, rest assured that there are ways in which you can get a residential or commercial mortgage at a reasonable rate if you look in the right places.
What Creates Bad Credit?
Everybody has a credit score, and that score reflects how confident lenders are that you will pay a debt in a timely manner. Your score is based on many different factors, ranging from the number of revolving accounts you have open to the number of times creditors have performed checks on your history. Most commonly, somebody finds themselves struggling with a bad credit score due to either a high amount of debt or a series of missed payments.
Other factors can reduce your credit score as well, however. These include opening many new accounts in a short period of time or having a low amount of available credit. Generally speaking, if your accounts have greater than 30% of their available credit in use, that will lower your score until you pay them down some.
Mortgage Options for People with Bad Credit
In Canada, somebody who has a bad credit score may find it difficult to secure a mortgage from one of the country’s major lenders. In these cases, the easiest option for many is to seek out a Blender. These lenders offer mortgages and other lines of credit to people with poor credit histories.
They do take some steps to protect themselves, such as offering mortgages for shorter terms than the 15- or 30-year standard. If you have been turned down for a mortgage by a major lender but still think that you can make the payments needed on the loan, you should consider looking into Blenders as a possible solution. This can help you in the short term and may improve your fortunes years down the line.
Possible Uses for Your Mortgage Loan
Usually, people use a mortgage to buy a residential home or commercial property. Some uses of your mortgage loan can have more flexibility than that. For example, if your credit score is hampered by a lot of credit card debt, you might be able to use a home equity mortgage to consolidate that debt and lower your monthly payments.
This has the added advantage of putting more money in your pocket so you can either reduce outstanding debts further or start saving more in case you face a time of financial hardship. If you desire a home equity line of credit or other mortgage option, you should contact a mortgage professional who can review your situation and help guide you through the process.
Rebuilding from Bad Credit
When you secure a mortgage with bad credit, you should look at it as an opportunity to begin a new upward trend for your credit score. By diligently making your payments, you reduce your overall debt and prove your reliability to potential future creditors. Just paying your new mortgage loan is just one step, however. Ideally, you should also work to pay off your other debts and increase your credit standing as much as possible.
The best way to do this is to pay more than your minimum monthly payment on your revolving credit accounts. If you can’t do that, try to focus on paying one account at a faster rate while maintaining your monthly payment schedule with other accounts.
Bad credit is a hurdle that you need to clear, but it is not a barrier. Even if you can’t get a mortgage loan from a major lender, you have other options available to you if you search and work diligently to repair your credit. Mike Sergeev for Commercial mortgage company in Toronto, Canada.
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