If you have bad credit and you are trying to get a mortgage loan, you may be forced to look into a bad credit mortgage. A lot of people do not understand exactly how these mortgages
work, and here we will debunk three of the most common myths that surround them. Bad credit mortgages are actually a viable way to help you get back on your feet and get the house you want, and by understanding the fallacies behind it you may find that a bad credit mortgage is the right one for you.
Myth #1: Bad credit mortgages are only for people with low incomes.
Myth #2: Self certification mortgages do not need to have proof of income.
- Many people are under the misconception that if they have a low income they can get a bad credit mortgage. This is not the case. Bad credit mortgage brokers cater to people who have credit problems so they are inclined to make the mortgage affordable. This means that the borrowers income level and affordability checks will be much more detailed and in depth. They want to make sure that you can afford the mortgage that you are applying for, and you may need to have an income that is slightly higher than the national average in order to afford the home.
Myth #3: A bad credit mortgage will hurt my credit record.
- Once upon a time…this was true. People could write down how much they earned on the application and that was all there was to it. Since the housing market crash, more and more lenders are insisting that you prove how much you bring in. These loans are designed for those borrowers who are self employed and cannot prove what they make the old fashioned way through paystubs. In this case they are required to submit their last SA302, a letter that is issued by the Inland Revenue. This letter shows the previous year’s profits and proves to the lender that they make enough money through the course of the year to support themselves.
- Anytime you apply for a loan it shows up on your credit record. However, the details of the loan request - which the potential lender wants that queried the file or what it was for - do not show up on your credit record. Future lenders have absolutely no way of knowing who queried your credit file, so they have no idea that you applied for a bad credit mortgage. What does damage your credit file is if multiple lenders query your credit report. The more potential lenders who access your credit record, the more points that will be added to your credit file. The higher this number is, the less likely it is that you will be able to qualify for a mortgage.
A good bad credit mortgage broker will be able to work with your credit file and get you the best bad credit mortgage possible for your needs. These loans are not bad loans. They happen to be good ones and will help people who want a home but have bad credit secure one.