mortgage loans for bad credit
What is a mortgage loans for bad credit? Lets start first understanding what mortgages are and how they work and how they apply to the lending business and real estate loans originated today. Real estate has to be financed in some way and hence mortgages were originated and to facilitate the liquidity in the systems and flow of capital to invest in loans.
A mortgage is a financial instrument or claim against a real property. A mortgage is originated by mortgagee in the form bond or note- which is an agreement to repay the loan under certain terms and conditions. The borrower is referred to as the mortgagor. The lender, who creates your mortgage, is referred as the mortgagee. The instruments used are deeds of trust and mortgages and the property secured is called the collateral.
Mortgages are used in some states because they carry a clause that the lender can avoid a costly legal process should a default occurs and may regain control of the collateral which was used to secure the mortgage in the first place.
There are two different types of mortgages you should be concerned about. The first mortgages which are secured by first deed of trust and the second mortgages or home equity loans, which are sub-ordinate d to the first mortgages.
Buying a home and qualifying for a mortgage loan is called the loan process.
There are two types of borrowers for our discussion here:
A paper borrowers Those with pristine credit
B paper borrowers who have some credit problems and credit challenges.
Mortgage loans for bad credit implies those sub-prime mortgages that are for 620 FICO scores are less. The FHA mortgage may also be mortgage loans for bad credit. Mortgages that are for irregular criteria also fall in this category. For example many borrowers without income documentation will fall in the same category. The percentage of these loans originated is much higher than with people good credit.
There are fewer people with A paper borrowing compared to many people who apply for mortgage loans for bad credit. Mortgage loans with bad credit are more prevalent due to the fact credit bureaus keep derogatory information much longer on credit profiles than non-derogatory information. The other reason has been the Great Recession which started in 2008 and has wiped out a lot of credit profiles.