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Hi, everyone, how are you? It's Leah Coss with the Mortgage Center and I wanted to talk about people who have credit scores or beacon scores less than 600 and even less than 500. There is, obviously, the understanding that if you have a credit score below 600 or below 500, which is very, very low, very, very, low, that you cannot get a mortgage. No, you can't walk into your bank and get a mortgage, but can you get a mortgage? Yes.
Now, are you going to be able to get a mortgage with just five percent down? No. Are you going to be able to get a mortgage with the best interest rates that are out there? No. But, can you get a mortgage? Absolutely.
Now typically, any situation or any lender that I use, whether it be a private lender or a B lender or even a C lender, which simply means you've got your A business and you've got your B and your C business. It's also, it was once known as sub prime. Technically, sub prime days are gone, but if you had to call it something, that's what the mortgage would be.
For those lenders that we would go to to get lending for you if you have below 600 or below 500, these lenders are going to be lending to you based solely on the property as collateral. They're totally above [indecipherable 01:35] lenders. These aren't like just some guy with a lot of money, although some of my lenders are like that. But, these are legitimate registered companies who lend and they lend strictly based on the collateral.
Now, they are going to want to make sure that you have some means of paying this back. They want to know that you make income somehow. But, they're not going to be a stringent of questioning as a regular bank would be. And, in fact, a regular bank just wouldn't even look at you. But with these lenders, this is all that they do.
And, they're a temporary solution, and they know that they're a temporary solution. So, if you're going to use one of these lenders, you're not locking in for a five year fix. What you're going to be getting is a one year fixed or a two year fixed or a one year open. And, it just depends on the type of lender that you go to to get this.
Now, what are some of the things that you're going to be charged? Well obviously, a higher interest rate. That's just the cost of a higher risk portfolio. As well, depending on whether it's an opened or closed mortgage in which lender you go to, there might be an upfront fee. And, this could be anywhere from one percent to five percent, depending on the lender, and again, the risk of the file.
The other thing is the amount of down payment that they're going to want to see in the game. Now, if you have below 600 but you make decent income and you can prove that, well then, you know you can probably get an OK rate, a really low fee or no fee, and you'll probably only have to put down anywhere from I'd say safely 25 percent as a down payment.
However, if you have below 500, well if you have below 500, you better have a good story for why you're below 500, a legitimate reason for that. But, if you have below 500 or even below 550, then you need a good story. You're probably going to have a higher rate. You're probably going to have a penalty but not always or not rather a penalty, but a fee. But, not always. There's lenders that have no fees. And, you're also going to need a higher down payment that could range anywhere between 25 percent all the way up to 35 percent.
Typically, you don't need more than 35 percent for any deal, but if you have more, obviously, that just makes it a safer deal for the lender and you're probably going to get better rates and fees because of it.
So, if you have bad credit or even horrible credit, if you have a legitimate reason for why, and legitimate reasons can range anything from I was laid off, I was in a car accident, I got cancer, or I got a divorce even because that can always be hairy, I was in a legal battle, my company was in a legal battle or something like that, legitimate reasons, a reason, a reason other than I don't like to pay my bills, then you can get a mortgage. You just simply have to throw money at the problem in the way of fees, interest rates and down payment.
So, if you have any questions about this, give me a call, Leah Coss with the Mortgage Center, always happy to help.
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