With a large number of sub-prime lenders and investment groups filing bankruptcy, going under, and / or hemoraging money, it is not surprising to hear reports that mortgages for people with low credit scores are disappearing. Sub-Prime loans now make about approximately 20% of the entire loan market. A record high percentage. That worked when home prices were skyrocketing upward and the property was easy to move on foreclosure. With a tighter market and even losing equity positions in homes, mortgage companies are re-evaluating their portfolios. What does this all mean?
It means that traditional financing qualification methods will become more common place again. Your credit score will be a vital asset in qualifying for a mortgage or refinance of an existing mortgage. This is a problem for the millions of people who jumped into the housing market with no money down and an adjustable rate mortgage that they planned on refinancing after 2-3 years. Many of these people are finding out (or going to find out soon) that, at the least, they don’t qualify for the rate they thought they would be able to get, or at the worst, don’t qualify for a new loan at all. As the adjustable rates kick in people are going to be left with payments that they can not handle in houses that maybe worth less than they owe.
This problem looms large for many banks as they are held to very tight guidelines by the federal government as to how many bank owned properties (called REO for Real Estate Owned) they can handle. If they take on too many foreclosures that they cannot sell, they will quickly lose their license to sell mortgages altogether.
Where does this leave homeowners with less than average credit looking to refinance? Understanding your credit is the first step in getting your score up. Why is your score low? There are many factors that weight your score, such as number of trade lines, credit limits, outstanding balances, open balances, length of time trade lines have been open, tax liens, and bankruptcies are just the tip of the iceberg. Credit scoring is complex. Although scoring can be confusing and difficult to repair there are companies that can assist you in repairing your credit score. Like anything worthwile there is a cost but if you consider the cost of not doing it (paying higher monthly payments and more interest) it is certainly a worthwile investment.
It is difficult to predict exactly how the growing number of foreclosures will effect and be effected by the coming changes in the real estate market but most professionals and analysts are certain that inidividuals with low credit scores are certainly going to run into more trouble…
If you need assistance with credit repair, email us at info@bankstopper.com. We will be happy to refer you to several credit repair services with excellent reputations.
