Home Buying with Bad Credit in a Seller’s Market
Qualifying for bad credit mortgages in London is possible, even in a seller’s market. While the process may be more complex, help from the right lending professional can help resolve issues and move forward. Here are some of the strategies that come into play in this type of scenario.
Understanding What is Meant By a Seller’s Market
Simply put, a seller’s market is an economic situation in which sellers are able to command higher prices for their properties. This can come about for a number of reasons. One has to do with the desirability of the area where the property is located. When there is a huge demand and only limited properties available, sellers can command prices that are in line with the current market value of the general area and not have to settle for anything less. It’s only when people lose interest in those areas that prices drop and buyers begin to have more leverage.
Getting Past the Bad Credit Issue
Damage to credit ratings occurs for a number of reasons. Some people have reasonably good credit until they experience some type of major life change. That change can be a prolonged illness that inhibits the ability to earn a living. Perhaps a job loss and a subsequent period of being out of work for several months is the culprit. Going through bankruptcy also wreaks havoc with credit scores.
The thing to remember is that while some lenders will look at the lower credit score and automatically reject the mortgage application, others who specialize in poor credit mortgages in London will want to look a little closer. It’s those lenders that people with poor credit want to focus on as they search for the best financing option.
How Do Things Look Lately?
Lenders who are willing to consider bad credit loan applications look closely at the applicant’s current financial situation. Perhaps the damage to the credit rating has to do with events that took place two or more years ago. More recently, the applicant has demonstrated the ability to keep unsecured debt low, pays utility bills on time, and in general seems to be slowly moving past those unfortunate events of a few years back. Couple this with the fact that the applicant does have enough monthly income to manage a monthly mortgage payment, and the lender may find that the risk involved with approving the loan is within reason.
The Issue of a Down Payment
With any type of bad credit mortgage arrangement, up to and including private home loans in London, expect the lender to require a higher down payment. This is actually to the benefit of everyone involved. A higher down payment means the debtor has less to repay over the life of the loan. The lender benefits because the down payment reduces the risk associated with providing the financing.
While the terms for the bad credit mortgage may include a higher rate of interest, remember that things can change several years down the road. Whether first or second mortgages in London are needed, there is always the potential to refinance after five or so years. In the meantime, the buyer gets to move into a home in a desirable neighborhood and make those payments rather than renting. Thanks to the positive reports the lenders submit to the major credit bureaus, that bad credit rating will look much better in a few years.