The bad credit mortgage is often called a non-prime mortgage or alternative lending and is offered to homebuyers in with low credit ratings. Due to the low credit rating, conventional mortgages are not offered because the lender sees this as the homebuyer having a larger-than-average risk of not following through with the terms of the loan. Lenders often charge higher interest rates on non-prime mortgages in order to compensate for the higher loan default risk that they are taking.

If you have a poor credit score you can expect to pay a higher rate of interest on your loan & in most cases supply a larger down payment. In most cases gift funds are allowed.

  • Prior Bankruptcy Okay!
  • Prior Foreclosure Okay!
  • Short Sellers Okay!
  • Prior Modifications Okay!
  • Credit Scores 500 and up!

The bad credit mortgage is often called a non-prime mortgage or alternative lending and is offered to homebuyers with low credit ratings. Due to the low credit rating, conventional mortgages are not offered because the lender sees this as the homebuyer having a larger-than-average risk of not following through with the terms of the loan. Lenders often charge higher interest rates on non-prime mortgages in order to compensate for the higher loan default risk that they are taking.

If you have a poor credit score in most cases you will need to supply a larger down payment. In most cases gift funds are allowed.

Candidates For Bad Credit Mortgages

Some people with poor credit profiles or a small down payment may have trouble borrowing from conventional lenders. One alternative to consider is obtaining a Federal Housing Administration loan or a non prime mortgage. These loans have liberal underwriting requirements which allow people to purchase a home with a poor credit score and as little as a 3% down-payment. Non Prime and FHA borrowers can qualify with credit scores between 500 and 620. Veterans may want to explore low-cost VA loan opportunities.

Most borrowers use a non prime mortgage with the home buyer planning on refinancing at some point into a more appealing loan with a lower rate. However if the homeowner still has outstanding credit issues or the mortgage market tightens up then they might not be able to refinance. The higher rate can cause a prohibitively higher monthly payment, & an inability to refinance can mean a loss of home ownership.

The below items are the general guidelines that can be used as a rough rule of thumb when determining whether a consumer may be a candidate for a non prime, FHA or VA loan:

  • 1 day out of foreclosure, short sale, bankruptcy or deed-in-lieu
  • Loans up to $1 million
  • Credit scores down to 500
  • Up to 100% LTV
  • DTI up to 50% considered
  • Owner-occupied, 2nd homes, and investment properties
  • Non-warrantable condos considered
  • Jumbo loans down to 500 score
  • 5/1 ARM or 8 – 30-year fixed
  • No pre-payment penalty for owner-occ and 2nd homes
  • No active tradelines OK with housing history
  • SFRs, townhomes, condos, 2-4 units
  • Seller concessions to 6% (2% for investment)

About Us:

Smart Mortgage Centers is comprised of a team of qualified mortgage professionals who provide programs specifically for consumers whose circumstances may not meet standard Agency financing guidelines. With services available to consumers in Rockford, Illinois Smart Mortgage Centers is proud to serve as your team of non-agency lending specialists.

Business Hours:

Monday – Thursday 9am – 7pm

Friday 9am – 5pm

Saturday 10am – 3pm

Sunday – By Appointment

Ph: 630-904-1800

24 Hours: 888-416-0920

Creditworthiness is not determined exclusively by credit scores. A couple of missing credit card payments does not mean that a consumer is doomed to receive double-digit interest rates. The only way to know where one stands is to apply for the loan and speak to a Smart Mortgage professional specializing in mortgage loans. Call (888)429-6601