Homeowners Can Look Beyond Credit Scores

“Home is a place you grow up wanting to leave, and grow old wanting to get back to.” - John Ed Pearce

A hand to hold onto and a heart to listen to you, is what we expect when we visit a lending company during financial crisis. The fear of denial lurks in our minds but a ray of hope takes us to lending companies expecting words of wisdom, empathy, guidance to give us a second chance.

Owners planning to refinance a home mortgage often face challenges, especially if they have low credit score, below 620. The common practice is to approve loans on the basis of credit scores. Doors are open for homeowners with high credit scores. However, for people with low credit scores, the scenario is different.

• Common Reasons for Low Credit Score

Some of the common reasons for low credit score are:

• Late or missed bill payments
• High level of current debt
• Bankruptcy or foreclosure
• Missed credit card payments
• Recently closed credit card

• Effect of Low Credit Score

Homeowners or people, who have lost their homes and wish to buy a new one, find it difficult to find financing when they have a low credit score. Lending companies reserve prime loans for applicants having high credit scores. Sub-prime loans are offered to people with low credit scores. The loans have low teaser rates, high fees and high prepayment penalties. However, the process is not as rosy as it seems. There are hidden facts that applicants are not aware of. Initially, the low teaser rates attract homeowners trying to minimize monthly payments. However, in course of time, the interest rate goes up. Eventually, homeowners who default on loans can lose their homes built with dreams, aspirations and toil.

There are some lending companies that believe in the philosophy of empathy, to help borrowers during crisis. With housing market recovering at a rapid pace, increase in household wealth can be projected. This will be beneficial in home mortgage financing. There are companies offering mortgage and lending options to help borrowers sustain the crisis. Instead of focusing on numbers, they take a customized approach to hear out the problem of buyers, get an idea about the current financial status of the borrower and offer a suitable plan to lead way to their dream home.

Homeowners or people aspiring to make an abode for themselves can look beyond the three digit number.