Is Your Credit Working Against Your Mortgage Options

Is Your Credit Working Against Your Mortgage Options?


Okay, now here's an interesting spin on an already risky product, let's give the bad credit crowd or the low credit score crowd, a chance to make an even worse decision, and finance a home they can't really afford and obviously will have trouble making on-time and dependable payments.
Sometimes, the products and situations that you see in the everyday world of researching these loans, is truly amazing and this is one of those classic situations. There are actually mortgage companies that advertise these interest only mortgage options for the consumer with the bad credit or slow credit record.
Now, what I'd like to know is why the mortgage company, in all good faith, would want to take a risk such as this. It's risky financing mortgages for consumers with bad credit, even if you're financing with good solid collateral, and it is well within their means to pay. You take the consumer and the mortgage loan outside those realms of operation, and you're just simply a problem waiting to happen.
Maybe we should have an agency that's known as the "mortgage police" and when there's a clear and evident violation of just good sound common sense, a whistle blows; the computer locks up, and now enters the mortgage police. I truly believe the consumer, if not the mortgage company would be a lot better off, especially when the consumer has time to really absorb the basic facts about interest only mortgages, and the mess they can make of your finances; in the case of the bad credit consumer, the further mess they can make of your finances.
With all the government control that regulates the mortgage loan industry, and all the statistics that are published about the consumer with a bad or slow credit rating, who do you suppose thought it would be a good idea to give them an interest only mortgage, that they more than likely will have further trouble paying? You wonder if Alan Greenspan is aware of situations like this, and if he takes it into consideration when raising the prime lending rate? Do you suppose there's a number factor for the "really going to default on these mortgages" segment of his equation that determines our prime rate?
Then you have the individual who simply has a low credit score because he has too much credit on revolving charge cards, store cards, etc. How does this affect his or her ability to get a loan? Well, it doesn't necessarily prohibit their ability to secure funding, of course not. What it does accomplish, and this is where the mortgage and lending companies have decided to make a lot of profit, is up the qualifying interest rate. So, if you're credit score is low, you will pay a higher rate of interest. You can still obtain the mortgage, but it will be at several points higher than an individual with an excellent credit score.
As our country spirals ever further into debt, (for if you bother to read any of the headlines lately, you know that we are at the lowest point ever in home mortgage equity. Savings are at a negative balance, and we continue to spend, spend, spend) we do not attempt to encourage a more saving attitude in our consumer advocacy branches of government; we make it easier to spend more. With the passing and implementation of the new bankruptcy laws, I believe we will begin to see even more Americans in trouble with their finances, and offering them more credit, interest only options, and second mortgages does not serve them well.
Let's hope Alan uses more foresight and plain good business sense than our mortgage loan brokers, especially the ones that came up with this genius idea!