Recent Credit Event Loans: Explore Mortgages for Low or Bad Credit Scores

Many Americans struggle to maintain good credit scores and deal with significant levels of debt. In fact, the average American owes $105,056 in consumer debt. It’s not uncommon for that kind of debt to get out of hand, which can lead you to experience an event that negatively affects your credit score.

Whether you recently declared bankruptcy or defaulted on a debt, these types of events can have a major impact on your credit score. A poor credit score, in turn, can make it very difficult to secure the financing you need to purchase a home.

If your credit was negatively impacted by a recent event, you might want to consider taking out a recent credit event loan. Our non-QM credit event loans have flexible qualification standards, so you can still pursue your home-buying goals.

Can You Still Buy a House with Bad Credit?

Yes, you can buy a house with bad credit. Many people have gone through credit events that have a negative impact on their credit score, such as filing for bankruptcy, defaulting on a loan, or facing foreclosure. These events can have lasting effects on your credit, and make it hard to secure traditional financing.

If you have had a recent credit event, then it may seem impossible to secure a mortgage with many of the lenders on the market. For those with credit scores that fall below 680, certain financial institutions may demand unreasonable terms with excessive fees and high interest rates. However, it’s important to keep in mind that you do have options when it comes to securing a home loan, even if you have poor credit.

While 600 credit score home loans may sound completely out of the question for some lenders, Griffin Funding is a mortgage lender willing to work with low credit scores and borrowers who have experienced problems due to recent credit events and unforeseen circumstances. 

What Are Recent Credit Event Loans and How Do They Work?

A recent credit event loan is a type of lending service available to those who have undergone an event that damaged their credit score.

Since it can be next to impossible to secure a traditional mortgage with a bad credit score, recent credit event loans act as a more accessible alternative. Mortgages for bad credit offer flexibility in terms of who qualifies and the loan terms set forth between the lender and borrower.

Benefits of Credit Event Loans

If you’ve experienced a bankruptcy, foreclosure, or short sale, a recent credit event loan can offer a second chance at homeownership without the long waiting periods of traditional mortgages. Here are some key benefits of this type of mortgage for bad credit:

• Faster comeback after a setback: Recent credit event loans let you apply for a mortgage much sooner than conventional options, sometimes in as little as one day after the event.
• Low credit score mortgage options: These loans are designed to help borrowers with lower credit scores qualify, offering more flexibility than traditional loans.
• Alternative income documentation: Instead of relying solely on tax returns or W-2s, many lenders accept bank statements, which is ideal for self-employed borrowers or those with non-traditional income.
• Access to mortgage loans for bad credit: Even if your credit score has taken a hit, you may still be eligible to buy or refinance a home.
• Personalized loan solutions: Lenders take a more holistic view of your finances, not just your credit score, to determine your eligibility.

What Counts as a Credit Event?

A credit event is any occurrence in your borrowing history that typically has a negative effect on your creditworthiness or ability to borrow. Recent credit events may include:

• Filing for bankruptcy: Depending on the type of bankruptcy you declare, it can affect your credit score for as long as seven to ten years.
• Foreclosure, deed in lieu, or short sale: Failing to keep up with a mortgage or other type of home loan.
• Defaulting on a payment or loan: A failure to pay back a loan or accrued debt according to the terms of the contract.
• Restructuring debt: A decrease in the principal amount to be paid (changing the mortgage in exchange for a percentage of the house sale) or postponement of payment obligations (deferment).
• Obligation acceleration: If a debtor has defaulted on a loan and the payment becomes due.
• Repudiation/moratorium: A refusal to honor the terms of an agreement.

How Soon After a Credit Event Can You Get a Mortgage?

Griffin Funding offers bad credit home loans as soon as one day out from your bankruptcy, short sale, deed in lieu, or foreclosure. With that being said, typically the more time you allow to pass between the credit event and applying for a mortgage, the better the loan terms you can qualify for.

Even just waiting for one or two years can make a significant difference in interest rates, which, in the long run, can mean thousands in savings. In general, loan terms are best at about four years out. However, if you need to buy now, Griffin Funding can still work with you to find a solution.

Are There Ways to Improve Your Credit and Loan Terms?

Some of the ways in which you can improve your credit include:

• Make payments on time
• Pay off credit balances to lower debt-to-income ratio
• Review your credit history and dispute any mistakes
• Track your credit score on a regular basis
• Keep your credit usage as low as possible

While credit scores are important, there are other factors lenders can evaluate when qualifying you for a recent credit event loan instead of a traditional mortgage. Other determining factors in your loan terms may include the size of your down payment, your personal savings, steady employment history, or even a proven record of making timely rent payments.

How Does Bad Credit Affect Loan Terms?

Your credit score plays a major role in determining your loan terms. Generally, borrowers with high credit scores qualify for lower interest rates, while those with average or poor scores may face higher rates, stricter requirements, or even loan denial. This can make borrowing more expensive and limit your financing options, especially if time or circumstances prevent you from improving your score. 

Here are some common ways bad credit can impact your loan terms:

• Higher interest rates: Lenders often charge more to offset the perceived risk of lending to lower-credit borrowers.
• Larger down payment requirements: You may need to contribute more upfront to qualify.
• Fewer loan program options: Conventional loans may not be available, leaving alternative or non-QM loans as the main path forward.
• Tighter income and asset verification: Lenders may request more documentation to ensure you can repay the loan.
• More restrictive loan terms: This could mean shorter repayment periods or higher monthly payments.
• Mandatory mortgage insurance: Even with a sizable down payment, you may be required to carry private mortgage insurance (PMI).
• Higher closing costs or added fees: Lenders may include additional charges to reduce their financial risk, which can increase your closing costs.

How to Get a Mortgage with Bad Credit

To apply for a recent credit event loan, you will need to:

1. Schedule a discovery meeting with one of our loan officers where they will evaluate your circumstances.
2. Complete a loan application over the phone or online.
3. Lock in your rate based on the agreed-upon terms.
4. E-sign and return the initial application and disclosures.
5. Provide all requested supporting documentation.
6. Schedule an appraisal and pest inspection (if applicable) for the property.
7. Review all the final loan documents and meet with the notary to sign them.

When applying for your home loan, keep in mind that the more responsive you are and the faster you can return the necessary documentation, the more efficiently we can act on our end.