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

Yes, you can still get approved for a mortgage with a bad credit score, especially through lenders that offer bad credit mortgage loans or recent credit event loans. Approval often depends on other factors like your income, down payment, and overall financial profile.

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.

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.

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
• A proven record of making timely rent payments

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.

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.

Non-QM loans offer more flexibility than traditional mortgages, making them accessible to borrowers with lower credit scores. While there’s no universal minimum, most lenders look for a credit score of at least 620. However, some non-QM loans cater to borrowers with scores as low as 500, depending on their income, assets, and down payment size. The lower your score, the more you may need to compensate with higher reserves or a larger down payment.

If you’re looking for a mortgage for bad credit, expect to pay a higher interest rate than usual. Since recent credit event loans involve more risk for lenders, rates tend to be higher than conventional mortgage rates. 

However, there are steps you can take to qualify for a better interest rate. For instance, borrowers with higher credit scores, larger down payments, or substantial reserves may qualify for better rates. So try to optimize your credit score before applying and save for a larger down payment.

Yes, most lenders require a larger down payment for borrowers with recent credit events like a bankruptcy, foreclosure, or short sale. When getting a home loan with bad credit, you’ll typically need to put down at least 10% to 20% of the home’s purchase price. The exact amount depends on the recent credit event and other financial factors like income stability, liquid assets, and available reserves. 

Some lenders may offer lower down payment options if you demonstrate strong compensating factors, such as significant cash reserves or a high-income job.

Absolutely! Many borrowers use recent credit event loans as a stepping stone until they qualify for a traditional mortgage. If your credit score improves and your financial situation stabilizes, you can refinance into a different mortgage, potentially securing a lower interest rate and better loan terms. 

Most lenders require a seasoning period, which is usually six months to two years, before you can refinance, depending on the lender and loan type. Make sure to monitor your credit, make on-time payments, and improve your debt-to-income ratio, which can help you transition into a better loan option in the future.