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!