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Is a Bad Credit Mortgage Available?
Here’s How to Obtain One
Bottom Line Facts:
Sub prime lenders will be your resource for a bad credit mortgage.
In spite of this year’s reported crisis in the sub prime lending arena, a mortgage loan with bad credit is still obtainable.
The Good News:
Lenders that specialize in mortgages for those with bad credit are competing for your business.
Although you will have to pay a higher interest rate for your mortgage, your home will still appreciate in value. Then, after maintaining a good payment history for a period of time, you may be able to refinance your mortgage at a lower interest rate and lower your monthly payments.
The Bad News:
If you have bad credit, mortgage options are going to be much more limited than for those with better credit because people with poor credit are considered higher risk to lenders.
Lenders are less willing to offer a good interest rate to those with bad credit because:
The competetion for their business is less and so the lender can easily charge high rates. Higher rates cause people to put more thought into their loan and as such, they become more committed to the idea of the mortgage because it costs more.
The Process - What You Can Expect
The lender will run the credit report and analyze the credit score, debt-to-income ratio, and employment history for all parties on the loan application.
You may also be asked to provide statements from your utility companies and other creditors to help form a complete picture of how you manage your finances.
The lender will then inform you of how much you can afford to spend on a mortgage and the terms of the proposed home loan.
When applying for a bad credit loan, ask your lender about the costs involved in obtaining the loan, the length and interest rate of the loan, and the ability to refinance at a lower rate down the road.
Sample Illustration of Terms for a Bad Credit Mortgage
Bad credit home loans can include a 2/28 home loan or a 3/27 home loan. The interest rate for a 2/28 loan is fixed for two years and fixed for three years in a 3/27 loan. This means that there will be a prepayment penalty during the first two or three years of the mortgage and the home loan cannot be refinanced prior to that time.
How to Apply for a Bad Credit Mortgage
Contact several lenders that specialize in mortgages for those with bad credit. There are numerous variations in the interest rates and terms offered by these types of lenders.
Have A Question About Bad Credit Mortgages?
Do you have a question about Bad Credit Mortgages and need a quick answer? Get expert answers here!
Bad Credit Mortgage - More Articles
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