Mortgage Loans For Bad Credit
Everyone knows how important the mortgage loan is when it comes to buying a home
. But not all homeowners are lucky to get approved for a good deal on a mortgage loan, usually because of a bad credit history. Many lenders are hesitant to finance anyone with bad credit. For this type of consumer today, companies have created loans that are designed for people who do have bad credit called bad credit mortgage loans. Due to a borrowers lower credit rating, a conventional mortgage is not always available because lenders see the borrower with a larger risk of not following all the terms of the loan.
Mortgage loans for bad credit have become very popular in todays credit market. They are meant for people who suffer with poor credit. There are many reasons as to why credit has been jeopardized, including accidents, loss of job, emergency, loss of loved one and various other reasons.
If you are someone who has missed payments on bills or fallen behind on loans, purchasing a home may seem impossible. Securing a mortgage loan with a good interest rate depends mainly on a good credit score. If you do have bad credit and are looking into purchasing a new home, you should consider a bad credit mortgage loan.
What is a bad credit mortgage?
This type of loan normally has an introductory interest rate for 2-3 years that is fixed. This rate is much higher than a rate someone would receive with the conventional 30 year fixed loan. After the introductory period, the interest rate on the mortgage will change periodically.
A bad credit mortgage loan is for people who have poor credit. They can be used for either purchasing or refinancing a home. A bad credit mortgage lender is one who helps those who do have bad credit. The lender who specializes in these mortgages is known as a sub-prime lender and the borrower of the loan is the sub-prime borrower.
There are several differences between a bad credit and traditional mortgage loan. The first is the rate; bad credit mortgages have a higher rate than a traditional mortgage. The down payment is also different. When applying for a bad credit mortgage, a higher down payment is needed compared to someone with good credit. There are some cases when people with better credit can apply for a mortgage loan with a very small down payment or nothing at all. Closing costs also differ between bad credit and traditional mortgages.
Benefits of a bad credit mortgage loan
1. Relief from a high mortgage
2. Provides a chance to improve credit
3. Relief from creditors calling
4. Relief from worrying about how you will get enough money for the mortgage
5. Helps you to avoid bankruptcy
There are mortgage loans available to consumers with all different type of credit conditions. When you begin your search for a home loan, whatever type of credit you have, it is important to be a well-informed borrower. It is important to plan enough time to carefully research all the options that are available; comparing conditions, terms and rates of many different lenders. This is most important for consumers who have bad credit. Some people with bad credit rush into an agreement thinking they will not get anything any better because of their particular credit situation. Today, this is just not the case.
When you begin to apply for a bad credit mortgage you will soon see there are numerous lenders who are offering this type of loan. There are many mortgage lenders who will consider a borrower for a lower interest rate if you have few debts or County Court Judgments. When you do apply for the mortgage loan, remember that you will be offered a higher rate than with a conventional mortgage loan. The interest rates will also vary between leaders and will depend on how bad your credit is.
How to find a bad credit mortgage
To find a mortgage loan for bad credit, you first need to go into a banking center or contact a professional on the phone. Today, there are numerous online lending companies who offer free consultations. You need to find out exactly where you stand in terms of your credit and a mortgage loan; what type of interest rate you may receive and if you even qualify for a mortgage loan.
Talking with a professional will help you in determining what your monthly mortgage payment will be. This can sometimes be very surprising, especially for people who do not realize how much a higher interest can affect the monthly payment of a mortgage loan.
General guidelines to determine if a consumer is a good candidate for a bad credit mortgage loan
1. A credit score that is below 620
2. More than 2 delinquencies of 30 days in the last 12 months on a mortgage
3. One delinquency of 60 days in the past 12 months on a mortgage
4. Bankruptcy in the last year
5. A debt-to-income rate that is more than 50%
6. Inability to pay all living expenses within a months time
by: Tony Shepard
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