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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.
Article Source: http://www.article.directory4u.org
K.L. Huser is an industry expert and regular contributing author to Mortgage Info News. For this article and more, visit Mortgage Info News - Bad Credit Mortgage.
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