Mortgage Loan Bad Credit
Having a bad credit rating would not prevent you from getting a mortgage. There are a number of options for homebuyers who have a bad credit. Besides this there are many lenders that would try to take advantage of borrowers who have a poor credit rating. But there are some things which if followed can be used to stay away from mortgage lenders.
There are special lenders like sub-prime lenders that would give out mortgage loans to people with a bad credit history. There are a number of these lenders that are truthful to the borrowers and would be honest in their dealing. But there are quite a few who regularly are a part of scams and would take the advantage of people with bad credit history.
If you have bad credit history and are looking forward to take a mortgage loans then you should know that you would have to pay a higher interest rate as well as higher fees as compare to borrowers that have a good or a fair credit rating. There are both reasonable as well as bizarre interest rates as well as lender fees for the homebuyers with bad credit. In case the lender is charging you 5% more than the charges for a person with a good credit rating then he is charging you too much for the bad credit mortgage loan.
If you have a poor credit history and are looking forward to buy a house then you can protect yourself from being robbed by these predatory lenders. You should shop around and get quotes from a number of lenders. Once you get the quotes from these lenders you should compare them and then decide on the lender with whom you want to deal with. As a borrower for poor credit you should protect yourself from being taken advantage of.
The predatory lenders would take advantage of the borrowers is by charging them closing costs and points. In case the mortgage lender is taking advantage of your situation and is giving you promising terms for the loan then you can assume that the lender is not being honest with you. In case you get caught up with any such situation then you can be under the risk of losing your house. The loan would become difficult to pay for your budget. There are a number of predatory lenders that would structure the loan in such a way that you would be forced to default on the loan and then lose your house in foreclosure.
There are a number of sub-prime lenders that offer loans with no down payments however the interest rates are higher on these loans but buying a house would become easier. Besides unlike a conventional loan there is no requirement of private mortgage insurance. There are two types of zero down mortgage payments.
The types of Zero-Down mortgage Loans:
There is an option of 100% financing. This would offer a complete financial support for your property. Besides this there is another option called as the 80/20 financing which would finance your mortgage with two loans. Both the loans are given out by the same lender, however there are times that the seller of the house or another mortgage lender would be required to carry out the 20% mortgage. Out of both these options the 100% financing is easier to handle but not all the lenders offer these loans. The 80/20 financing is the more common financing option but if it involves the lender then it would involve some negotiation.
Qualifying for a Zero-Down:
For a Zero-Down every lender has their own criteria for determining the qualifications for a Zero-Down mortgage loans. Most of the sub-prime lender would require that if there has been as bankruptcy or a foreclosure then it should have been 12 months before. But when you take a bad credit mortgage loans from a conventional lender then they need it to be discharged 2-4 tears ago. If you have a credit score of 600 or higher then you can qualify for a zero-down easily. Besides if you have a cash reserve of 6-12 months in the form of money market, savings or any other liquid asset then this can also help you in qualifying for a zero-down.
In case you choose 80/20 financing where you negotiate with the seller who is carrying the second mortgage then you can qualify with a score of 560 for a sub-prime lender.
Zero-Down sub-prime lenders:
When looking for zero-down sub-prime lenders you can find both conventional as well as niche sub-prime lenders. You should make sure that you get quotes from as many lenders as you can and before you take a loan you should be sure that you are getting the lowest rate on your bad credit mortgage loan.
Besides this there are two types of interest rate options that you can have- one is the fixed mortgage rate and the other is the adjustable mortgage rate. It is easy to qualify for an adjustable mortgage rate (ARM) as you can enjoy lower rates when the rates in the market are down. If you take a fixed rate mortgage then you can have the option of enjoying a fixed interest rate for the full loan period. Taking an ARM is a better deal in case you have plans to refinance your loan within some years. Once you improve your credit history you can refinance your mortgage with a conventional mortgage but at a lower interest rate.
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