Bad Credit Mortgages

admin — Wed, 07 Oct 2009 07:08:35 +0000

Just because your credit may be poor, obtaining a mortgage can be accomplished with ease. What makes a bad credit mortgage different than a standard one? A bad credit mortgage typically has a higher interest rate than if you were to have excellent credit. In most cases your creditor will start you out and an introductory interest rate; this will likely be a fixed rate for the first 2-3 years. This introductory rate is significantly greater than an interest rate you would receive on a regular 30 year fixed rate loan. However, after these 2-3 years your rate will adjust from time to time based on your credit score (you can also choose to refinance your mortgage as we’ll discuss later). In other words, people who look for bad credit mortgages are intending to improve their credit score over the span of the debt as to eventually get better interest rates than they would have with a fixed rate loan.

Furthermore, with a bad credit mortgage the lender can (and likely will) charge you some additional fees in comparison to a conventional home loan. These fees could be anywhere from 1-6% of the loan you wish to receive. This must be taken into account when trying to determine whether you’re more suited for a bad credit mortgage or a conventional one. Remember, although the interest rates and fees may be higher, if you have a plan worked out in which you are going to work on improving your credit, this option may be best for you.

2-3 years down the road after you’ve gotten yourself a bad credit mortgage, maybe you’ve improved your credit rating. You can then refinance your mortgage with a conventional loan at a much more desirable interest rate. So with the added incentive of cleaning up your credit report, we can easily start planning for a better future – today!

Keep in mind that getting even a small difference in the percentage of your interest rate (even 0.5%) will save your tremendous amounts over the span of your debt. Start rebuilding your credit score now by simply budgeting your expenses, and paying your monthly payments consistently and on time. If necessary, seek the help of a reputable credit counseling organization to form a plan and stick to it. It will be worth it when it comes time to refinance.

Next, the Bad Credit Refinance Guide will take a look at how to refinance a mortgage, something you may want to do in the future after building some credit.

Bad Credit Refinance Guide » Home

Bad Credit Mortgages