What You Need To Know About Bad Credit Mortgages

Introduction

At one time bad credit mortgages were easier to get then they are now. Many of these bad credit mortgages, which are referred to as sub prime, are believed to be what has caused the issues in the housing market. For that reason, lenders are much more careful now than they may have been in the past. Regulations and requirements are now much more stringent than they used to be. For this reason many are unable to get bad credit mortgages. This is not to say that no bad credit mortgages are made now, just that is is more difficult. There are also some things that those attempting to get bad credit mortgages should be aware of.

Step 1

Be aware that interest rates are higher on bad credit mortgages. Your monthly payments will be much more than the payments of someone with good credit borrowing the same amount.  You would probably be better off waiting for a while before buying a home. This way you could work on your credit rating and bring it up some before getting a mortgage.

Step 2

In addition to higher interest rates that should be expected with bad credit mortgages, also expect more fees added into the loan and closing. This is something else that those with bad credit must deal with when getting a mortgage.

Step 3

You should avoid banks when you are applying for a bad credit mortgage. You will have more luck with credit unions or other lenders. At this time only those with good credit are being approved by banks. Banks have the strictest lending rules.

Step 4

Having a large down-payment may help you when it comes to bad credit mortgages. If your down-payment is big enough, you are more likely to be approved. You will also have lower monthly payments each month. Begin putting aside as much as possible when you are planning to get apply for a mortgage. This is especially important when you have less than perfect credit.

 

Step 5

Pay down your credit card bills before applying for your mortgage. Having the balance owned at less than half of the amount you are able to charge looks better on your credit report.

 

Tips

Do all that you can to raise your credit score before applying for a mortgage. Even if you feel you will still be in need of bad credit mortgages, you can still raise your score. Every little bit helps.

Be sure to check your credit reports for errors. Check with all three credit reporting agencies. Each one may have different information.

You may want to think about a rent to own option for buying a house. This lets you live in the home while working on your credit. This way you may be able to avoid bad credit mortgages and qualify one for a better rate by the time your lease is up. The way these work is that you pay rent for anywhere from one to three years, a portion of the rent is held to be used to go towards your down payment. You work on your credit while living in the home, you then get a mortgage and buy the house.

 

Comments

Most Recent Articles