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Bad Credit Mortgage Loans: More than Getting Your Foot in the Door
By Karen LawsonMortgage Credit Problems Columnist
People with bad
credit may feel challenged when buying a home. It's wise not to jump into
homeownership without doing some "home-work" in advance. Home buyers
with bad credit may assume that they'll have to pay top dollar for a bad credit
home loan obtained through a non-reputable source. Mainstream mortgage lenders can
often assist those with bad credit. The key to finding a bad credit mortgage
loan is establishing affordability and learning about how mortgage terms can
impact mortgage payments.
How Bad is Bad Credit:
Know Thy Credit Score
Mortgage lenders set interest rates and other loan charges
according to risk. To predict their risk of making bad credit mortgage loans,
lenders typically rely on FICO scores, commonly called consumer credit scores.
Free credit reports are available from the three major credit bureaus on an
annual basis. It's a good idea order a free credit report directly from the
credit bureaus at annual credit report.com.
This website also provides credit scores from each of the three major credit
bureaus (Equifax, TransUnion, and Experian.) for a fee. This information can be ordered online, by
phone, or mail. There are a number of services offering "free" credit
reports, but these may require membership or additional purchases.
Understanding Mortgage
Terms and Rates
A credit score below 720 can result in additional lender
fees, higher interest rates, or more restrictive terms, such as requiring a
larger down payment. Understanding all of the terms of any mortgage loan being
offered can help avoid problems similar to those experienced by homeowners who
weren't aware that they had adjustable rate mortgage (ARM) loans with rates hat
could increase after a period of very low payments. When shopping for a bad
credit mortgage loan, it's a good idea to ask plenty of questions of potential mortgage
lenders, and to make certain that all loan terms are fully understood before
signing any mortgage documents.
About the Author
Karen Lawson is a
freelance writer with more than 15 years of experience in mortgage banking. She
holds BA and MA degrees in English from the
About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.
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