Bad Credit Home Loans: What do Credit Unions Have to Offer?

By Gabriel Traverso
Mortgage Credit Problems Columnist

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When you have bad credit, you are likely to pay a higher interest rate on a mortgage and there may be additional fees. This makes shopping around very important. The more mortgage lenders you check with, the more likely you are to get a good deal on a home loan.

Home Loans Through a Credit Union

If you've never looked into doing business with a credit union, you might be surprised to learn that they differ very little from any other banking institution. The primary difference is that a credit union is owned by its members, which can result in a more personalized way of doing business--and credit unions offer mortgage loans just like any other bank.

What's New?

Many credit unions are now offering what is called a Home Loan Payment Relief loan, or HLPR loan. This loan is similar to a hybrid adjustable rate mortgage (ARM). ARMs usually offer consumers an initial interest rate below the market index. You may have heard in the news lately that ARMs might be part of the reason behind rising foreclosure rates. It's true that many homeowners need to refinance out of an ARM before mortgage payments become unaffordable. The HLPR loan, by contrast, offers an introductory rate of one percent below the national average for the first three years. After three years, the loan jumps to the national rate average at the time the loan was closed.

Mortgages for Middle to Low-Income Families

Referring to the loan, Bill Hampel, president of the Credit Union National Association, said that they "would like to remind people that credit unions are a good deal." The HLPR loan is for low and middle-income families and household income must be no higher than the median for the area. If you think you might meet the qualifications,  perhaps you should add your local credit union to the list of mortgage lenders as you shop around for a home loan.

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