Bad Credit Loans: Get Back on Track with Timely Payments

By Karen Lawson
Mortgage Credit Problems Columnist

You have bad credit, and need a mortgage loan. The right loan can help you help you improve your credit, but the wrong one can stick you with escalating rates and unmake-able payments. Shop first--you may qualify for lending programs that provide 30 year fixed rate loans to borrowers with bad credit. These loans offer interest rates that drop over time in return for making payments as agreed, and they eliminate potential problems associated with changing interest rates increasing payments.

Avoiding Bad Credit Mortgage Problems

If you have bad credit, try a variety of subprime lenders but don't forget full-service mortgage companies either. You may not have to get a sub-prime mortgage after all.  Mortgage industry leader Fannie Mae has developed a 30 year fixed rate mortgage product designed to help people with bad credit buy a home. Here are some features of mortgage loans made under this program:

• Minimum Cash Required: Borrowers may put as little as $500 down from their own funds, or may provide up to 3% down payment from flexible sources. Up to 100% financing is available
• Predictable P&I payments: A 30-year-fixed-rate mortgage provides steady principle and interest (P & I) payments for the life of the loan.  (Please note that amounts collected for payment of property taxes and hazard insurance can vary according to changes in amounts needed to pay them).
• Timely Payments Reward feature: If you make 24 consecutive payments on time you may qualify for up to 1% interest rate reduction. This will lower your monthly payment and can help save costs associated with refinancing to get that lower interest rate.

Loans made with less than a 20% down payment will require mortgage insurance, which increases your monthly payment. When shopping for a mortgage, be sure to ask potential lenders for a written estimate of all charges (called a Good Faith Estimate). Comparing costs quoted by several lenders can help you save money. Asking for clarification of costs you don't understand, and negotiating with lenders can help you get a great deal on a mortgage loan.

Getting this type of bad credit mortgage can provide a great boost for your credit while offering the ability to keep a predictable budget for housing expenses. Making timely mortgage payments can help you improve bad credit while gaining the security and benefits of owning your own home.


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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