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Bad Credit Mortgage: 5 Tips to Avoid Predatory Lenders

By Gabriel Traverso
Mortgage Credit Problems Columnist


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If you have bad credit and are in the process of buying a home, or are thinking about applying for a home loan, you need to watch out for predatory lending.

Predatory lending describes a wide range of unfair home loan practices. Lenders who engage in these practices typically look for people who have bad credit or poor credit and are looking for a home loan or mortgage refinance. They make big promises and will exert a lot of pressure to close the loan. Loans will often have balloon payments, high interest rates, or perhaps there will be penalties for early payment of the loan. Looking for a bad credit mortgage doesn't mean you have to become a victim -- educate yourself and pay attention to what you're hearing from lenders as you apply for your home loan.
  • Always shop around. Don't go with the first loan you're offered. Apply with different lenders to make comparisons. Even if you have bad credit you will have plenty of options.
  • Ignore high pressure sales tactics. Don't cave to the lender's attempt to close on their schedule. You are in charge, so take your time.
  • Look at the total loan package. Low monthly payments can be a trap. Look at the entire cost for your bad credit mortgage.
  • Never sign blank documents, and never sign anything you don't understand or haven't read. This should be fairly obvious but you'd be surprised. People looking for bad credit mortgages often feel desperate to get into a new home.
  • Ask questions. Some lenders will promise the world just to get you in the door. Make sure that you understand everything before you sign.
If you follow these tips while looking for a bad credit home loan you should be able to avoid predatory lenders. Just because you have bad credit doesn't mean you have to get a bad loan.

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