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Bad Credit Home Loans: How the Truth in Lending Act Can Help You
By Gil MackeyMortgage Credit Problems Columnist
The Truth in Lending Act was established in 1968 to help
regulate lending practices. It requires full disclosure on the costs and terms
of your mortgage. This is your tool to make sure you don't pay too much for
your bad credit home loan.
Bad Credit Mortgages Terms
If you have bad credit you can probably still qualify for a home
loan -- but you represent a greater risk to the mortgage lender. Most mortgage
companies handle this risk by charging more for a bad credit mortgage than they
would if you had good credit. This means you could pay a higher rate, closing
costs, or fees. When your lender prepares the documents for your bad credit home
loan they will give you a Truth in Lending form. You'll need to sign this
document, stating that you agree to the terms. Before you do, understand what
you're reading.
Your Truth in Lending Form
Your Truth in Lending form will outline the following:
- When payments are due
- Amount of each payment
- Finance charge: the total cost of your bad credit mortgage
- Amount financed: the amount you are borrowing for your home loan
- Annual
Percentage Rate (APR): includes the interest rate plus the fees you pay for the loan
It also lets you know if there is a prepayment penalty, what
insurance is required, and whether someone else can assume the home loan.
It’s Important to Ask Questions!
The Truth in Lending form is designed to help you and your mortgage
lender is required by law to give you this form to review before finalizing
your bad credit home loan. However, it is up to you to make sure you understand
the form. If you don't understand the details, the costs, or anything listed on
your Truth in Lending form, then start asking questions. Your mortgage lender
should be more than willing to go over it with you until you're clear on all
the details and costs.
About the Author
Gil Mackey has been a writer and artist for the past
twenty years. In addition to freelancing, he writes for his local paper, and
lives with his two children in Nevada
About the Author
Gil Mackey has been a writer and artist for the past twenty years. In addition to freelance writing, Gil writes for his local paper, and lives with his two children in Nevada.
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