If you are a homeowner with a poor credit rating, refinancing your mortgage or taking out a second one can be an intimidating process. Here is all you need to know to make the process go smoother. Bad credit mortgage lenders specialize in lending to individuals with less desirable credit ratings. These lenders are often referred to as sub-prime mortgage lenders or hard money lenders. Homeowners with less than desirable credit ratings have bad credit for a variety of reasons. This could be due to a low FICO score, low income, or no assets or equity in the home. For whatever reason, the homeowner is unable to qualify for financing from a traditional mortgage lender. Interest rates for bad credit mortgages are much higher than traditional mortgage lenders. The reason for this is the homeowner with poor credit is a much greater risk for the lender. Expect to pay between 12-17 percent interest and as many as ten upfront points. Sub-prime mortgage lenders should be used as a last resort. You will pay a premium for every aspect of the mortgage; this loan will come with less than favorable terms. Ideally you will want to stay with this loan no longer than two years. If you make all of your mortgage payments on time and save some money you should be able to qualify for more traditional financing. During this two year period you will need to concentrate on rebuilding your credit and saving money. It is extremely important to make all of your payments on time and carry low balances on your credit cards. To learn more about qualifying for a better mortgage sign up for a free mortgage guidebook. |
