Bad Credit Mortgage
Info on bad credit home mortgages
A bad credit mortgage works just like any other mortgage. You reach an agreement with a lender on the terms, including the interest rate and payment schedule, after offering a down payment towards the total value of the property you want to buy. The lender funds the balance of the purchase, then you pay the lender back over the life of the mortgage, including the principal plus the interest.
However, a bad credit home mortgage does have some specific characteristics you need to be aware of. While it is possible to get a mortgage with bad credit, you do take on additional risk if you do, and it is often a better idea to spend some time repairing your credit score before getting a mortgage.
What You Need to Know About Bad Credit Mortgage Loans
The reason that bad credit mortgages are riskier to borrowers is because financial institutions tend to impose higher interest rates and stricter penalties than they would if you had good credit. This is because the bank always has to balance risk against profit whenever they make a decision, and the fact that you have bad credit represents an increased risk to the bank. Thus, they need to increase their profits to make the risk worthwhile, which they do in the form of higher interest payments.
With bad credit home mortgages, your monthly payments will be higher or the term of your mortgage will be longer. Either way, you will pay thousands (perhaps even tens of thousands) more than you would for a comparable mortgage with good credit. This is the reason why it may be better for you to fix your credit rating instead of getting a bad credit mortgage -- you'll save a lot of money.
It is possible to get bad credit mortgage refinancing. This means that you can take out a bad credit mortgage, but refinance it (with better terms) once you repair your credit. Generally, it takes between one and five years to fix bad credit, depending on how low your score has become. Bad credit mortgage refinancing can be a good strategy that can help you enjoy the best of both worlds -- home ownership and manageable payment terms.