Poor Credit Home Loans - Beware
I just finished my weekly Internet research to see which credit and home buying topics are the most popular (judging by the number of Internet searches for those phrases).
The phrase poor credit home loans is still high up on the list. This means that a lot of home buyers -- presumably with bad credit -- are wondering what their home loan options are.
Here's where I offer a word of caution. Getting a home loan with poor credit means that you will likely be getting a subprime mortgage loan. And if you've been paying attention to the news over the last few months, you'll know the subprime home loans have been a hot topic lately ... and for a bad reason.
Subprime lending has led to a "mortgage meltdown" over the past year or so. The media is also fond of the phrase mortgage crisis and other doomsday terminology. When lenders extend home loans to people with poor credit history, they do so by jacking up the interest rate. After all, these people have far fewer options when shopping for a loan that a person with excellent credit. They basically have to take what they can get.
This means they will pay a much higher interest rate on the loan.
Now we come to another piece of the mortgage "crisis" -- the adjustable rate mortgage. When lenders offer subprime loans to borrowers with poor credit, they often do it through the adjustable rate mortgage (ARM) loan. This type of home loan starts off with a lower interest rate (than a fixed-rate mortgage), but it will eventually adjust or "reset" to a higher interest rate.
In the case of subprime borrowers (who are already in a high-interest situation), this adjustment to an even higher rate can be the death blow to their homeownership.
Right now, this is happening in record numbers across the United States. Poor credit home loans are resetting to higher interest rates ... the homeowners can no longer afford the mortgage payments ... the lender forecloses on the home ... and thus you see the subprime mortgage "meltdown" / "crisis" that we are experiencing.
Now, this is not to say that all poor credit home loans are bad. But if you are a home buyer with bad credit, you really need to do some homework:
Of course, the best thing you can do it improve your credit score altogether. This will help you secure a lower interest rate on your home loan and lower the mortgage payment as a result.
I hope this guide to poor credit home loans helps you in your quest to purchase a new home responsibly. Good luck with your home buying ventures!
P.S. -- If you're not even sure where you fall on the credit scale, you'll want to get a copy of your free credit report and scores.
The phrase poor credit home loans is still high up on the list. This means that a lot of home buyers -- presumably with bad credit -- are wondering what their home loan options are.
Here's where I offer a word of caution. Getting a home loan with poor credit means that you will likely be getting a subprime mortgage loan. And if you've been paying attention to the news over the last few months, you'll know the subprime home loans have been a hot topic lately ... and for a bad reason.
Subprime lending has led to a "mortgage meltdown" over the past year or so. The media is also fond of the phrase mortgage crisis and other doomsday terminology. When lenders extend home loans to people with poor credit history, they do so by jacking up the interest rate. After all, these people have far fewer options when shopping for a loan that a person with excellent credit. They basically have to take what they can get.
This means they will pay a much higher interest rate on the loan.
Now we come to another piece of the mortgage "crisis" -- the adjustable rate mortgage. When lenders offer subprime loans to borrowers with poor credit, they often do it through the adjustable rate mortgage (ARM) loan. This type of home loan starts off with a lower interest rate (than a fixed-rate mortgage), but it will eventually adjust or "reset" to a higher interest rate.
In the case of subprime borrowers (who are already in a high-interest situation), this adjustment to an even higher rate can be the death blow to their homeownership.
Right now, this is happening in record numbers across the United States. Poor credit home loans are resetting to higher interest rates ... the homeowners can no longer afford the mortgage payments ... the lender forecloses on the home ... and thus you see the subprime mortgage "meltdown" / "crisis" that we are experiencing.
Now, this is not to say that all poor credit home loans are bad. But if you are a home buyer with bad credit, you really need to do some homework:
- Determine your maximum budget for a monthly mortgage payment.
- Shop around for a home loan and see what kind of interest rate lenders will offer.
- Find out if the offered interest rate is on a fixed-rate loan or an adjustable mortgage.
- Before choosing an adjustable rate mortgage, read this guide to ARM loans first.
Of course, the best thing you can do it improve your credit score altogether. This will help you secure a lower interest rate on your home loan and lower the mortgage payment as a result.
I hope this guide to poor credit home loans helps you in your quest to purchase a new home responsibly. Good luck with your home buying ventures!
P.S. -- If you're not even sure where you fall on the credit scale, you'll want to get a copy of your free credit report and scores.
Labels: Bad Credit Mortgage
posted by Brandon at
6:24 PM
