Finding a Bad Credit Mortgage

From the Superpages.com

Finding a bad credit mortgage is possible, although usually the interest rate is higher than with a more conventional mortgage. However, there are sub-prime and other such lenders who may offer fees and terms that are less than advantageous. The key to finding a bad credit mortgage that will allow you to buy a home without exorbitant costs, is to do your research and follow these simple bad credit mortgage tips.

Tips for Finding a Bad Credit Mortgage

Check the reputation of the broker. Visit your local Better Business Bureau website or state commerce agency list to make sure your broker doesn't have any outstanding complaints. It's also a good idea to ask others who have dealt with the broker in the past. Real estate agents, family and friends are an excellent resource.

Never pay an up front fee. While an escrow fee is perfectly normal and acceptable when working with an agent to reserve a home while waiting for financing; it should be considered a red flag or warning if a bad credit lender requires money before they provide any services.

Comparison shop. Some homebuyers mistakenly believe they will be unable to obtain any other type of loan so jump at the first opportunity that presents itself. Always take time to comparison shop when searching for a bad credit mortgage. Remember, chances are you will be required to pay a premium due to your lower credit score, high bills, prior delinquencies or other credit problems, but don't add to the overall cost by including hidden fees or other charges. Ask for a complete breakdown of anticipated expenses including closing costs, terms and other fees.

Obtain an amortization schedule. Go the extra step and obtain an amortization schedule showing all the payments and the amount that will go toward principal or interest pay-down. It can help differentiate loans to compare the long term cost of each.

Save ahead of schedule. As a general rule of thumb, the larger the down payment the more favorable the terms. Work with a reputable real estate agent who specializes in foreclosures or other properties with a strong equity position, then combine the built-in equity with a good-sized down payment to reduce the total debt burden. If you can put 20 percent down, it's possible to avoid many fees including Private Mortgage Insurance (PMI) premiums or other surcharges based upon poor credit.

Shop right. Believe it or not, the actual home and neighborhood will also play a large role in the type of financing you can obtain. Everything from insurance coverage and property taxes to appraisal values are determined by the neighborhood, crime rate, schools and other amenities. Search for a safe home in a low cost area with great schools for the best rates.

Get a C.L.U.E. Ask the real estate agent for a Comprehensive Loss Underwriting Exchange (C.L.U.E.) report prior to making an offer on the home. Each and every property has its own exclusive insurance risk; homes with a higher risk rating cost more to insure and are likely to decrease the amount of extra funds you have left over at the end of the month.

Pay down other debt. The better your credit rating the more favorable the terms on your bad credit mortgage is likely to be; begin by paying back your highest interest rate loans and credit cards and work down from there.

Look for special programs or other incentives. Depending upon your individual circumstance, it may be possible to obtain first-time homeowner or other housing assistance to help with the down payment.

Sign-up for interest rate alerts and lock-in as soon as possible. Interest rates continue to decline including those for a bad credit mortgage. Sign-up for an email notification to keep track of interest rates and then be sure to have your broker lock in when they hit the right target. With a little planning and preparation you can find a mortgage even with bad credit.