Bad Credit Mortgage - Facts Borrowers Should Know
Some FACTS to ponder if you are looking for a mortgage with bad credit: 1. Mortgage brokers will lead you to believe you are stuck with a high interest rate...if you have bad credit. 2. Mortgage brokers will lead you to believe you can't NEGOTIATE your loan...if you have bad credit 3. Most bad credit borrowers EXPECT to pay higher rates so they fail to shop loans - taking whatever interest rate they get! 4. Most bad credit borrowers accept the first offer they are quoted...not knowing they could do MUCH better. 5. By shopping and comparing mortgage or refinance quotes, bad credit borowers can lower their interest rate by as much as 4.25% 6. Origination fees are negotiable. Typically they're 1% to 2% of the loan amount. Did you know that all it takes is a simple request to the broker to 'lower their origination percentage'. Many time they'll do it if they know you're shopping loan quotes. 7. Yield Spread Premium (YSP) is a hidden fee - it can and will be misused against sub prime borrowers. 8. Brokers will receive a bonus from the lender if they increase the interest rate on your loan. If you qualified with the lender for a 6% loan, the broker may offer you 6.25%. The broker receives as a bonus an extra 1% of the loan amount for raising your rate by .25% . On a $250,000 loan he makes an extra $2500. This is fee is called 'Yield Spread Premium' 9. Repeat! Most bad credit borrowers (sub prime) EXPECT to be offered a high interest rate so they rarely question the rate they are offered. So a broker tactic like 'Yield Spread Premium' goes un-noticed by most sub prime borrowers 10. Mortgage brokers subject to RESPA legislation must disclose all fees including YSP - which will appear on your HUD-1 settlement statement around line 800-810 under "ITEMS TO BE PAID IN CONNECTION WITH THE LOAN". HOWEVER, many Broker Banks DO NOT have to disclose this fee and are not subject to this legislation.