3 Factors in Finding a Mortgage Company For Bad Credit Borrowers
Most mortgage seekers with bad credit end up paying a higher monthly housing bill than they should. The reason is because studies have shown that borrowers with poor credit simply do not compare rates to the extent that borrowers with good credit do. There are lenders willing to compete for your business - DESPITE YOUR BAD CREDIT. You need to keep 3 things in mind if you have bad credit and are looking for the best mortgage rate: 1. What size loan are you looking for?
2. Just how bad is your credit?
3. Assess what you can afford regarding a mortgage.
Bad Credit Plus Large Loan Amount - More Attractive to Mortgage Company
Brokers will compete aggressively for a larger loans by making the terms more attractive for you the borrower - even with bad credit. Mortgage brokers make more money on loans if they charge points. 1 point is 1% of the loan amount so if the amount you need to borrow is $250,000, 1 point will be about $2500 in the brokers pocket. The point will also lower your interest rate by about .25 of a percentage point. The point is ( no pun intended), that the larger the loan the more money the broker will stand to make IF the loan is granted. Of course if a broker can charge 1-3 points on a large loan amount they'll be willing to compete fiercely for your loan. It's simply worth the effort to them to close the deal.Just how bad is your credit?
Most people don't have a clue about their credit, or credit score or they are really off-base. It's probably not as bad as you think. You may think your credit score will be dreadful because you missed one gas bill 4 years ago. Conversely, you may think you have perfect credit but are oblivious to the 4 or 5, 30 day late payments which are automatically reported to the credit bureaus. Credit score is CRITICAL of course in determining what interest rate you are awarded - but not the only bargaining tool. Being upwardly mobile helps. A bad credit score combined with increased income( a spouse suddenly working for example , or a promotion etc..) will make your loan more competetive among brokers - knowing you can afford the payments because of increased income will give you leverage as a borrower.Asseses your financial situation relative to the amount you want to spend on the home
You should first assess what you can afford regarding a mortgage. Use this affordability calculator which considers your income, debt obligations, interest rate and length of loan. Don't worry about specific interest rate – you want to get a good idea of how much you can comfortably borrow based on your income and debts. This Affordability calculator gives you great starting point and hopefully an insight into what you can reasonably expect to pay on a monthly mortgage. To start, use 7.25% as an interest rate and 30 years as the term length If you have slightly or moderately damaged credit, and are looking to buy a home - don't get locked into the first broker you come into contact with. Especially if you have bad credit in combination with Increased income or large down payment, or better yet BOTH. Inquire! Fight for the best interest rate!More on adjustable rate mortgages
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