10 Mortgage Loan Tips for People With Bad Credit
A person’s credit standing is a reflection of his financial principle and status in life. The privilege to make a loan is only given to those who have established a good credit rating. Thus, a person who wants to have available credit immediately when he needs it should maintain a good credit rating.
Establishments and organizations that provide credit do so for the purpose of earning money in terms of the interest earned from the principal amount loaned. Since credit provision is a business, every creditor will always have his best interest in mind when lending money to anybody.
In view of this, every person who wishes to make a loan should make sure that he gets the best mortgage loan available in the market. To do this, a person should look at the following factors and consideration.
1. Shop around for the best deal
A person with bad credit who wants to get the best mortgage loan should approach not only one but several loan providers and choose the package that is most favorable to him. By looking at the conditions of the different loan providers, a person will have many choices as to which among these companies can offer him the best deal.
2. Negotiate the best term with the loan provider
The loan provider’s rules for those who are applying for a mortgage may be written in black and white but there is always room for adjustments and special arrangements. A person with bad credit who wants to get the best terms for his mortgage loan should try to negotiate the best term with the loan provider.
3. Know the upfront and the hidden costs
It is easy to know the upfront costs of getting a mortgage loan because they are written in the contract. In most instances, there are hidden charges accompanying the mortgage and these are either written in very fine text that cannot be noticed or these are implied in the contract. Make sure that everything in the contract is understood as regards interests, terms and all financial responsibilities
4. Always ask whether or not the lender is also acting as a broker
There is a thin line between a lender and a broker and a borrower should always ask the lender the mortgage transaction will involve the services of a broker because it can mean additional costs for the borrower, especially if you have bad credit.
5. Always be wary about the interest rates
Lenders earn money out of the interest rates they charge the borrower — and it runs even higher if you have bad credit. Thus, every borrower should be wary and vigilant about the type of interest rate of the lender. It pays to compare the interest rates and to compute how much the mortgage will be worth after the payment period, plus the interest rates.
6. Make sure you are capable of paying the monthly amortization
You may be signing up for a loan that you cannot afford to pay monthly so you better make sure that the monthly amortization is equal to an amount that you will be able to pay every month or quarter depending on the repayment scheme — when you have bad credit, brokers may try to rope you into something you can’t afford so make sure you understand the amortization. There are lenders that offer rebates when the monthly amortization is paid in advance or on time.
7. Ask if the mortgage loan requires an insurance and how much
Most mortgages come with an insurance to secure the loan — with bad credit, you can’t get around this. Ask about the rate of the insurance and how much you would be required to pay for the insurance.
8. Try to lock in the interest rates
Interest rates are most often the culprit why mortgages have remained unpaid — bad credit loans are known for this. Getting a mortgage with a locked-in interest rate would make the loan more favorable to the borrower. However, the lock-in agreement should be put in writing to make sure the borrower is not being taken for a ride.
9. Keep your eyes and ears open for more favorable mortgage loans
It is sometimes beneficial if the borrower is aware of economic and social events that may lead to the lowering of interest rates or which would encourage lenders to be more flexible in providing loans. Being aware of these events can give the borrower an upper hand in mortgage negotiations.
10. Do some research on the company providing the mortgage
Take a look at the lending history of the loan provider. Do they automatically forfeit any collateral or security given once the borrower fails to pay the mortgage or do they give extensions?
Whatever you do, make sure that the mortgage loan you are getting will be favorable to you not only at the present time but during the whole period of the mortgage — some mortgages for bad credit will give you great terms for the first 5 years, only to push you into something you can’t afford later — just to get you into a home.