Does A Poor Credit Mortgage Cost Me More Money?

Buying a home is one of the biggest investments of every homeowner’s life. It is very important that you find a home that you can afford, but also that you love. There is a lot more that goes in to how much you can afford than just the price of the home and the amount of the down payment. Your interest rate will make a huge difference in the amount that you will pay over time to the lender, and your closing costs and other fees at the time of purchase can vary greatly.

Interest rates

A poor credit mortgage usually has higher mortgage interest rates than a standard mortgage. This is because the lender views a borrower with a low credit score as more of a risk than a borrower with a good credit score. In order to offset this risky loan, the lender must charge high interest rates. This will make a poor credit mortgage cost more money.

Fees

There are larger fees associated with a poor credit mortgage than with a normal mortgage. Again, this is because the lender feels the need to charge more in order to make up for the amount of risk they are taking by giving a borrower with a low credit score a mortgage. These fees are usually associated with the closing costs and are paid upfront or rolled in to the mortgage.

Longer Terms

A poor credit mortgage can cost more money because often times they are in longer terms. This is very common in a poor credit refinance. Stretching out the life of the loan will help make monthly payments cheaper, but you will pay more interest over then life of the loan than if you kept a shorter term mortgage.

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