How Can I Get A Better Mortgage Loan With Bad Credit?
How can I get a better mortgage loan with bad credit? Find out here how you can improve your mortgage even if you have bad credit!
Due to tight lending standards, many mortgage lenders are not willing to lend to people with bad credit. If a mortgage lender does lend to a bad credit borrower, they often charge very high interest rates. Luckily, there are ways to improve your mortgage even if you have bad credit.
Put More Money Down
The first way to get a better mortgage loan with bad credit is to put more money down. Most mortgage lenders prefer that borrowers with good credit have at least a 10% down payment. For borrowers with bad credit, mortgage lenders often prefer a 20% to 25% down payment. The higher the down payment, the more favorable of an interest rate you can expect to receive.
Pay More Fees
The next way to get a better mortgage loan with bad credit is to pay more fees. Most mortgage lenders offer borrowers the ability to pay “points” at closing, which pay down the interest rate. Each point costs 1% of the mortgage balance, but will pay down the interest rate by 0.125% to 0.25%. By paying more points, a borrower with bad credit will be able to get a more affordable mortgage loan.
Get a Co-Signor
The last way to get a better mortgage loan with bad credit is to find a co-signor to sign your mortgage. With a co-signor, the bank will be less concerned with your credit score and history because they have the co-signor’s history to rely on. This is because in the event of default, the co-signor will be required to repay the borrower’s outstanding debt. In some situations the borrower may be able to have the co-signor released after payments have been made successfully for a few years.
*Affects pricing. With the No Closing Cost
Option, borrowers finance the closing costs instead of paying for them at
closing. Borrowers who pay closing costs at closing may qualify for a lower
interest rate. Some upfront fees (ex. credit report and appraisal) may apply
and may be credited at closing.
*Refinancing or taking out a home equity loan or line of credit may increase
the total number of monthly payments and the total amount paid when compared to
your current situation.
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