Bad Credit Mortgages Aren’t All Bad
Take care when shopping for bad credit mortgages. Finding a good deal is possible, and can actually help turn your bad credit into good. Find the wrong one though, and you may be stuck with escalating monthly payments you may not be able to afford. Believe it or not, there are 30-year fixed mortgage products for which you may qualify, even if you have bad credit. Such bad credit mortgages can be structured so that a history of timely payments can trigger a reduction in interest rates. This is a much better alternative to increasing interest rates that serve only to increase your monthly payment.
When shopping for bad credit mortgage providers, don’t overlook the traditional full-service lenders. You won’t know if they have anything to offer you until you ask. Case in point is Fannie Mae. It offers a mortgage product that’s targeted to individuals with bad credit. Here are just a few of this 30-year fixed rate loan program’s key features:
Low down payment
That’s right – as little as $500 of your own funds or 3% of the loan amount from flexible sources may entitle you to up to 100% financing.
Easy-to-Calculate Principal and Interest (P&I) payments
One of the nice features of fixed rates mortgages is the ability to calculate the amount that is applied to P&I each month. Of course, the amount of escrow collected in addition to P&I may change according to changes in your property tax and insurance rates.
Make 24 consecutive mortgage payments on time and you may qualify for a Timely Payments Reward. This 1% interest rate reduction will lower your monthly payments without having to go through the hassle (and costs) of refinancing.
Other tips to consider
Remember that anytime you put less than 20% towards the down payment, lenders will require you to pay PMI or private mortgage insurance which will increase the amount you’ll have to pay each month.
And always obtain a Good Faith Estimate every time you apply for a bad credit mortgage, and carefully review the listed costs. If you see a cost that you don’t understand, ask for clarification. Comparing costs among different lenders and then negotiating to lower the costs that are negotiable can save you money. So take time to do it.
If you have an opportunity to apply for this type of bad credit mortgage, take it. If approved, budgeting for housing-related expensed will be easier. You’ll be taking steps to repair your damaged credit and reaping the many benefits of home ownership. You’ll be accomplishing so much plus you’ll be doing it all from the comfort of your brand new home!