Legitimate Bad Credit Mortgage Lenders

Bad credit mortgage lenders are oftentimes the lender of last resort for applications with less than good credit scores. While conventional lenders will find it difficult and perhaps even impossible to approve a loan request made by someone with a low credit score, companies that specialize in bad credit mortgages offer hope. But homes aren’t the only goods people with bad credit want to buy. They also need auto loans, student loans, and more. With so much demand, it’s no wonder the bad credit lending business is booming. But as with most things that seem too good to be true, this is one area where bad credit borrowers must proceed with caution.

Here are some tips for distinguishing the legitimate bad credit mortgage lenders from those that simply want to make a fast buck:

Be wary of the lender if:

The lender asks you to pay an upfront fee. You should never have to pay for lending services in advance. If you are asked, this is a red flag and you should take notice. Don’t fall for the dire warning that because of your poor credit history, no other lender will work with you. This likely is not true. If you do pay money to a lender that requires advance payment, chances are you won’t get what you want nor will you get your money back.

The lender does not have a physical location. A well-designed flashy website might look good, but if online is the only way to contact the lender, you should consider looking elsewhere. Having a physical location as well as an actual phone number, one that’s preferably not a toll-free number, adds a layer of legitimacy to the organization. Online businesses come and go all the time, and when you’re looking for a bad credit mortgage, you want assurance that the lender will be around later on when you may need to contact it.

You are not informed upfront of all fees and other costs associated with the bad credit mortgage. Immediately after you apply for a bad credit mortgage, you should get from the lender a Good Faith Estimate of Costs. If you don’t get this document, look elsewhere. And if you do get this document, make sure you take time to review it carefully. Be on the lookout for a prepayment penalty and be sure you understand exactly how it is calculated. Pay attention to the amortization schedule as well since a longer amortization plus this penalty can add up to a sizeable expense.

You get an uneasy feeling. It’s alright to trust your instincts. If you’re not satisfied with the service you’re getting from the lender, look elsewhere.

Legitimate bad credit mortgage lenders will take a close look at your credit score and your current financial situation as well as your loan needs. It will have dedicated customer service representatives ready to answer all of your questions accurately and timely. It will provide a detailed account of all costs so you aren’t surprised when it’s time to close on the loan. Interest rates on bad credit mortgages are higher than those offered to borrowers with good or excellent credit. They can be anywhere between 7% and 18%. So before you agree to bad credit mortgage terms, understand how the interest rate will affect your monthly payments. Keep in mind that the higher the interest rate, the more likely you are to default on the loan. It’s unfortunate but true.