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Bad Credit Mortgage Lender - What To Look For
By: Carrie Reeder
If you have less than perfect credit and are looking to get approved for a
mortgage loan, be careful not to make some common, costly mistakes. When dealing
with sub-prime mortgage lenders or bad credit mortgage lenders, many people are
taken advantage of because of their eagerness to get approved.
Choosing and settling on a mortgage lender or mortgage broker is a very
important decision. Make sure you don't make mistakes that you will regret
later.
Ask yourself, the mortgage broker or lender these questions before you sign on
the dotted line:
1. Is there a pre-payment penalty on the loan? Ask about this as soon as you are
told you are approved. A 6 month pre-payment penalty is probably ok, but 1 year,
or two years? Over 1 year is too long. Find out how much the pre-payment penalty
is. Maybe its not much. But if there is one, its most likely to be so much, that
it would defeat the purpose of refinancing the loan before the penalty time is
up. If you are get a mortgage loan with a poor credit score, and then make your
mortgage payments on time, you are likely to be able to refinance in 6 months to
1 year for a much better interest rate. You don't want to hurt your chances of
doing that with a heavy pre-payment penalty. Sometimes brokers will neglect to
tell you about one.
2. What will the interest rate be? Sounds obvious, but lock down exact numbers.
Don't settle for vague answers on this. Brokers may promise you a low interest
rate, but as it gets closer, end up locking you in at a much higher rate. If you
are doing a combo loan, 80/20, the second mortgage may end up being the one that
has an interest rate that surprisingly jumps up as it gets close to the loan
closing. Try to negotiate a lower interest rate, especially if you are going
through a mortgage broker, they will usually have some play in this area.
3. Is my mortgage broker being too pushy? If you feel your broker is being too
pushy, there may be something in the loan that is not in your best interest. Ask
a lot of questions and don't be afraid to start searching elsewhere. When
getting a mortgage loan, you don't want to be in too big a hurry.
4. Can I afford the payment even I am not able to refinance for a lower rate
within 2-3 years? Many people get into a sub-prime mortgage loan with a higher
interest rate, just because they are happy to get approved, only to feel
suffocated later, when they cannot refinance and get out from under the high
payment. If you don't think you could make the payment for at least the next 2-3
years with no problem, then you shouldn't be getting into the loan.
5. What are my closing costs going to be, exactly? Bad credit mortgage lenders
and mortgage brokers know that the person they are extending the loan to doesn't
have as many options. These lenders and brokers can sometimes take advantage of
that fact by upping the fees at closing. Make sure you see what all of your fees
are going to be in writing before you commit to the loan. Compare those fees
with other lenders and make sure they are comparable. If there are a little
high, try negotiating with your mortgage lender or broker. They will usually be
able to make changes there if they choose to.
About the Author:
Carrie Reeder is the owner of www.abcloanguide.com, an informational website
about various types of loans. To view our list of recommended bad credit
mortgage lenders, visit this page: www.abcloanguide.com/lessthanperfectcredit.shtml. |
