Bad Credit Mortgage Rates

Bad credit mortgage rates are slightly higher than good credit rates, but it is a little hard to actually find out what they are unless you apply for the loan. This is due to a whole range of variables that are involved in determining a rate for people with less than fair credit. If you make an application, however, you open yourself up to making your credit record even worse.

Lenders are reluctant to publish bad credit mortgage rates because they are dependent upon so many variables. The best policy would be to find a lender who has the best rates for their excellent credit customers; they may be more inclined to work with you and be honest about it. If you make any applications, the lender will pull up your credit report and that counts as a hit against it. If you are at a mortgage broker, they may try repeatedly to hook you up with a lender, which can result in dozens of hits against your credit record.

A bad hit on a credit report will result in a lowering a credit score, which is partly calculated by the number of hits (inquiries) about a person’s credit history by potential lenders. This may be interpreted by a new lender as a person who is looking to run up more than they can handle in bills. The result could be a loan offer, but at an extremely high interest rate to compensate for potential losses that might occur. Credit scores are based in part upon a debt to income ratio. Finding a co-signer for your loan may be another way to find a better deal.

Banks want you to have a credit score about 620, but bad credit scores are below that. They may work with you, depending upon your individual circumstances. If you have a good reason for bad hits on your credit report, they may overlook them and you can get a better rate.

Another way to qualify for a better bad credit mortgage rate is to have a higher down payment. Put down as much as you can. Delay purchasing until you have a solid down payment. A 20% down payment is far better than a 3.5% down payment. It also will reduce monthly payments. If you can qualify for any government programs for down payment assistance, like the $8000 home buyer credit, that can be applied to your down payment.

There are loan products designed for people with bad credit. A bad credit mortgage rate falls into a range of interest for persons who are called sub-prime borrowers. Some government agencies specialize in making loans to sub-prime borrowers, but this is what got the financial markets into deep trouble recently as sub-prime lenders were unable to make their payments.

There are other personal options for people who have bad credit history but want to obtain a mortgage. They can increase their income, for starters. To get a mortgage, you must have at least 2 years of employment in the same industry or line of work. Finding a bad credit mortgage rate is possible, but it will be higher than those for people with good credit.