Apartment dwellers and homeowners with bad or poor credit who want a mortgage with 100% financing may be surprised to learn that today's more flexible lending practises make it almost as easy to get approved for a new home loan or to refinance your current mortgage if you have bad credit as it is if you have good credit.
Tip: This kind of mortgage loan for people with bad credit doesn't usually mean lower interest rates. You might be able to get a 100% mortgage, but the loan terms and interest rate won't be as good as they would be if you had good credit.
Bad credit (also called "Subprime") mortgage lenders offer a variety of 100% mortgage packages for borrowers. In some cases, you can even get 103 percent mortgage loans that cover your closing costs as well. When it comes to this kind of loan, you have more than one choice. Here are a few things that should help you get off to a good start.
The Good and the Bad of 100% Mortgage Loans
The main benefit of a home loan that pays for everything is that you can buy a home with little or no cash down. This is especially helpful if your credit isn't great. Instead of throwing money away every month on rent, you can start to build equity in a home you own.
On the other hand, the main problem with 100% financing is that you will pay more for financing because the interest rate will be higher and, in many cases, the closing costs will be higher as well. Also, instead of a 15- or 30-year fixed loan, you will usually get an adjustable-rate mortgage whose interest rate will go up after 2 or 3 years. Another risk for the homeowner is that they will have no equity in their home because they bought it with no money down. If the housing market goes into a slump and the value of your home goes down, you could end up with a mortgage for more than your home is worth.
Tip: If you want to learn more about how to buy a home with bad credit or no credit, go to a local real estate company. They might be able to put you in touch with a bad credit mortgage specialist. You can also do research on the Internet or in your local phone book, but make sure to shop around. The mortgage business is very competitive, so the more options you have, the better chance you have of getting the best deal.
Another benefit of this type of financing is that you usually don't have to pay for private mortgage insurance. This is because private mortgage insurance is already built into the higher rate you get because you have bad credit.
Tip: The links below can help you find the best lender for your needs.
