If you need a home loan and your credit is not in great shape you may want to consider getting a bad credit mortgage.
What is a bad credit mortgage?
Federal law requires that all creditors must state the cost of their
credit in terms of an Annual Percentage Rate (APR). This rate takes
into account how the loan is repaid on a yearly basis, and allows you to
accurately compare the cost of credit among lenders. For example: You
borrow $1000 for one year and pay a finance charge of $100. If you can
keep the entire $1000 for the whole year and then repay $1100 at year’s
end, you are paying an APR of 10 percent. But if you repay the $1000 and
finance charge (a total of $1100) in twelve equal monthly installments,
you don’t really get to use $1000 for the whole year. In fact, you get
to use less and less of that $1000 each month. In this case, the $100
finance charge amounts to an APR of 18 percent.
Why is the interest rate so much higher on a bad credit mortgage?
If you have bad credit, the chance that you will default on your home loan is greater than someone who has excellent credit. In order to compensate for this extra risk, the lender will charge a higher interest rate on the loan.
Will I have to pay this higher interest rate for 30 years?
Not necessarily. People who get a bad credit mortgage typically do so because they are trying to get their credit back into good standing. If you make your monthly loan payments on time for two (2) consecutive years, you can refinance the bad credit mortgage with a coventional loan with a much lower interest rate. The finance charge is the total dollar amount you pay to use credit. It includes interest costs and other costs, such as service charges and some credit-related insurance premiums. For example: Suppose you borrow $1000 for one year, and the interest is $100. If there is a service charge of $10, the finance charge will be $110.
What kind of fees will I be charged for a bad credit mortgage?
A lender can charge you more fees for a bad credit mortgage compared to a conventional home loan. Fees can range from 1-6% of the loan amount.
Although the interest rate and fees are higher for a bad credit mortgage, most borrowers of these types of loans do not complain. Lenders say that after being turned down for credit so many times, people with bad credit are often grateful that they can get into a home and realize the American dream. Section Topics
What is a bad credit mortgage?
If you have bad credit, the chance that you will default on your home loan is greater than someone who has excellent credit. In order to compensate for this extra risk, the lender will charge a higher interest rate on the loan.
Will I have to pay this higher interest rate for 30 years?
Not necessarily. People who get a bad credit mortgage typically do so because they are trying to get their credit back into good standing. If you make your monthly loan payments on time for two (2) consecutive years, you can refinance the bad credit mortgage with a coventional loan with a much lower interest rate. The finance charge is the total dollar amount you pay to use credit. It includes interest costs and other costs, such as service charges and some credit-related insurance premiums. For example: Suppose you borrow $1000 for one year, and the interest is $100. If there is a service charge of $10, the finance charge will be $110.
What kind of fees will I be charged for a bad credit mortgage?
A lender can charge you more fees for a bad credit mortgage compared to a conventional home loan. Fees can range from 1-6% of the loan amount.
Although the interest rate and fees are higher for a bad credit mortgage, most borrowers of these types of loans do not complain. Lenders say that after being turned down for credit so many times, people with bad credit are often grateful that they can get into a home and realize the American dream. Section Topics
Mortgage Rates Update
Freddie Mac (NYSE:FRE) released the results of its Primary Mortgage
Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM)
averaged 3.87 percent with an average 0.8 point for the week ending
2/9/2012,
unchanged
from last week when it averaged 3.87 percent. Four weeks ago at this
time, the 30-year fixed rate mortgage averaged 3.89 percent.
The 15-year FRM this week averaged 3.16 percent with an average 0.7 point, up from last week when it averaged 3.14 percent. Four weeks ago at this time, the 15-year fixed rate mortgage averaged 3.16 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.83 percent this week, with an average 0.7 point, up from last week when it averaged 2.8 percent. Four weeks ago, the 5-year adjustable rate mortgage averaged 2.82 percent.
The 1-year Treasury-indexed ARM averaged 2.78 percent this week with an average 0.6 point, up from last week when it averaged 2.76 percent. Four weeks ago, the 1-year adjustable rate mortgage averaged 2.82 percent.
"A strong January employment report added upward pressure to most mortgage rates this week.," said Frank Nothaft, Freddie Mac vice president and chief economist.
Why should you consider a mortgage refinance? A mortgage refinance can allow a homeowner to save money on mortgage interest expenses. Federal law requires that all creditors must state the cost of their credit in terms of an Annual Percentage Rate (APR). This rate takes into account how the loan is repaid on a yearly basis, and allows you to accurately compare the cost of credit among lenders. For example: You borrow $1000 for one year and pay a finance charge of $100. If you can keep the entire $1000 for the whole year and then repay $1100 at year’s end, you are paying an APR of 10 percent. But if you repay the $1000 and finance charge (a total of $1100) in twelve equal monthly installments, you don’t really get to use $1000 for the whole year. In fact, you get to use less and less of that $1000 each month. In this case, the $100 finance charge amounts to an APR of 18 percent.
Here are some common reasons homeowners get a mortgage refinance:
The finance charge is the total dollar amount you pay to use credit. It includes interest costs and other costs, such as service charges and some credit-related insurance premiums. For example: Suppose you borrow $1000 for one year, and the interest is $100. If there is a service charge of $10, the finance charge will be $110.
If you are considering a mortgage refinance to lower your monthly payment, you need to make sure that you will be staying in the property long enough to recoup the costs related to the mortgage refinance (i.e. application fee, processing fee, origination fee), property appraisal and title-related fees.
The 15-year FRM this week averaged 3.16 percent with an average 0.7 point, up from last week when it averaged 3.14 percent. Four weeks ago at this time, the 15-year fixed rate mortgage averaged 3.16 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.83 percent this week, with an average 0.7 point, up from last week when it averaged 2.8 percent. Four weeks ago, the 5-year adjustable rate mortgage averaged 2.82 percent.
The 1-year Treasury-indexed ARM averaged 2.78 percent this week with an average 0.6 point, up from last week when it averaged 2.76 percent. Four weeks ago, the 1-year adjustable rate mortgage averaged 2.82 percent.
"A strong January employment report added upward pressure to most mortgage rates this week.," said Frank Nothaft, Freddie Mac vice president and chief economist.
Mortgage Refinance
Why should you consider a mortgage refinance? A mortgage refinance can allow a homeowner to save money on mortgage interest expenses. Federal law requires that all creditors must state the cost of their credit in terms of an Annual Percentage Rate (APR). This rate takes into account how the loan is repaid on a yearly basis, and allows you to accurately compare the cost of credit among lenders. For example: You borrow $1000 for one year and pay a finance charge of $100. If you can keep the entire $1000 for the whole year and then repay $1100 at year’s end, you are paying an APR of 10 percent. But if you repay the $1000 and finance charge (a total of $1100) in twelve equal monthly installments, you don’t really get to use $1000 for the whole year. In fact, you get to use less and less of that $1000 each month. In this case, the $100 finance charge amounts to an APR of 18 percent.
Here are some common reasons homeowners get a mortgage refinance:
- Mortgage refinance to lower monthly payment
A mortgage refinance can result in a lower interest rate, which in turn will lower monthly loan payments. This can allow homeowners to use the monthly savings for other purposes. - Mortgage refinance to get cash
With this type of mortgage refinance, the borrower can get a lower rate and get cash out of the property to use for any purpose. In order for this type of mortgage refinance to be a viable option, the homeowner must have a fair amount of equity in the property. - Mortgage refinance to shorten loan term
Many people use a mortgage refinance to reduce the term of their home loan. While this strategy in many cases increases the monthly loan payment, the loan is paid off much faster, which can save tens of thousands of dollars in interest costs over the life of the loan.
The finance charge is the total dollar amount you pay to use credit. It includes interest costs and other costs, such as service charges and some credit-related insurance premiums. For example: Suppose you borrow $1000 for one year, and the interest is $100. If there is a service charge of $10, the finance charge will be $110.
If you are considering a mortgage refinance to lower your monthly payment, you need to make sure that you will be staying in the property long enough to recoup the costs related to the mortgage refinance (i.e. application fee, processing fee, origination fee), property appraisal and title-related fees.
Home Purchase Loan
What types of fees are associated with a home purchase loan?
When you get a home purchase loan, you will have to pay fees to the lender. Such fees could include an application fee, origination fee, underwriting fee, processing fee, brokerage fee, courier fee. Fees for home purchase loans can vary widely by company, so it pays to shop around.
The finance charge is the total dollar amount you pay to use credit. It includes interest costs and other costs, such as service charges and some credit-related insurance premiums. For example: Suppose you borrow $1000 for one year, and the interest is $100. If there is a service charge of $10, the finance charge will be $110.
How much of a home purchase loan can I afford?
When determining how much of a home purchase loan you can afford, a lender will take the following things into consideration: current interest rate levels, your income, current monthly debt load and your history of handing credit obligations. Every lender may establish their own guidelines regarding these factors, so if one lender turns you down, you can always apply for a home purchase loan with a different lender.
Where can you get a home purchase loan?
There are many services on the Internet that can help you obtain a home purchase loan. You can also get a home purchase loan from a local mortgage company and many banks and credit unions.
-- Credit Tip by FindLocalBanks.com
Federal law requires that all creditors must state the cost of their credit in terms of an Annual Percentage Rate (APR). This rate takes into account how the loan is repaid on a yearly basis, and allows you to accurately compare the cost of credit among lenders. For example: You borrow $1000 for one year and pay a finance charge of $100. If you can keep the entire $1000 for the whole year and then repay $1100 at year’s end, you are paying an APR of 10 percent. But if you repay the $1000 and finance charge (a total of $1100) in twelve equal monthly installments, you don’t really get to use $1000 for the whole year. In fact, you get to use less and less of that $1000 each month. In this case, the $100 finance charge amounts to an APR of 18 percent.
What is the interest rate charged on a home purchase loan?
The common types of home purchase loans offer the home buyer either a fixed interest rate (which will remain the same each year until the loan is paid off) or an adjustable rate (which is subject to change every year). The adjustable rate home purchase loans have the advantage of a low introductory rate, which can increase a buyer's purchasing power (allow the buyer to afford more loan). Mortgage rates charged by lenders for home purchase loans are subject to change on a daily basis. Weekly averages for popular loan products are reported in the
