Bad credit mortgage loans make the American dream of home ownership a possibility even for people with less than perfect credit scores. Subprime loans (also called second chance lending) are usually granted to people with credit scores of less than 680.
Subprime loans are generally required by people who have missed more than two payments in the last 12 months; have a judgment, foreclosure, or eviction against them; declared bankruptcy in the last 5 years; or have a generally defined high risk of default.
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Back in the 1930s, the 30 year fixed rate mortgage was introduced as a financial instrument. Since then, the rate of home ownership has doubled and two-thirds of Americans own their own homes today. To expand the reality of homeownership to as many people as possible, sub prime or bad credit mortgage loans came into being.
When you take out bad credit mortgage loans, be prepared to pay higher interest rates and fees. You may also have to take out extra insurance to ensure that the bank gets paid back. Be prepared for bad credit mortgage loans to be more difficult to get in 2009 than they were before the housing bubble burst. This is because there is less liquidity in the markets and the capital will flow first to those with better credit.
But that does not mean that bad credit mortgage loans do not exist. You just have to work a little bit harder to find them.
First off, you should clear up your own credit history to the extent possible. Get a copy of your credit report and dispute any inaccuracies. Pay off any bad debt and get the creditor to mark the bill satisfied in full on your credit report.
Then, start shopping for lenders. You are looking for a bad credit mortgage loans lender who will give you the best loan at the best rate with the fewest fees.
Be prepared to get into a loan for the short term as your chances of refinancing after 24 months are good. There are two reasons for this. The first reason is that after 24 months of regular payments, your credit will improve making regular loans more accessible.
But, the other reason is that by 2012, the credit markets are bound to have improved. You will have built equity in your home so the loan will be a secure investment for the bank. At that point, you can refinance into a more manageable loan.
Bad credit mortgage loans exist to allow people like you the benefits and security of owning your own home. These subprime loans are lifesavers for people who want to work their way back into normal credit. Generally within 2 to 3 years, a responsible borrower will get into a regular loan rather than the bad credit mortgage loans they started with.
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