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Bad Credit Mortgage Details

Author : Ask Bill

Bad credit mortgage might sometimes be known as sub-prime mortgage. Some finance companies might be willing to make mortgages to people who might not qualify for a standard mortgage or home loan from a traditional bank. These so-called bad credit mortgages would have a number of advantages and disadvantages for both lenders and borrowers. Finance companies might offer a number of different types of bad credit mortgages. Most of these types would have features that intersect, and every lender would have their own definitions and names for their loans. Some of the most common types of bad credit loans available might be fixed rate mortgages, adjustable/floating rate mortgages and hybrid adjustable rate mortgages.

Bad credit mortgage may be offered by banks and financial institutions with many features to make them attractive to borrowers. It may however be noted that one shouldn't expect to find all of these features in one loan. Most mortgages would have only one or two of these features. Low Introductory Rates, or "teaser" rates, might often be used in hybrid ARMs to make it easier for lenders to qualify. No Down Payment loans were originally designed for people who might have enough income to cover mortgage payments, but not enough to save a substantial down payment on a new house. No Income Verification mortgages also sometimes called Stated Income loans are designed for people whose income might be difficult to prove. A mortgage that features No Income Verification wouldn’t require submission of pay stubs, W-2 forms or any other kind of verification of an individual’s income. No Income No Assets also known as NINA loans wouldn’t require income details or assets owned. They would be decided solely on the basis of an individual’s credit history, the value of the property owned by the individual and the value of the property proposed to be purchased. Interest Only loans would have the option of paying only the interest for a period of time at the start of the loan. Interest Only loans would be often combined with a scheduled Balloon Payment, when the total amount of the loan would be due.

A bad credit mortgage might make it possible for a borrower who might have very little credit history to get a mortgage and start establishing their credit history. A bad credit mortgage may be also useful for people who might have had financial troubles in the past and thus may not be approved for a loan by a traditional lender. This type of mortgage may also make it easier for people who might be paid on commission or who may lack records to verify their income to buy a home or get a second mortgage on their current home. Hence bad credit may not necessarily mean that no mortgage plans might be available.

Before availing any mortgage, it would be advisable to check the lender's credentials with the local Better Business Bureau and the state's lending regulatory agency. It would be beneficial to insist on reading the completed loan application thoroughly before signing anything. Double checking the loan application to make sure that the lender wrote down the correct figures for your income would be prudent. It might also be wise to never sign any form that might not be completely filled out. Insisting on filling up or crossing out possible blank lines or fields on the application might eliminate any clauses which might be added without the borrower’s knowledge. These steps would help avoid becoming a victim to predatory lenders who might take advantage of borrowers who may be desperately in need of a loan from any source. The predatory lenders may misrepresent their loan terms or even lie on loan applications without the borrower's knowledge in order to get the loan. Hence, being aware of the pitfalls and taking steps to avoid them may help in choosing the right kind of loan from a lender.

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Tags:   bad credit mortgage, bad credit , mortgage

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Submitted : 2010-10-13    Word Count : 655    Times Viewed: 399