Bad Credit Mortgage Rates

Bad credit mortgage rates are generally going to be higher than if your credit was good or excellent. The exact rates available will change daily and the exact rate you can expect to get will depend on your specific credit score. Some ‘bad’ scores are still worse than others. The number you have will be the determining factor.

There are some things that you can do that will not only increase the chances of getting a loan if you have bad credit but might even shave a point or two off of your interest rates in the process.

One of the best things you can do to qualify for a mortgage is to show the bank that despite your past credit issues and subsequent low score you are actually a good credit risk. How, you may be asking. Well for one thing come to the table with at least 20% of the total purchase price as a down payment. If you’ve been able to save some money then they’ll think of you as someone who is making more money that they need to survive, you live within your means. This can help them learn to ‘trust’ you as a potential loan recipient.

Another reason a down payment can help you get better bad credit mortgage rates is that the bank isn’t on the hook for as much money. When you borrow the total amount of the value of a property the bank can really take a bath if you default on your loan. There is no room between what the loan amount is and what the property is worth. So if they had to foreclose on you and sell the house at auction they would probably lose all of the their money.

If you’ve put some money down that means that the loan amount is less than the value of the property. If the bank tried to sell a property like this at auction they might be able to get their money, or at least a big chunk of it, back. Less risk to the bank makes you a better candidate for a loan.

Being able to show the bank a source of stable and steady employment will also help. If you’ve been at your current job for years they will see you as someone who is responsible and again, that will make you look like a better candidate.

Having valid reasons for why you fell behind on some payments and the reason for the issues on your credit report can also help. If you were out of work because you got hurt, but you’ve since fully recovered and haven’t missed a day, the bank will see that as an exceptional circumstance and may be a little more forgiving about your score.

If your credit score is bad you might as well resign yourself to having to pay a higher interest rates. But you will be able to refinance once you’ve brought your score up and with interest rates so low anyway even bad credit mortgage rates are much better than several years ago, so you might still be able to get a decent deal on your mortgage.

Category: Bad Credits