Finance

The answer to that is quite simply, yes, lenders do offer a bad credit mortgage but there are certain conditions that apply.  First of all the rates for mortgages with bad credit are generally higher than a loan granted to someone who has good or acceptable credit.

Secondly, since these mortgages for people with bad credit are high risk loans the loan to value ratio, or LTV, as it is commonly referred to, is of prime importance.

Interesting Tip:

There are plenty of lenders out there that deal with poor credit, don’t rush in to something without first weighing your options.

Check the Facts

The loan to value ratio means that the lender will take the amount of the proposed mortgage and divide it by the selling price or the appraisal price, whichever is smaller.

From a business perspective, the value of the property must be great enough that should the borrower default on the loan, the lender will not lose his investment.  Unless the prospective buyer has a large enough down payment, an original poor credit mortgage may be difficult to obtain.

The lender is doing business to make money.  Not only do they want their investment to be secure, they do not want to lose potential revenue derived from the interest rates they are charging.  A bad credit mortgage refinance loan may be easier to obtain if there is enough equity in the house.

Know Your Options

Quite often homeowners look to refinance their homes in order to pay off or pay down some of their smaller outstanding debts.  Currently, with our faltering economy, interest rates are down.  Even mortgages for people with bad credit tend to have lower rates than loans originated more than a couple years ago.

Because of the financial slump we are in their credit may have also slid into the valley.  They hope to refinance their mortgage as a means of bad credit debt consolidation.  One monthly payment with a lowered interest rate is easier to handle than multiple payments scattered throughout the month.

Make the Right Choice

Over time their credit rating should improve making it easier in the future to obtain more reasonable financing.  Rates for mortgages for people with bad credit may be high, but if someone is facing foreclosure then paying higher interest rates is not an issue.

Bad Credit Loans

The immediate need is saving their property.  Once things improve for them financially they can look into obtaining a new mortgage with lower rates.

So, keeping in mind that there are some definite drawbacks inherent in a poor credit mortgage, there are also some benefits.  Don’t let high interest rates deter you if you stand a chance of losing everything you have worked so hard for.

It may take a bit of research, but with diligent effort you should be able to find a lender willing to finance.  After you have repaired your credit keep an eye on the market and try to refinance as soon as possible if the interest rates start going up.  In this way you’ll not only save your property, but you’ll be able to lock into the lowest interest rates possible.  Kind of like killing two birds with one stone!