Finding A Bad Credit Mortgage - part 2
by Bob Hartz
You might consider going into a mortgage with an adjustable rate that jumps in, say, five years. After five years of timely mortgage payments, your credit rating will have improved considerably - presuming you've kept other spending under control. At that point, refinance the loan. Even if interest rates have gone up, for you they may come down because of an improved credit rating. If you take this approach, shop for an ARM with no or with minimal prepayment penalties and don't sign on the dotted line until you find one.
Fine Print
If you are a marginal candidate for a mortgage, it probably makes sense to go through the process with a person that you can ask questions and keep asking until you've gotten them all answered. The internet is littered with bad credit loan brokers: just fill out the application and they'll do the rest. That is probably a recipe for a bad deal. You need to understand every clause in your mortgage. Get an itemized list of closing costs and ask what the dollar figure is on them - not just what they add to the mortgage payment.
If you haven't got a twenty percent down payment, you'll be asked to buy a Personal Mortgage Insurance policy to protect the lender if you default. With bad credit, that insurance policy could be substantial. So first the obvious - avoid it if you can. Make sure there aren't other insurance policies hidden in the mortgage structure. And if you are forced to pay it, get a clear and unmistakable understanding of when your obligation to pay insurance ends.
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