Bad Credit Loans Guaranteed Approval

While I definitely understand the desire to be a home owner, buying a home even if you have an excellent credit score range may not be the best move. Sure there are plenty of benefits to owning a home – having stability and being able to remodel your home to your liking are two of the most common; amongst many others. There is also the downside of massive debt and the very strong possibility that your home will be worth less and less every year, leaving owing more money than your home is even worth.  If you have had credit troubles a bad credit mortgage is most likely not going to be the answer you are looking for. You would be taking on a huge amount of debt and be paying an extreme amount of interest, leaving with monthly payments you can’t afford or a loan you can’t ever pay off. Worst case you could be out tens of thousands of dollars and without a place to sleep. I am not here to tell you what to do, or if you should be considering bad credit mortgage loans or not. The point of this is to provide you with as much information as possible so you make the decision yourself. Remember renting is not that bad of an option!

How Does a Mortgage Work?

On the surface, applying for a home loan is a lot like applying for a car loan. They both require down payments and you to pay interest. Mortgages usually require you to put 15-20% of the total home value down to show you are serious about being a home owner (mortgage loans for bad credit may require even more). These are fairly large down payments, as 15% of a $400,000 loan is $60,000, this is a significant sum of money for almost all Americans. Down payments are almost always required now days, (though before the housing bubble burst it was possible to find no money down bad credit home loans) you might be able to negotiate a lower down payment, but skipping the down payment all together is going to beextremely unlikely.

Here is a quick reference of the common mortgage terms –

Equity – This is how much your home is worth compared to what you own, a negative equity would be owning $100,000 on a home only worth $75,000. Ideally you want to have a positive equity in your home, meaning the house is worth more than you owe on it.

Principle – The total amount of money you are a borrowing for your loan

Interest – This is the amount the banks will charge you for lending the money, its how they make their money. The better your credit score range, the lower your interest rate, bad credit mortgage rates will carry a much higher interest.

Amortization – The process of decreasing the principle of your loan over time. Most home loans have the same monthly payment throughout the life of the loan, what will change is the amount of interest you are paying compared to the principle.

Insurance – You will be required to get insurance on all property purchased with a mortgage to protect the property against damage such as fires and floods. You may also be required to purchase an insurance policy for the loan itself to cover paying off the mortgage in the event of default. The latter insurance is more common with lower down payments or bad credit home loans.

What are the different types of mortgages?

There are several different types of mortgages available to home buyers, not all of them are entirely  straight forward on how they work. These are some of the most common types of mortgages that are offered.

Fixed Rate Mortgages

This was the most common type of mortgage available; these are not as common these days. Fixed rate mortgages are home loans where the monthly payments and the interest rate does not change for the length of the loan. This the type of home loan you should be shooting for, as there are no surprises and you will always know how much your mortgage payment is going to be for the entire length of the loan. These are usually offered as 30 Year Fixed Rate, 20 Year Fixed Rate and 15 Year Fixed Rate loans. The only difference between them is the length of the loan. If you get a 30 year fixed-rate mortgage you will end up with lower monthly payments but will pay more in interest, making it harder to have a positive equity in your house.  Then there the flipside of the 30 year, the 15 Year Fixed Rate mortgage will have the highest monthly payments, but the least amount of interest paid, making it easy to have a positive equity on your home.

Adjustable Rate Mortgages (also known as ARMs)

These home loans have an interest rate that will change over the course of the loan. These loans are usually less desirable because your mortgage payment can change year to year, making it difficult to stick to any sort of budget. There is also the possibility that your interest rate can raise high enough to make your mortgage unaffordable, though there are usually caps put in on how high the rates can raise, a little like rent control you find in major cities.

How often your interest rates can change will vary from every six months to every 3 years. The most common type is a 1 year ARM, so the interest rate, and your payment will change every year. There are also slightly more complicated ARMs, you may see things like 3/3 or 5/1 ARMs. These mortgages have a set rate for a number of years (the first number) then change every set number of years (the second number). This means a 5/1 ARM will give have the same monthly payment for 5 years but after that period your interest rate will get adjusted every year. The amount of the interest is usually that rate the Federal Reserve Bank sets for lending money to banks plus a few points of padding so the bank can make a profit from you.

Reverse Mortgages

These are fairly rare, and to be honest I am not super familiar with them so if anyone can provide me with more information about how to get a reverse mortgage or how reverse mortgages work, please use the sites contact form and shoot me an email.

Balloon Payment Mortgages

These are the most dangerous types of mortgage out there, they are enticing because they usually offer extremely low monthly payments for the first 5 years or so. These mortgages appear to be extremely affordable but the kicker is at the end of the predetermined period, you will owe the entire balance of the mortgage! This means if you will owe $300,000 on your house, you owe all that money at the end of the mortgage which means you need cash fast or you lose the house. Most of us do not have that kind of money lying around so if we cannot find someone to refinance our bad credit mortgage we are going to lose the house.

Is a Bad Credit Mortgage Worth it?

Honesty the opinion here at Bad Credit Loans Guaranteed Approval is no they are usually not worth it.  Renting is usually cheaper and unless you are generally debt free and have a good paying job with good credit, buying home might be something you want to wait on. If it’s something you truly want, and are determined to be a home owner, I  suggest you make a budget of what kind of mortgage payment you can afford every month and use a reverse mortgage calculator to determine how much you can afford to spend on a home. The last thing you want to lose a down payment of this size and still be homeless, and if you have been watching the news lately, some banks are even suing people who foreclosed on their homes, yes that’s right after taking your home they are suing you for the lost profits from sale of the house. So be careful out there.

Where Can I find Bad Credit Mortgage Lenders?

We will be putting together a list of mortgage lenders. This will take a bit of time, please feel free to submit suggestions to our contact page. Check back soon.