With your bad credit problem it's very easy to make a couple of big mistakes when you find lenders who offer bad credit mortgages. The world of the bad credit mortgage lenders is an arena in which you need to be very wary and alert. Your desire for quick approval is entirely understandable but the actual choice of a mortgage lender or broker is critical.
So here are five basic areas where you must get your questions answered before you are prepared to sign on the dotted line:
1. Do not accept a loan offered that has a prepayment penalty. Short term prepayment penalties may be acceptable but periods of a year or even longer are not. Once you get a mortgage loan with a bad credit history and then develop a good payment history on that loan, you should be able to refinance in short order for a better interest rate. A lot of brokers keep prepayment penalies quiet at review time. Ask the question!
2. As soon as you are able to get a lock on rate. While many brokers will promise low rates up front, the low rates have a hbit of changing as the time of approval draws closer. The broker probably knows how critical this loan is for you and may play the waiting game in order to get you to sign up for a rate that is anything but low. If you encounter this kind of activity, move on – find a new broker!
3. Do not be afraid to try to negotiate a lower rate. Most brokers bay have some leeway in this aspect. Probe for the best offer. Again, do not jump at the first offer out of desperation to get any kind of loan.
3. Watch out for high pressure tactics from your broker. Ask all the questions you need to have answered and do not be put off by hedging tactics. Do not take vague "I'll get back to you" type answers. When in doubt change brokers. There are plenty of players in this game. It's a lucrative field and highly competitive. Because of this caveat emptor! Buyer beware.
4. Is the payment under this loan affordable for you? While you might be happy to get any loan to get you out of current trouble do not take on a loan that you can not see covering at present income levels for the next, say two years. Yes, you hope to get refinanced in a year or two at a lower rate but do not bank on that happening at this stage.
5. Ask for a detailed run down of the costs involved in obtaining this loan before you see the closing documentation. Unfortunately, bad credit lenders and brokers are apt to take advantage of uneducated or pressured borrowers. You want to know what this loan is going to cost up front and to make sure that the fees do not change at closing. Get these details in writing before you show any willingness to proceed. There are a lot of lenders and brokers you can deal with who will provide these necessary details so do not be shy.
Now listen to this – get tough! Yes, you are in financial difficulty but that does not mean you'll take any offer to take on more debt. It's debt that got you in to this in the first place. Only deal with lenders who have a solid reputation for fair dealing, get all these questions answered and if they are not – move on. If you can, get a referral or recommendation from someone who has been this route or from a trusted reputable source.