Bad Credit Mortgage Loans With Low Interest Rates

Owning your own home is a dream shared by millions of Americans. Whether you are a single mom or a young family or an upwardly mobile professional, there is nothing like turning the key in your own front door.

An integral part of buying a home is taking out a mortgage. Even tycoons who can afford to pay cash for homes take out mortgages because if the interest rate is low enough it can be financially advantageous to borrow. Taking out a mortgage is something that virtually every homeowner does. The key is to borrow money at the lowest possible interest rate. Even a one-point difference in your interest rate over 30 years can make a big difference in the amount you'll pay over the term of the loan. For example, if you take out a 30-year mortgage for $ 200,000 at 7% interest, you will pay $ 1,330 each month. Over the life of the loan you will pay a total of $ 279,017. For the same loan if your interest rate is 6%, you will pay $ 1,119 a month and over the period of the loan you will pay a total of $ 231,676. That's a savings of $ 47,341. It's significant!

How do you get a lower rate?
Your lender will take into account many factors when determining how much to lend you and at what rate. These include:

• The appraised value of the property
• The sale price of the property
• The amount of your down payment
• Your income
• How much other debt you owe
• And, last but not least, your credit score

It can be seen that your credit score is an important factor, but it is not the only factor. A good credit score of at least 580 or higher will improve your chances of receiving a lower interest rate. The very low interest rates are given to qualified borrowers who have high credit scores. For example, according to the Fair Isaac Corp. (FICO), a borrower with a score of 620 might pay 6.3% for a mortgage loan while the same person with a score of 800 might pay 4.7%, and pay $ 300 less per month on a typical $ 300,000, 30-year loan.

Getting a mortgage loan
If you have a low credit score and you want to get a mortgage, you should begin by shopping around. Talk to lenders. Give them your information. See what criteria are the most important for them. You may find that a local credit union will give you a better deal than a bank.

If you discover that you can not get the rate you need to buy the property, then there are several ways you can make your loan application more competitive.

• Get a bigger down payment. If you can put down 20% or more, then you will get a lower rate, you will not have to pay private mortgage insurance, and you'll qualify for a larger loan. But the catch is that the bank will want to make sure that you are putting down your own money. You can not borrow money for the down payment, and lenders even frown upon relatives giving you the money as a gift. So if your parents, for example, want to give you cash for a down payment, put it in your bank account well ahead of time.

• You can also pay down your debts and improve your credit score. Concentrate on paying off accounts that have posted negative items on your credit report.

• If you have negative items that are close to seven years old, remember that with the exception of bankruptcy they will fall off your credit history after seven years. Do not open any new lines of credit. Focus on repairing what you have.

• And you can always look around for a house with a lower price. After a few years of successfully paying your mortgage, you'll be able to access more credit and move into that larger house.