| Whether you're in the market to purchase your first | | | | break in, etc. PMI protects the investors in your home |
| home, or simply refinancing your existing home loan, | | | | incase you default on your loan payments and the |
| bad credit can cause some troubling headaches | | | | house is sold at auction. PMI will cover any gap |
| throughout the entire lending process. Have no fear, for | | | | between what the home resold for and your |
| modern day brings with it sub-prime lenders that | | | | mortgage balance, therefore protecting the investors. |
| specialize in bad credit mortgages, assisting those who | | | | Sometimes, in order to get you a lower rate on your |
| suffer from a blemish or two on their credit reports, a | | | | mortgage, a sub-prime lender may offer you a "points" |
| bankruptcy, foreclosure, auto repossession, or anything | | | | option. Points are typically equal to 1% of your financed |
| else that could easily hinder a conventional loan from a | | | | amount, and are considered "prepayments of interest" |
| traditional lender. | | | | that will reduce your interest rate. Sub-prime lenders |
| One key factor in bad credit mortgages is the down | | | | may charge you upwards of 5 points or more to get |
| payment you provide or the amount of equity you | | | | you into a better loan program. More often than not, |
| have in your home. This is referred to as the LTV or | | | | you can roll the points (and the closing costs) right into |
| Loan to Value ratio- how much your home is worth | | | | your home loan so you don't have to bring money to |
| compared to the amount financed. The lower the ratio | | | | the closing. |
| (loan amount), the lower your interest rate, fees and | | | | Typical mortgage rates can be as much as 3% higher |
| monthly payment will be. The higher the loan amount, | | | | for borrowers with bad credit than those with sparkling |
| the higher your interest rate, fees and monthly | | | | credit for obvious reasons, so you shouldn't get too |
| payment will be. This is because you are considered a | | | | shaken up about the rates and fees. A bad credit |
| risk, so a large loan will cost you more than the | | | | mortgage should be considered a "temporary fix" to |
| average consumer. | | | | allow you to get caught up on some bills while ironing |
| PMI (Private Mortgage Insurance) is another factor in a | | | | out your credit. You've worked hard for your house; it's |
| bad credit mortgage, especially for those who have a | | | | more than just walls, a floor, a roof and some furniture- |
| higher LTV (as explained above). This insurance differs | | | | it's your home! Allowing it to work for you simply |
| from your hazard insurance, as that's bought from an | | | | proves the valuable resource that homeownership is. |
| insurance agent to protect your assets in case of fire, | | | | |