Good Options For Bad Credit Rating Mortgages

All hope is not lost. Not everyone can qualify for the A loan, with the best rates. Even people with good credit scores may have a reason for not qualifying. So don't feel bad if you have a bad credit rating. The goal is to get into a house of your own. There are many options for people with a bad credit rating. Even if you don't qualify for the A loan, you may still qualify for a B, C, or even D loan. While you're taking the time to build up your credit, you can benefit from a bad credit rating mortgage and get into a house.

What Is A Bad Credit Rating?

A bad credit rating comes from having several negative entries on your credit report such as late payments, high credit balances and judgments or bankruptcies. When getting ready to by a house, you need to get a credit report to see exactly what is in your file. You can get a free report from each of the major credit reporting agencies once a year. Don't get all your free reports at one time. Stagger ordering the reports and you can get a new report every four months. It is not uncommon to have errors on your credit report. Each report comes with the procedure to correct errors that you find.

If you do have legitimate bad credit, you still may be able to get a decent loan. If a health emergency, unemployment or something understandable is the cause of your problems, you can submit a letter that will go along with your credit report explaining your circumstances.

Money talks. Getting a good loan rate is all about credit risk. If you can reduce your credit risk, you may still qualify for an A loan. Having a large down payment may reduce your credit risk and prime lenders may take another look at you. If not, there is nothing wrong with getting a bad credit rating mortgage if it gets you in a house that you want.

Bad credit rating mortgage loans or B, C, and D loans are also based on your credit risk. Credit risk includes several factors such as your credit score, income, and potential down payment. Logically, a B loan will have higher rates than an A loan, but lower rates than a C or D loan. Your overall credit risk will determine what category you will fall in.

Use B, C, or D loans for short term financing. Subprime financing, which includes B, C, and D loans, offers a short term solution until you improve your credit score. If you believe your financial situation will improve and you plan to refinance to get better rates in the future, an adjustable rate mortgage (ARM) may be a better choice than a fixed rate mortgage. You need to fully understand the terms of the loan and when and how the rate will adjust. Get informed about the different types of loans before you decide on either type. Compare the risk levels and interest costs over the long term.

Reverse Mortgage Scams

Reverse mortgages scams are on the rise. Reverse mortgages are becoming more popular with seniors who are looking to supplement their retirement income. With the popularity gaining, more and more people are trying to cash in on the lack of knowledge of seniors and rob them of their money. There are many cases of reverse mortgage scams or frauds. These scams can have a devastating effect on a person's retirement since a house is typically your largest asset. These scams can cost you thousands of dollars in home equity. The biggest way to fight against this rise in reverse mortgage scams is to educate yourself about reverse mortgages.

You don't have to pay for information.

You can get all the information you need about reverse mortgages free from HUD. Some companies are charging thousands of dollars for this information. Typically these companies add on the charge for this information as part of an estate planning program.

Don't use a reverse mortgage to pay for other products.

If a company is trying to sell you a product and suggests that you use a reverse mortgage to finance it - RUN! Many companies selling annuities or other insurance products do this. These companies are getting paid on the reverse mortgage and the insurance products. The reverse mortgage scam is not that it's a bad idea, it's just used in the wrong way. When you add up the fees associated with both products, you are paying way too much.

Beware of high fees.

Some lenders will prey on seniors' lack of knowledge and include high fees and unnecessary terms in the contract. There are some terms included that could cost thousands of dollars in equity with no benefit for the additional cost.

How can you protect yourself from reverse mortgage scams?

1. Take advantage of HUD counseling. Almost all reverse mortgage contracts will require counseling. Beware if you are told you don't need it. HUD counselors will help you determine whether a reverse mortgage is a good option for you.

2. Shop around. Get several offers from different reverse mortgage lenders and compare for your best deal.

3. Make sure you understand your reverse mortgage contract thoroughly. You cannot afford to make a mistake - it could cost you your retirement. Your reverse mortgage counselor is there to help you.

Get information about buying and selling homes, different mortgage types and other real estate information at Real Estate - Get In The Know.

Dangers of Reverse Mortgage - Reverse Mortgages Could Be Costly

As baby boomers get older and start thinking about how to finance their retirement, reverse mortgages are becoming more popular. For people over the age of 62 who have 75% equity in their home, a reverse mortgage can be a good way to get tax-free income that doesn't have to be repaid. But along with every good thing comes some bad and there are some dangers of reverse mortgages that you should be aware of. Although they are a good opportunity for most of those who qualify, you just want to make sure you are fully informed about all the options.

A reverse mortgage allows seniors to use the equity in their home and receive tax-free income without having to give up ownership, or make a monthly payment. The money that is received is paid back when the home is sold, usually after the owners have died or moved into other living arrangements. The amount of money received depends mainly on your age, how much the house is worth, the interest rate, and the current mortgage balance, if any.

You can receive the money basically three different ways: a lump sum payment, fixed monthly payments, or a line of credit that can be accessed whenever needed. There are dangers of reverse mortgages associated with each of these options. Stay away from these reverse mortgage pitfalls.

A lump sum payment
When you receive a lump sum payment you need to be a good steward of your money so that it will not run out.

Fixed monthly payments
Fixed monthly payments are good because you know the exact amount of money you'll be receiving each month. The dangers of fixed monthly payments for reverse mortgages is that inflation is not taken into account. The first payment amount is the same as the last payment amount whether the payments last two years, 10 years or 20 years.

Line of credit
As with the lump sum payment, a line of credit is exhaustible. Once you've reach the limit, there is no more money available unless you refinance.

Another danger of reverse mortgages is in the terms of the contract. Some of these contracts can be very confusing, it is highly recommended to get counseling before entering in to this type of loan.

How Does A Reverse Mortgage Work?

When considering options for using the equity in your home, you may have come across the idea of reverse mortgages and you've been asking, how does a reverse mortgage work? A reverse mortgage works the opposite of a traditional mortgage. Instead of making payments to reduce the loan amount and increase the equity in your home, you are receiving money that will use up some of the equity in your home and increase your debt. Increasing your debt may seem like a bad thing to do but for seniors, this is a good way to get additional money to spend and not worry about repayment.

Basically when you get a reverse mortgage you agree to a certain amount of money paid out either as a lump sum, monthly payments, or a line of credit. In return you agree that when the house is no longer your primary residence, you will sell it and pay the money back along with other fees associated with the loan, such as interest.

Reverse mortgages are available for people 62 years and older. There are many factors that go into the amount of money that you can receive, including your age and how long you may live, the value of your home and if you owe anything on it. With a reverse mortgage you retain ownership of the home, and can have money to make needed home repairs, pay down expenses, or enjoy your quality of life.

There are many things you should consider about how reverse mortgages work when deciding on your options. Reverse mortgage contracts are a little more complicated than traditional mortgages. A lot of times people go into these contracts without knowing the true costs, such as what you'll have to pay back on top of the money that you receive. Understand, that to get out of this mortgage you will probably have to sell the house because normally you can't pay the money back without selling the house. For some people are home equity loan might be safer and easier.