Individuals with bad credit will find that they are most likely going to have to go with a sub-prime lender to get their mortgage. Because there are many people with bad credit looking for mortgages, there have been several scams surface that you need to look out for. There are also sub-prime lenders who are preying on these desperate people as well. Here are few things to look out for when it comes to dealing with a sub-prime lender:
1. Outrageous Fees
There are several predatory lenders who are just looking for desperate borrowers. These are often buyers who have never purchased a home before and do not know the process. These people do not know what the fees typically are and so these lenders cover these naïve buyers with fees and incredibly high interest rates. Educate yourself on the process and learn what reasonable fees and rates are for people with below average credit.
2. Foreclosing After One Late Payment
Predatory lenders are notorious for lending to people who they know cannot afford the mortgage they are getting into. Deep within the loan agreement they often have a clause that states the house will immediately be foreclosed upon if one loan payment is late, even by a few days. You can’t always control the mail system, so just because your check was late a couple days this does not mean default. A respectable lender will work with a borrower and attempt to not foreclose on the home. Foreclosure costs a lender money rather than make them money.
3. They Tell You Your Credit Score is Lower Than It Really is
Another tactic that is often used is that the lender will tell someone that their credit is lower than it really is. This means that the lender will attempt to raise the interest rate even higher because of the risk they claim they are taking. Avoid this situation by finding out what your credit score is before you go to the lender. You should also comparison shop before you make your final decision.
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