Lenders today look at one number above all else when deciding what interest rates and points to charge you when you’re looking for a mortgage loan: your credit score. If you want to lose money, try financing your mortgage with bad credit.

Your credit score is compiled by the nation’s three credit bureaus, Experian, TransUnion and Equifax. It’s a snapshot of your history with managing money. Your credit score reflects how often you’ve missed payments, how many open lines of credit you have and whether you have any bankruptcies. A bad credit score means that mortgage lenders will charge you higher interest rates for mortgage loans. Higher interest rates equal higher monthly mortgage payments.

How much money can you lose? If you took out a $200,000 30-year fixed-rate mortgage with an interest rate of 7 percent, you’d pay $1,330.60 a month. If, however, you took out that same loan with an interest rate of 9 percent, you’d pay $1,609.25 a month.

If you have bad credit, you’ll only quality for a sub-prime mortgage loan. These loans come with higher interest rates as a way to protect mortgage lenders. This makes sense from the lenders’ perspective: They are more confident that borrowers with good credit scores will make their mortgage payments on time. They’re not as confident that borrowers with shaky credit histories will do the same, so they charge these borrowers more. It’s a way for mortgage lenders to protect themselves.

It’s financially foolish, then, to refinance your mortgage with bad credit. You’ll lose a significant amount of money over the long-term. The wiser decision is to work hard to improve your credit. Pay your bills on time. Close unneeded credit card accounts. Show mortgage lenders that you can be responsible with your money.

This does take time, and you may have to put off buying a home for two or three years. But in the long run, waiting until your credit scores improve makes financial sense. If you want to lose money, finance your mortgage with bad credit. If you want to save it, make the sacrifice now and build up your credit scores.

Similar Content:

  1. How To Lose Money – Personal Loans For Bad Credit The current economic crisis has led many people to make bad decisions in terms of personal loans. Whether they...
  2. Financial Suicide – Do A Mortgage Refinance With Bad Credit All over the Internet and television lenders are advising people to refinance their homes. There are even lenders that are...
  3. When Should I Refinance My Mortgage? It’s important to keep abreast of the current prime rate in order to decide if it’s time to refinance your...
  4. Why You Should Hold Off On Your Home Refinance If You Had Bad Credit Everyone wants to own their own home, but waiting merely one year to refinance your home with bad credit could...
  5. The Truth About Bad Credit Mortgage Lending If you’re looking for the truth about bad credit mortgage lending, you might be shocked by what you learn. Bad...

Tags: , , , ,
Share this post on: