Bad credit mortgages for home purchase are difficult to obtain when your credit rating is below 500 on most credit rating agencies. Do you have a rather large down payment that is at least 20% of the value of the home? Many lenders will not even consider lending money to you. What happens if you miss a few monthly payments on loans or credit cards? If there are reports from missed rent payments or utility payments you may have more problems. You may find that your credit rating tanks. Relatively small mortgages in the range of $50,000 to $200,000 are just as difficult to obtain with bad credit ratings. Even people who are looking for larger mortgages on a home will find that unless they have a huge down payment, they just will not be approved for a mortgage.
A down payment of more than 20%, on a home that is valued at below market average values, is one way to be approved for a bad credit mortgage. It means that there is lots of equity in the home. The lender knows that if you default on the mortgage, they will be able to sell the home and get their money back with relatively low risk.
Bad credit mortgages for home purchases may also attract higher interest rate mortgages. They reflect the risk that the lender feels that they are taking when they lend money to you. They may also assign mortgage insurance fees and other fees to the cost of the mortgage approval process. Lenders really do not want to be stuck with any costs at all.
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