However, along with the crash of the housing market there has also been a crash of the entire economy. Many consumers have run in to job loss, pay cuts and cut hours at their places of employment. This has led to increased financial stress all around the nation. Many consumers have at one point or another missed a payment on a bill or even defaulted on a loan. This has destroyed the credit history of many hard working and honest Americans.
Many people who would like to take advantage of the buyer's market in the housing industry are unable to get a mortgage because they have low credit. Lenders view consumers with low credit as a risk to their bank, and will not give them a loan, even at a high interest rate or with high fees. For these potential buyers, there are other options. A bad credit lender will give bad credit home loans for those people who are unable to get a loan at a bank or through a traditional mortgage lender.
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Bad credit home loans usually come with higher than normal interest rates and higher than normal upfront fees. There are also very high fees associated with late payments or payments that are not made in full every month by the borrower. This is how the bad credit lender will hedge his risk, by charging what some people would consider unreasonable rates and fees. However, to many borrowers it is worth paying the high rates and fees in order to have the opportunity to take advantage of the down housing market and purchase their dream home.
A common poor credit home loan is in the form of an ARM, or adjustable rate mortgage. This type of mortgage will have a low interest rate for a stated amount of time and then will adjust to a higher interest rate for the remainder of the mortgage term. The lower interest rate period is usually for either 3 years, 5 years, or 7 years. In most cases the shorter the mortgage term before it adjusts, the lower the rate will be for the beginning period of the loan. These loans are very common for people who are not planning on staying in the same home for more than 5 or 7 years, or for people who are planning on refinancing to a fixed rate mortgage after the beginning part of the mortgage is up.
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