Bad Credit Mortgage Loans

Definition

A bad credit mortgage loan (or "subprime" mortgage loan) is a specialized mortgage loan designed for customers with credit issues. Bad credit mortgage loans are easier to qualify for than regular mortgage loans, because they have more flexible credit and income requirements. There are various types of bad credit mortgage loan programs, but most of them tend to be adjustable rate mortgage loans as opposed to fixed rate mortgage loans.

This is because bad credit mortgage loans usually have higher interest rates and higher down payments than regular mortgage loans, so most people prefer to use a bad credit mortgage loan simply to get into a home and help rebuild credit. Once they've been in the home for a year or two, people typically refinance the bad credit mortgage loan with a regular loan.

Key Points

  • Bad credit mortgage loans are specialized mortgage loans designed for customers with credit issues.
  • Bad crdit mortgage loans have easier qualifying guidelines than regular mortgage loans.
  • Because bad credit mortgage loans have a higher risk of default (foreclosure) than regular loans, they typically have higher interest rates and monthly payments.
  • Bad credit mortgage loans are usually adjustable rate loans. They are normally used to help get into a home and rebuild credit, and are then refinanced after several years for a regular mortgage loan.

Pros

  • Bad credit mortgage loans give borrowers who might not otherwise be able to qualify for a mortgage the opportunity to purchase or refinance a home.

  • There are many bad credit mortgage loan programs available today, so there is a bad credit mortgage loan for almost every credit and income situation.

Cons

  • Because bad credit mortgage loans have a higher rate of default (foreclosure), they typically have higher interest rates and monthly payments than regular mortgage loans.

  • Bad credit mortgage loans also typically require higher down payments than regular mortgage loans (although there are bad credit mortgage loans available today that require little or no down payment).

Summary

Bad credit (or subprime) mortgage loans are specialized mortgage loans designed for borrowers with credit issues. Because bad credit mortgage loans have higher rates of default (foreclosure), they tend to have higher interest rates and higher down payment requirements than regular mortgage loans. The higher interest rates mean that bad credit mortgage loans also tend to have higher monthly payments than regular mortgage loans.

Bad credit mortgage loans are typically adjustable rate mortgage loans, and they are typically used to help purchase or refi a home and begin rebuilding credit. Once borrowers have reestablished good credit, they typically refinance the bad credit mortgage loan with a regular mortgage to take advantage of the lower interest rates available with regular loans.

If you're interested in applying for a bad credit mortgage loan with Arizona Mortgage Group, simply complete our Quick Application. One of our loan originators will then call you within 1 business day to answer any questions you have and get you started.

Calculators

Mortgage Calculator
Our mortgage calculator can calculate principal and interest payments, calculate total monthly payments and display an amortization report.

Refinance Calculator
Our refinance calculator can calculate whether it would save you money to refinance your existing mortgage loan (s).

Local Information

We specialize in loans for borrowers in the greater Phoenix metropolitan area. Click a link below for more information about a particular town:

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