Legitimate Sources for Poor Credit Home Loans

Having poor credit can be extremely stressful especially if you are trying to secure a home loan. There are still options available to you. Most likely you will be dealing with a sub-prime lender.

A sub-prime lender specializes in securing home loans for those people who have become a credit risk. Sub-prime lending also called, "second chance lending" involves financial lenders who provide credit to borrowers who are perceived by the lender as a financial risk or at least, at a higher risk for defaulting on the loan.

Like most people, owning a home is probably going to involve the largest financial transaction you will be making and the process of purchasing a home can seem daunting to say the least. Add on top of that a poor credit rating and you are now having to try to borrow money from companies that consider you a high risk client. You don't want to become a victim just because you have fallen on hard times that may be due to no fault of your own. Finding a legitimate source for a poor credit home loan can be stressful and even out of reach at times.

Your first step in securing a home loan should involve educating yourself in the real estate process so that you can still make a sound financial decision. The more educated you are in the process of obtaining a sub-prime loan, the less likely you will be to sign a dotted line that could get you into even more financial troubles. You can make a good start for familiarizing yourself with some mortgage terms by looking them up online.

If you have a FICO score below 660, then you could be considered for a sub-prime home loan. Most lenders offer prime and sub-prime loans for a home loan. The easiest way to tell if your home loan is going to be considered a sub-prime loan is by the interest rate and terms being offered for your home loan.

One of the most common mortgages offered by a sub-prime lender is called the 2/28 ARM loan. An ARM loan is an "Adjustable Rate Mortgage" loan. It's called a 2/28 ARM loan because for the first 2 years of the loan the rate is fixed. After the 2 year period, the rate adjusts to the equal value of the rate index for that specific time. People with a poor credit rating sometimes opt for this type of loan hoping to re-establish their credit within that two year period. In doing so they can then qualify for a better loan rate. The borrower needs to watch out for fine print that threatens a prepayment penalty on the original 2/28 ARM loan.

How to find a legitimate source for poor credit home loans:

1. Check your local mortgage company to see if they offer sub-prime loans for home purchases

2. Check online for sub-prime lenders in your specific area.

3. Ask your personal bank if they can suggest a legitimate sub-prime lender in your area.

A note of warning...

Not all sub-prime lenders are on the up-and-up. You are protected by the "Truth in Lending Law" which is a federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.