Bad Credit Home Mortgage Lenders For California, Florida and Texas

:: Bad Credit Lenders for Poor Credit & Subprime Loans

Why You Would Need a Bad Credit Lender

Individuals with poor credit, low FICO scores or little to no assets and/or equity may find it difficut, if not impossible, to obtain a poor credit loan from a bank or other financial institution. If you do not qualify for an A paper, B paper or C paper loan, you move into what is called the subprime category. Subprime mortgage loans are still executed through a financial institution, although the percentage rate on a subprime loan will be higher than if you had perfect credit and substantial income or equity. For borrowers who do not qualify for a subprime loan, the final lending option is a private loan.

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Bad Credit Lender Rates

A private loan, also referred to as a hard money loan or a bad credit loan, is made by a private individual or fund, as opposed to a bank. Because a private individual or fund is not FDIC insured, there is a greater risk involved for the lender. In addition, the borrower has a shakier track record with paying back their financial obligations and/or has less economic resources available to them and, therefore, carries a greater risk on defaulting on the loan. For these reasons, a hard money or bad credit lender charges a higher annual percentage rate and up front points. Bad credit lenders charge anywhere from 11%-16% plus 2 to 6 points. Lending amounts will vary by lender and by state.

The Benefits of Using a Bad Credit Lender

Borrowers should only apply for a bad credit loan after they have unsuccessfully applied for a financial loan from several financial institutions. Due to the high percent rate of a bad credit loan, borrowers should structure their hard money loans so that they do not exceed 12 to 18 months. The goal for a borrower in this situation is to rebuild their credit during this time (borrowers are not penalized by credit bureaus if they miss payments etc. on a bad credit loan because their loan is not recorded through a bank or other financial institution). With diligence and work, hopefully the borrower can now refinance their loan and obtain a subprime loan. This way, the borrower is on their way to reestablishing their financial future.