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Adjustable rates have more lenient qualifying criteria than fixed rate mortgages. Fixed rate mortgages have a constant interest rate that does not change throughout the life of the loan, ensuring that your monthly payments remain the same from start to finish. An adjustable rate does not have the same security, but relaxed qualifying standards and low introductory interest rates make this type of loan worth certain risks, especially if you are having a hard time qualifying for a fixed rate mortgage. If interest rate indexes drop over the years or if you plan on moving within five to seven years, an adjustable rate loan can save you money. There is a risk that interest rates will rise, but adjustable rate loans come with rate caps to minimize this risk.
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By insuring home mortgages, the federal government has enabled lenders to relax their qualifications for certain low interest loans for low income families and for those with less than perfect credit. An FHA loan, insured through the Department of Housing and Urban Development (HUD), is an example of such an insured loan. These loans have low interest rates and very low down payments. The FHA stipulates that the monthly payment on the loan can not equal up to more than 29% of your monthly income and also has a limit on large these loans can be. A VA loan often requires no down payment and has very low interest rates. This loan is available only to those who have served in the United States military. For more information, refer to HUDs website (www.hud.gov) or to the VA (www.homeloans.va.gov).
Secured loans, or loans that use a home or automobile as collateral, can help those with bad credit qualify for a loan because, like the insurance provided with FHA loans, this type of loan reduces the amount of risk to the lender. The benefit of this reduced risk is passed on to you through lower interest rates.
If you have experienced bankruptcy or have bad credit, you may believe that
you will not be able to qualify for a mortgage. This is not necessarily true.
There are many loans available that make it easier than ever to qualify for
a mortgage. For example:
- Federal Housing Administration (FHA) insured mortgage
- Veterans Administration (VA) insured mortgage
- Adjustable rate mortgages
- Secured loans
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