If you have a low credit score, you may find it harder to secure mortgage financing. Traditional lenders want good credit and if you don’t have it, they’ll turn down your application. But, many lenders, like Save Financial, offer low credit score loans.
How do you know if what you’re being offered is legit? Here’s what to consider.
The Interest Rate
The interest rate is what lenders charge you to borrow the money. You pay a percentage of the outstanding balance each month until you pay the loan off in full.
Low credit score loans don’t mean you should overpay in interest, though. Read the fine print and know what you’re paying. Is it a fixed rate or will it change (adjustable rate)? Compare your options and choose the loan that offers the lowest cost.
The Closing Costs
Some lenders will quote a low interest rate even for low credit score loans, but then pack the loan with fees. Don’t just look at the interest rate but look at the big picture.
An easy way to compare your options is by looking at the APR or annual percentage rate. This is how much the loan costs you annually based on the interest rate and closing fees. A loan with a low interest rate but high closing costs will have a higher APR than you might think.
Some low credit score loans have prepayment penalties. This prevents you from refinancing the loan once you improve your credit. While you can usually refinance after 3 years or so, lenders want to make money on the loan for at least a few years to make taking the risk worth it.
Read the fine print and know if there is a prepayment penalty. Find out how much it will cost if you do pay the loan off before the prepayment penalty date too, so you know the worst-case scenario.
Do your research before closing with a lender and make sure their loan servicing is good. Read reviews and call the lender yourself. See how easy (or not) it is to get someone on the phone. Pay attention to how well they answer your questions or if they just pass you off to someone else.
When you have a mortgage with a lender, you want to be able to get answers to your questions when you need them. A company with poor customer service could be worse than paying a high interest rate.
If you are looking for low credit score loans, check out what we offer at Save Financial. We are here to make sure our borrowers are 100% satisfied by providing top notch customer service.
We also offer some of the most competitive interest rates and lowest fees for loans for borrowers with low credit scores. We understand you are more than a credit score and we do whatever we can to get you the loan you need to buy your home.