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What type of bad credit home loans is the most common?

Bear in mind that most lenders will refuse in a mortgage for an applicant with a bad credit score. However, low or ‘border’ score can sometimes qualify you for a subprime home loan. The main difference of a subprime loan to a usual home loan is the significantly higher interest rate. Besides the bad rates, subprime loans may also have a diverse interest or additional tricky features that make such loans extremely risky for the borrowers. For instance, a subprime home loan may have an adjustable rate. This means that initially, the interest rate will be promotional, so much lower than you could possibly get with a fixed-rate mortgage; however, after the introductory term (which can be several months to several years), the interest together with the number of your payments can be revised and usually they will only rise.

Another drawback of subprime loans is possible negative amortization. Such a term may appear for you whenever your monthly payments do not cover the interest due on the mortgage; this means that it becomes even tougher to pay down your loan balance. If the lender introduces negative amortization on your loan, your balance will be growing every month since the unpaid interest will get added to the remaining balance on your home loan.

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