Setabay Private Hard Money Lender: How to Avoid the Pitfalls of Bad Credit Arizona Mortgage Loans

Arizona home loans for bad credit have gotten a bad reputation in the last 8 years and have been blamed for causing the housing market crash of 2008. Knowing the ins and outs of each loan type as well as any potential pitfalls can help borrowers with bad credit make an informed decision and choose a responsible loan product.

In 2008, the housing market crashed. Foreclosures were up, home values were down, and some notable lenders like Freddie Mac, Fanny Mae, and many banks were accused of giving out predatory loans, selling bad loans, and even fraud. New government regulations attempted to crack down on sub-prime lending and keep consumers safe. However, many of these regulations effectively shut out borrowers with credit scores of less than 700, making it impossible to get Arizona mortgage loans to purchase a home.

Since 2008, many regulations and requirements have been loosened and there is more flexibility in the lending market and sub-prime loans are making a comeback. This is good news for borrowers with bad credit because it will allow them to purchase a home. With various banks and other lenders giving out Arizona mortgage loans to borrowers with credit scores as low as 500, the housing market has opened its doors to a much wider and more diverse segment of the population.

With bad credit loans making a comeback, it is important to remember that not all loans are created equal. If you are in the market for Arizona mortgage loans with bad credit, understanding the terms of your loan as well as taking certain steps to help mitigate risk factors will help you make sure that you are choosing a legitimate loan and will not have your home foreclosed on.

Ways to Risk Less with a Arizona Bad Credit Loan

The first, and arguable most important way to minimize your risk is to know the exact terms of your loan. Adjustable rate mortgages were blamed as a major culprit of the foreclosure crisis. This is because after the initial term of the loan, the interest rate on the mortgage increases and so does the monthly payment, usually going fairly high. Many homeowners were unable to make the new higher payment and could not refinance due to declining home values or a bad credit score, so they were ultimately foreclosed on. An adjustable rate mortgage is still a viable option for borrowers with bad credit, but make sure you know the exact terms of the loan. Know your initial interest rate, when it will adjust, and its lifetime cap for how high the interest rate can go. Make sure that you will either be able to refinance before the rate adjusts or will be able to make the new, higher payments. This will help minimize your foreclosure risks.

Another way to help bad credit borrowers risk less is by having an accurate appraisal before purchasing a property. If your home is worth less than when you bought it, you will not be able to refinance even if you have good credit. Although it is impossible to predict what home value trends will do, you can help your investment retain its value by having an accurate appraisal. Also, make sure that you work with a real estate agent who understands market trends. A good realtor will steer you away from homes in areas of town that traditionally lose value over time. Choosing the right home is as important as choosing the right home loan.

Finally, you can reduce your risk of choosing a bad loan by working with a mortgage broker. A broker who specializes in Arizona mortgage loans for bad credit borrowers can help you weigh the pros and cons of multiple loan types to choose the most stable and least risky loan for your situation. Your broker will also be able to help you calculate current and future monthly payments and interest rates.

Do your homework and find the right Arizona Mortgage Broker.

Make sure that your broker has experience in bad credit lending and can clearly explain any and all loan options to you. Also make sure that he operates under a valid broker license and can give you the names of a few different clients to use as references. Finding the right broker is an important first step in the home loan process. Your broker will be there to help you through the loan qualification process from the initial application to being handed your keys.