Bad Credit Mortgages

Bad credit mortgages are home loan options specifically for people not considered to be good credit risks.  Applicants tend to have poor credit ratings due to prolonged periods of unemployment, extended illnesses in the family, or other situations; however, they still wish to purchase a home.  Some lenders are willing to take on these high risk applicants and will provide bad credit mortgages.  Such mortgages are generally offered at a higher rate of interest because the lender is assuming a higher risk.  This higher interest results in the final amount for the home being higher as well.

Many bad credit mortgages do not include grace periods that other mortgages offer; as a result, a borrower who is only one or two days late with his monthly payment may be too late and the lender will be able to foreclose on the property.  Bad credit mortgages are controversial as there are some financial institutions and other organizations that mislead applicants with promotional strategies that are vague, confusing, and do not adequately describe how these mortgage plans work.

Underwater Mortgages

Underwater mortgages leave an owner with more debt on his property than the current market value.  Such situations occur when a borrower takes out a second or third mortgage on the property or if his property value depreciates unexpectedly.  Refinancing an existing mortgage is the most common way of getting out of an underwater mortgage situation. A lender may allow the borrower to borrow on the existing equity in the property, which can be beneficial should he possess a large amount of equity.  Of course, if the amount of equity is relatively small, then the borrower will actually accumulate debt, thus putting himself in an underwater mortgage situation.

Mortgages also go underwater when property values change.  There are many situations where property values alter – rezoning, unemployment, weather – and the property can fall below the total of the current outstanding mortgages.  As a result, the owner is no longer able to sell the property for enough revenue to pay off his debt.  Housing crunches also create such situations as a rise in demand for housing results in the higher prices for homes.  When this crunch ends, however, and the market values begin to drop, owners then owe more on their homes than the actual market value.  In these situations, the owners will find it very difficult to sell the property at a value higher than the mortgage and in many situations it is more economically practical to default on their loans.

Jumbo Reverse Mortgage

A jumbo reverse mortgage allows older homeowners to access money without having to sell their property.  This financing is available for homeowners at 62 years old and whose homes are valued at $625,000.  These mortgages allow the owners to access the equity, which is the difference between the existing mortgage and value of the home, which has built up in the property.  When advanced, funds within a jumbo reverse mortgage first go to paying off the secured by the property.  After these existing mortgages or secured lines of credit are paid, the homeowner receives the balance.  The funds obtained through this mortgage are released either by monthly payments, or lump sum payments, or even a line of credit, which grants the homeowner significant flexibility as he can access the funds as needed.

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