Getting a Long Island NY Mortgage With Bad Credit

Getting a Long Island NY mortgage when you have bad or poor creditDuring the days of the housing boom, “sub-prime mortgages” — aka ‘home loans for people with bad credit’ — were very popular. After the housing bust and the financial crisis of 2008, most banks stopped issuing sub-prime mortgage loans, and it became much more difficult for people with bad credit to qualify for a loan to buy a house.

Now the sub-prime mortgage market seems to be making a come-back. There are more options now than there have been since the days of the housing bubble for people with bad credit who want to get a home loan.

Getting a Long Island NY Mortgage When You Have Bad Credit

If you have bad credit, banks and lenders view you as a bigger risk to fail to repay the money they loan you. You can lower your risk by paying more money in advance — otherwise known as the down payment — on your house. Borrowers with bad credit usually have to make down payments of 25%-40% of the purchase price of a home, depending on their credit scores. For example, on a $300,000 house, a 25% down payment would be $75,000.

Prepare For Higher Rates

Getting a Long Island NY mortgage with a sub-prime loan will have much higher interest rates than conventional loans. Even at a time of historically low interest rates (3% or less on many mortgages), sub-prime borrowers paid interest rates of 7.95% or higher. Terms and conditions will vary by lender, of course, but it’s worth knowing that when sub-prime mortgage loans are available, they come at a higher cost.

Prove That You Can Pay

During the height of the housing bubble, people were getting a Long Island NY mortgage approved for sub-prime loans at irresponsible levels. People were getting a Long Island NY mortgage even if they didn’t have jobs or any money at all. There was even a joke about “NINJA” loans for people with “No Income, No Jobs/Assets.”

Today the situation is different. If you want to get a sub-prime loan, be prepared to show ample proof of income and have a solid work history. This is not an unreasonable expectation for getting a Long Island NY mortgage loan, but it goes to show how relatively insane the situation was during the housing bubble. But banks do their customers no favors when they give them loans that they cannot afford to repay.

The Good News

The housing market is improving. House prices are on the rise again. Millions of homeowners who were “under water” on their mortgages are now getting some relief, and many other people who were blocked out of being able to qualify for a home loan are once again getting a Long Island NY mortgage.

Even if you have bad credit, it is still possible to get a mortgage, but you need to be prepared to offer a sizable down payment, pay higher interest rates, and have your personal financial life in order so you can prove you are a good risk.