High risk mortgage lenders, commonly referred to as sub-prime lenders, are lenders that specialize in offering mortgages to individuals with less than perfect credit. Because of record low interest rates, many people are choosing to purchase their first home or refinance their current mortgage in order to obtain a better rate. For the most part, anyone can acquire a home loan. The process is a little easier for individuals with a good credit rating. Nevertheless, individuals with poor credit have options.

Interest Rates

Monthly mortgage payments are determined by two factors, the amount of the loan and the interest rate. The interest rate carries a lot of weight. Today, most new mortgages have an interest rate of 5 or 6 percent. Individuals who receive mortgage loans from a sub-prime lender can expect to pay one or two points higher, depending on their credit score. An interest rate at a one or two point difference from the current rate may increase a monthly mortgage payment by $50 to $200. For this reason, many people avoid obtaining loans through sub-prime lenders. Instead, they work towards improving their credit rating with the intent of receiving a home loan with a reasonable rate. Several factors may boost credit score. These involve paying creditors before the due date and reducing debt.

Compare Rates and Conditions

Even if you do not qualify for a loan with a traditional mortgage lender, it is important to compare rates and terms from at least three different sub-prime lenders. Individuals with bad credit who are interested in refinancing their current mortgage may begin by contacting their current mortgage lender. In some cases, these lenders are willing to negotiate acceptable rates with existing customers, especially if they have a good payment history. Nonetheless, reviewing offers from other lenders may prove beneficial.

The best course of action involves submitting a loan application through a sub-prime mortgage broker. These brokers have relationships with various sub-prime lenders. Upon review of an applicant's employment history, income, credit standing, etc, brokers will remit multiple offers from lenders to the applicant. Applicant should carefully review quotes and select the offer with the best rates and services.