How Much Will Bad Credit Cost Me On My Mortgage Loan?

How much will bad credit cost me on my mortgage loan? Read below for all the ways that bad credit could make your mortgage loan more expensive.

While interest rates appear to be at their lowest point ever, for those with bad credit, mortgages are still quite expensive. Having bad credit can cost someone a lot of money a number of different ways.

Higher Interest Rate

The first way that bad credit can cost you more money on your mortgage loan is through higher interest rates. While banks may advertise a certain interest rate, those rates are only available for people with good credit. People with bad credit will often be charged up to 1% higher than a person with good credit. On a $200,000 loan this means a person with bad credit will have to pay an additional $125 per month or $45,000 over the course of the loan.

Higher Fees

The second that bad credit can cost you more money on your mortgage loan is through higher fees. Many mortgage lenders charge additional origination fees or mortgage points to people with bad credit. Generally, a mortgage lender will charge a fee of 1% to 2% of the mortgage loan to a person with bad credit. For a $200,000 loan, this could mean an additional $4,000 in fee.

More Down Payment

The third way that bad credit can cost you more money on your mortgage loan is through the down payment. Many mortgage lenders require a person to have a down payment of at least 10%. Since you have bad credit, and have a higher chance of default, a bank will require you to put down even more money. In some situations, people with bad credit will need to put down as much as 20% of the purchase price just to be approved.

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