Question:

Are interest only home mortgage loan rates affordable for bad credit borrowers?

Answer:

Not always. With abrupt increase on interest rates on 30-year traditional FRMs, interest only home mortgage loan rates are on the rise, as well. In general, I-O home loans have higher rates than fixed rate mortgages with corresponding terms. Usually, IO mortgages are available on subprime terms but are you sure you want one?

When FRM Rates are on the rise Interest-Only loans interest rates spike up as well.

The market is different at any given moment. If you are a prime borrower, that is, your average FICO is 720+, you will have no problem getting a nice Interest Only mortgage or any other type of loan, suitable for your particular situation.

However, if your credit goes below 700-720 rates are going up for any type of loan (traditional fixed, jumbo, pure adjustable, Option ARM or interest-only) and prepayment penalties will be included on your loan agreement.

For real bad credit borrowers, a loan will work only if they manage to improve their score to go over 620+, or if they are an investor who needs a commercial loan, and these have different underwriting requirements.

Otherwise, bad credit residential IO mortgages can become burden on your budget and this is something to avoid.

To sum up, it depends on how bad your credit is and what type of borrower you are for an Interest Only loan to be available with decent rates. If you are a bad credit borrower in need for a residential mortgage with interest only option, you might like to consult a mortgage broker on exclusive terms, to be advised on the best possible mortgage.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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