Mortgage Articles Bad Credit Score - Does Not Mean No Mortgage Tip! You must understand that the same mortgage rate can be said a number of ways. You can calculate a mortgage rate very differently with the same end result, but the numbers may be drastically different from the start. Because this is the case, some mortgage companies use lower numbers to quote the same mortgage rate because they want to attract more customers. Avoid this by being very specific about your mortgage rate when you call competing companies. Ask for the annual percentage interest rate (APR) in order to standardize your results. You can also ask for a lender’s mortgage rate in terms of effective monthly interest rate. Be sure to ask for the mortgage rate the same way from each lender so you can better compare results. It's amazing sometimes what lending institutions will do to get business, even if it is risky business. Many lending companies are now offering loan packages to borrowers who cannot afford to pay principal and interest on a loan whereby they only have to pay interest. This is just like knowingly lending money to someone when you know they cannot afford to pay it back. It really is unbelievable that these types of products are offered but if you just research the kind of loans that are being offered today, you will see that this is just an example of some of the risky loans these institutions engage in. These companies actually advertise that this is the best solution if you have bad credit, or a record of late payments. Why do mortgage companies want to take such a risk? If a consumer is not a good risk because he cannot make his mortgage payments, it does not make any business sense for these lending institutions to take such a risk. Even if the loan is backed by a home as the collateral for the loan, the lending institution is taking a big risk. Lending institutions have a hard time foreclosing on property, and they lose a lot of money in the process. Lending to risky customers is bound to lead to problems for the mortgage lender. I propose a new government agency that would serve as a mortgage policeman and would protect consumers against themselves and companies who are willing to get them into loans that they cannot afford. Perhaps there could be a program whereby each loan was judged against sensible criteria, and when a bank or mortgage broker wants to lend money to a bad credit risk, the computer program would not allow the loan to go through. Not only would the mortgage companies and banks be better off, but so would the consumer. Once consumers realize the danger of interest only mortgages, they would be happy that the loan did not go through, since these kinds of loans will only make a persons' credit worse in the long run. If someone had a bad credit rating before, they will have an even worse one after an interest only loan. The government has so many programs and laws that affect the lending and mortgage industry, and all of the facts that are known about lending to persons with bad credit history, that you would think that these agencies would be averse to interest only loans that will only serve to put bad credit risk individuals into a worse credit situation. Does the chairman of the Federal Reserve know about these kinds of risky lending practices? Does he take them into account when he is deciding upon lowering or raising interest rates? What are the chances that these individuals are going to default on their loans? Very high, I would imagine, and I think that should be taken into account when interest rate policies are determined. Now let us consider the person who has a lousy credit score simply because he has too many credit card debts. You would think that this would have an impact upon his ability to obtain a loan. But in the crazy society of today, it may not. What happens instead, is that mortgage companies and other lenders just raise the interest rate on such loans, hoping to increase their profits. In other words, the lower your credit score, the higher the interest rate you will have to pay for a loan, as much as several points higher than someone who has a good credit score. This is just causing our country and our consumers to build more and more debt. If you have paid attention to the headlines, you know that we are at the lowest point ever for equity held in homes. The national savings rate is in the negative, and yet we continue to spend like there is no tomorrow. The government does not even seem to try to encourage savings in the consumer advocacy and protection branches. Instead, they appear to be making it easier for consumers to spend more and save less. The new bankruptcy laws that have been passed, that will make it easier for people to declare bankruptcy, will only make matters worse. More consumers will get into financial trouble because they think they have an easy way out. All of this easy credit, interest only loans and other such programs are making things worse. I hope the Chairman of the Fed has more sense than the people who are running our banks, mortgage companies, and other lending institutions! Michael Benifez reports for http://www.LifeinPalmCoast.com, covering the world of finance, mortgages, refinancing, debt and insurance in Palm Coast, Florida and Flagler county. His recent latest article on palm coast florida real estate discusses the current real estate market.