How to Get A Second Mortgage Even with Bad Credit
second mortgage
The procedure of getting a second mortgage with a bad credit score is not an easy one. Even if you have substantial equity built up in your house, lenders may deny your mortgage financing based on your credit history. However, you can take a few steps to improve your chances of getting a second mortgage with a poor credit score. There are chances that a second mortgage can even improve your credit score. Below-mentioned is a few pointers of what you can do to attract lenders to finance your second mortgage request.

You maintain a minimum credit score of at least 680

When applying for a second mortgage with a bad credit rating, you must first review your credit report. Traditional lenders will offer the best interest rates to borrowers with a good credit score and will not lend to individuals with a credit score of less than 680. If you get approved for a second mortgage with poor credit, there is a high chance that you will be charged with a high-interest rate, and the mortgage terms will be more stringent. Try to clear any outstanding debts like credit card balances etc., before applying for a second mortgage.

Your current mortgage payment must be convincing to lenders

Lenders will look at your recent mortgage repayment history to identify how well you have handled the debt in the past and how likely you will be able to repay the second mortgage payments. If you've defaulted on your payments in the last twelve months, you're likely to get your application denied. Before you choose to apply for a second mortgage with bad credit, we highly advise you to review your payment history with a mortgage broker.

You must have a minimum of two years of verifiable income

Unlike a first mortgage, second mortgages have a high-risk rate for lenders; this is to ensure the lenders that you've had a steady flow of income in the last two years. If you have bad credit and apply for a second mortgage without presenting any proof of verifiable income, there is a strong chance you will be denied mortgage financing. It can be quite a hassle being denied financing for a second mortgage, but it is not the end of the world; you can approach a private mortgage lender to secure your financing. Please note – obtaining mortgage financing from a private mortgage lender will mean the interest rates would be much higher than a traditional lender's.

Identify a guarantor or a co-signer

If you have a poor credit history having a co-signer or guarantor can help you secure mortgage financing. Lenders will look at this as a way for borrowers to reduce mortgage default risk. A co-signer will sign all the documents, and their name will appear on the purchaser's title. They are liable for the monthly payments as well. A guarantor will guarantee the mortgage payments will be made and held responsible if the payments are not paid on time. They, however, do not own the property, and their name will not appear on the title. For more information on second mortgages, please contact us today.

Tags :
Mortgage
Share This :