So you may already have a first mortgage and you might even be looking into getting out a second mortgage loan. You might be looking to get a second mortgage for a number of reasons. It could be in order to get a second property or you might just want to make some renovations on your current property. Whatever the reasons may be for wanting to take out a second mortgage, the process gets a little more complicated when you have a bad credit history. However, that does not make it impossible. In this article we are going to cover how to take out a second mortgage even if you do have a bad credit history.
How is a second mortgage different and how it works
When you get out a second mortgage what you are in fact doing is using the equity in your current home as a safety net for the new mortgage. This means that you are offering your currently property as backup for if you were to fall behind on payments on the new mortgage. However, the conditions that you have to meet in order to get out a second mortgage are a little stricter than those for the first mortgage. Normally the first payment is a little bit more, and also they tend to charge more interest upon every payment. This is because they would receive the money only after the first mortgage has received theirs. See more!
Getting a second mortgage with bad credit history
In order to be able to apply for a second mortgage you need to meet the following requirements: you need to be up-to-date on your currently mortgage payments, you have to have had no late payments within the last year, you need a credit score of more than 680, and you need two years of income that you can verify. However, if you have a bad credit history it is more than likely that you don’t meet at least one of those basic requirements. This is where you might have to start looking into alternatives to a second mortgage. Some examples to getting a second mortgage – and ones that are available if you have a bad credit history are: cash-out refinance, streamline refinance, HARP refinance or a no closing cost refinance.
How to quickly improve your credit score
However, if you do still need to try and improve your credit score then there are ways that you can do this both quickly and effectively. With a higher and better credit score you have a better chance of your second mortgage loan application being accepted. You can quickly improve your credit score by: paying off your credit card balances, removing or paying off collections accounts, by getting added as an authorized user, by disputing negative accounts with credit agencies and by not applying for any new credit.
In conclusion, whilst getting a second mortgage with a bad credit history may be difficult, it is not impossible. If you want to try and apply for the second mortgage, then try and improve your credit rating first as this improves your chances of being accepted. However, if you still do not get accepted for a second mortgage this way, then remember that there are always alternatives, but study which one suits you best and also the pros and cons of each alternative before making your final decision and getting your second mortgage loan. Learn more details at: https://www.investopedia.com/mortgage/heloc/bad-credit/