If you have been contemplating getting a 2nd mortgage with bad credit, then you will want to read this article. Specifically, we will be discussing things you should consider prior to looking for a 2nd mortgage and what you need to know to qualify. After reading this article, you should be clear on whether a 2nd mortgage is right for you.
Should you really put your home on the line?
Although mortgage advertisements would have you believe otherwise, getting a 2nd mortgage is a big deal. It is not something that you should enter into lightly. There are thousands of people who have now lost their homes who wish that they had made another decision when it comes to overextending themselves with home debt.
So ask yourself – why are you looking for a second mortgage? The reason should never be so that you can take a trip or live above your means.
If you are overextended with credit cards and looking to pay them off, a second mortgage can make sense. The key thing to realize, however, is that almost 85% of the people who use a second mortgage to pay their credit card debt off end up right back in the same situation just a few years later. So, you should consider a second mortgage only if you are ready to cut your credit cards up and start living within your means.
Underwriting Criteria
When you are looking for a bad credit mortgage, there are two key factors that lenders will be looking at. The first is your ability to repay the loan. Stable and verifiable income is critical. The next factor, and perhaps the most important, is the equity that you have in the home. You will need to be in a significant equity position if you want to get a second mortgage with bad credit. Depending on just how bad your credit is, you should expect combined lien amounts to be somewhere between 60% and 80% of the value of your home.