What Are the Requirements to Get a Second Mortgage with Bad Credit
Getting a second mortgage with bad credit is not a simple process. Even if you have equity built up in your home, lenders may deny you financing based on your credit history. Fortunately, there are a few simple steps you can take to improve your chances of being approved– even if you have black marks on your credit report. In fact, getting a second mortgage can even improve your credit rating. Below, we'll look at the requirements for second mortgages and what you can do to make your application as attractive as possible to lenders.
You Must Have a Credit Score of At Least 680
The first step in applying for a second mortgage with bad credit is to review your credit report. Prime lenders (i.e. the "big banks") offer their best interest rates to borrowers with near-perfect credit scores and will refuse to lend to individuals with credit scores below 680. Even if you are approved for a second mortgage with bad credit, you'll be charged a much higher interest rate and face stricter terms. Before applying for a second mortgage, take some time to resolve any issues like high credit card balances and defaulted credit accounts.
Your Mortgage Payments Must Be Current
Lenders will look at your mortgage payment history to determine how well you've handled debt in the past and how likely you are to repay your second mortgage. If you've had any late payments in the last 12 months, your application may be denied. Before applying for a second mortgage with bad credit, it's a good idea to review your payment history with a mortgage broker.
You Need to Have At Least 2 Years of Verifiable Income
Second mortgages carry greater risk for lenders than first mortgages, so lenders will want to see that you've had a steady income for at least 2 years. If you're applying for a second mortgage with bad credit and can't provide verifiable proof of regular income, you may be denied financing.
Being denied a second mortgage because of a poor credit history can be stressful, but it isn't the end of the world. There are alternatives to traditional second mortgages for borrowers with blemished credit histories – such as cash-out refinancing, streamline refinancing, and hard money second home equity loans. Contact us today for more information about securing a second mortgage with bad credit.