9 Tips on Applying for a Second Mortgage

Summary: People usually apply for a second mortgage or home equity loan when they need money for debt consolidation, to pay large expenses or for home remodeling and home improvement. What type of mortgage loan you select, depends on your needs, but the application and approval process is similar for both. These nine tips will help your loan process be as hitch-free as possible. Consider the second mortgage terms, pre-payment penalty for early pay off, and of course the interest rate & closing costs.

People usually apply for a second mortgage or home equity loan when they need money for debt consolidation, to pay large expenses or for home remodeling and home improvement. Second mortgages are generally categorized as fixed interest rate home equity installment loans (HELOANS) and adjustable mortgage rate home equity lines of credit (HELOCs). Which you choose depends on your needs, but the application and approval process is similar for both. These nine tips will help your loan process be as hitch-free as possible: 1. Compare options like mortgage refinancing and other loan options to determine if a second mortgage is the best choice. 2. Make sure you can tell lender what the purpose of the loan is. Your answer will help determine whether or not you are approved. 3. Check your credit report for errors and get your FICO scores (myfico.com/12) because lenders will review your FICO score to determine your loan rates. Check "How to Improve Your Credit Score" for more information on cleaning up your credit. 4. Compare several home equity loan options. Discuss the loan programs with your broker or lender and find the best loan for your situation. Getting a good interest rates isn't a bad idea either. 5. When applying for a loan, you will get a mortgage checklist from your lender containing the list of paperwork you need to close the loan, including: