Do I Need a Credit Check for a Second Mortgage?
I am often asked questions regarding personal finance, especially about home mortgage loans. One of the questions I was asked recently was this: “Do I need a credit check for a second mortgage?” The short answer is “yes.”
What is a second mortgage?
Before you can understand the why behind the neccesity for a credit check for a second mortgage, it is important to realize that a 2nd mortgage is really another loan altogether. One of the biggest money mistakes made by some is believing that a second mortgage is an extension of the first, and that it is not a new loan. It is important to realize this error.
A 2nd mortgage is a new loan. When you get a second mortgage, you are in reality replacing your original home mortgage with another loan. The 2nd mortgage pays off the first, and creates an all new mortgage loan. If there is extra equity in your home, that is when some people take a cash out refinance second mortgage.
Why you need a credit check for a second mortgage
Because a 2nd mortgage is a new home mortgage, you need to go through all of the steps associated with getting home mortgage loans. This includes a credit check. In fact, many lenders require a higher credit score for a second mortgage than they do for a first home mortgage. A second mortgage means that you are acquiring more debt, and that you could be a higher risk. Therefore, the lender wants to make sure that you will be responsible for the home. This is especially true of a cash out refinance second mortgage, since such a mortgage loan reduces the equity in the home.
Before you get a 2nd mortgage, think about the consequences. Why are you getting the second mortgage? Do you want to refinance to a lower interest rate? Or do you strictly want a cash out refinance? Will you be using your second mortgage for debt consolidation? It is important to understand that a 2nd mortgage is a new home loan, and that a credit check is necessary.
Tags: home mortgage, home mortgage loan, 2nd mortgage, credit check second mortgage,
second mortgage, cash out refinance, cash out refinance second mortgage
