Bad Credit Second Mortgage By The Numbers - part 1
by Mike Hamel
Bad credit second mortgages make up a sizable part of the mortgage market. According to a recent survey by the Mortgage Bankers Association, the number of second mortgage originations increased by 13 percent in the second half of 2005 and closed-end second mortgages increased by 33 percent. The survey included 114 lenders that originated $189 billion in second mortgages, many of them to people with bad credit.
There are at least five numbers that determine the ultimate cost of a bad credit second mortgage: interest rate, years on the job, credit score, closing costs and term length.
Interest rate - The interest rate on a second mortgage is slightly higher than on a first mortgage because it is in a subordinate position. If the borrower defaults and the home goes into foreclosure, the second mortgage is settled after the first, so the lender is taking a greater risk.
The interest rate on a bad credit second mortgage will be higher still, so says Steven Frank, Senior VP at FlexPoint Funding, one of the nation's largest subprime mortgage bankers. "A bad credit borrower is someone with a FICO score below 62. He or she will pay between 1.5% and 2% higher interest for a second mortgage, but there is no shortage of money or willing lenders in the bad credit mortgage market."
Work history - When considering a bad credit second mortgage, lenders look at the borrower's ability to repay the mortgage. This is verified by checking his or her current employment and total income. Mortgage lenders prefer that the borrower has been employed at the same place for at least two years, or has been in the same line of work for several years.
Credit score - The lender will also look into how the borrower has met previous financial obligations. This is where a credit report and credit score come into play. A credit report lists a person's credit activity for the last several years. It shows the highest balance, current balance and payment history on every account. Negative data such as late or missed payments gets erased after a few years but a bankruptcy can stay in the report for up to ten years.
Read the end of
Bad Credit Second Mortgage By The Numbers
Related Second Mortgage Articles: Second Mortgage Home Equity Loan Second Mortgage Loans Second Mortgage A Good First Step Understanding A Second Mortgage Obtaining A Second Mortgage |
Related Second Mortgage Questions: Other resources for Second Mortgage Second mortgage? Second mortgage? Second Mortgage Lender re: Collateral? Cash-Out Refinance or Second Mortgage? If Second Mortgage...home equity loan or HELOC? Second mortgage refi or consolidate 1st and 2nd (UPDATE)? |
Back from Second Mortgage Articles
to California Mortgage Articles Directory