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More Information
Second Mortgage
Why Take Out a Second Mortgage?
Traditional Second Mortgage
Home Equity Line of Credit (HELOC)
Preparing Your Credit
Preparing to Apply
Understanding Fixed Rates
Understanding Adjustable Rates
Shopping for a Lender
Locking in a Rate
Understanding Points
High-Interest Debt: A Way Out
Paying for College
Home Renovation
Using the Internet to Research
Payment Comparison
An Affordable Monthly Payment
Private Mortgage Insurance
HELOCs and Monthly Payments
The Role of the Loan Officer

Preparing Your Credit

While the process of applying for a second mortgage loan is often somewhat less complicated than the requirements associated with an original mortgage, there are still several pieces of information and documentation that will be required by your lending institution.

Before applying, obtain a copy of your credit report from one of the three major credit reporting bureaus, Equifax, Experian, or TransUnion. You can do this online, on the phone, or through the mail.

Make sure your credit report is accurate. If you find errors, omissions, or outdated information on your credit report, it is critical that you immediately notify the credit bureau in writing and provide whatever documentation is necessary. The bureau is obligated to correct any misinformation that appears on your report.

If you neglect to audit and update your credit report, your credit score may not accurately reflect your financial health. This can complicate the second mortgage loan application process. Your application may be rejected, or you may not receive the most favorable interest rate available. Failing to be certain that your credit report is completely correct can be a costly mistake. Remember, an ounce of prevention is worth a pound of cure when it comes to being ready for the loan application process.

If you have questionable items on your credit report that are accurate, such as late payments or charge-offs, be prepared to explain the occurrence of such; for example, “I was laid off my job unexpectedly.” Many lending institutions will accept a written statement clarifying any past negative items, assuming you have made a good faith effort to resolve the issue with the creditor in question.

Once you are confident your credit is ready for scrutiny, you will feel more comfortable with the second mortgage loan process.