How To Shop For A Reasonable Second Mortgage

Before you go shopping for a second mortgage, you'll need to spend time looking for the best deal as to which second mortgage will fit your needs. No matter what the reason may be for wanting a second mortgage -- debt consolidation, equity build-up, lowering your monthly payments, or to get out of a mortgage faster -- there are several factors to consider before looking into a second mortgage.

Lender

The first thing to consider in a second mortgage is which lender you should use. Lenders -- commercial banks, credit unions, mortgage companies, or thrift institutions -- each have different prices and terms. In addition to the above, mortgage brokers will find a lender for you. However, it's best to go through several different brokers to find the best deal, as they are not required to give you the best options.

Pricing

There are several different types of costs to keep in mind when looking at the different possibilities of a second mortgage, so it's very important to check out pricing. What will be your interest rate charge? Remember, within these rates are aspects, such as being fixed or adjustable, and these will vary. Also keep in mind the APR, or annual percentage rate. This includes broker fees, credit charges, interest rates, and points. What about the fees that are included in the loan? These fees include broker fees, closing costs, settlements, transaction fees, and underwriting fees. Although the fees may be in one lump sum, it is important to know the cost of each different fee, as well as the total. Some loans, however, have no attached costs, but the rates are usually higher as a result.

Down Payment

When taking out a second mortgage, an important pricing aspect is the requirement for a down payment. Although they average about 20% of the purchase price of the home, some brokers and mortgage companies offer less. You may also choose to make a smaller down payment and purchase PMI (Private Mortgage Insurance). This insurance protects the lender if the owner does not receive the payments. If required to purchase PMI, be sure to ask what the total cost of the insurance is, as well as the monthly payment, and how long you will be required to carry PMI.

Bad Credit?

Have bad credit? Getting a second mortgage with bad credit is a matter of not only finding the right mortgage company, but also discussing your credit problems with the credit-reporting agency. If you explain your bad credit situation and require information from the lender as to how credit history affects your loan, then you should be able to find the best deal possible in securing your loan.

Equal Credit Opportunity Act

The ECOA (Equal Credit Opportunity Act) assures that lenders cannot discriminate against your obtaining a loan for reasons such as age, disability, ethnic background, etc. If this does happen to you, contact the ECOA and report the lender.

The Best Deal

There are several different things to consider when looking for a second mortgage: First of all, what are your reasons for a second mortgage (lower monthly payments, consolidate debt, build up equity, or getting out of a first mortgage faster)? Plus, you need to consider what types of costs and rates are suitable for you. Know where to go for your lenders and what information you'll need from them. By following the above informative tips in this article, you should be able to get the best deal for your second mortgage.