Getting Home Equity Loan With Poor Credit - 3 Dos and 3 Don'ts

You know your home equity is good - meaning, you owe less on your mortgage than your home is worth and you need some extra cash.
By taking out an equity loan aka a second mortgage, you could use the cash to clear down outstanding credit card debt, pay off other debt, remodel your house, or do whatever you like.
But what do you do if you have a bad credit score? This can make things tougher. As common knowledge dictates, whether or not you can qualify for a loan depends largely on your credit score. A higher score means an excellent chance of obtaining approval while qualifying for a lower interest rate. Conversely, a lower score means you pay more in interest – and that is if you even get approved.


 If you are interested in obtaining a home equity loan with poor credit, here are 3 do's and 3 don'ts to consider:


Three Do's


1. Know your credit report forwards and backwards
Lenders specializing in making equity loans to people with poor credit scores have ways of determining your credit-worthiness that go beyond just checking your credit score. Unlike other types of lenders, poor credit home lenders look at the details of your report. So, to be sure you can answer detailed questions they have about your credit history, go through all your report line by line. Make notes on any items that stand out.


2. Determine the amount you need to borrow
It is best to walk into your lender's office or when you apply online with a precise knowledge of how much money you intend to borrow against home equity. Borrow enough, not borrow more than you need.


3. Locate bad credit equity lenders
Approach only lenders specializing in making bad credit equity loans. List at least 5 such lenders.

Three Don'ts


1. Don’t forget to calculate how much your equity is
Before making an application for credit home loan, calculate your home's current equity. You will need to have an idea of your home's current market value. Then, find out just how much you owe on your mortgage(s). Deduct the amount you owe from the home's value to get your equity.
Note: certain lenders will only allow the amount they lend you plus the total outstanding first mortgage loan balance to be equal to or less than 80% of the value of home value. This is called an 80% loan-to-value (LTV) loan, whereas, some will go as high as 100% or even 125% LTV.


2. Don't assume you will pay the same interest as if you had a good credit score
If someone who has a better credit score than you do has told you what their equity loan interest rate is, don’t make the mistake of assuming that you will qualify for as good of a rate - it is most unlikely.


3. Don’t accept the first offer you get
When you start putting in for loans and getting accepted, be sure you do not just go with your first loan offer. Rather apply to all 5 lenders on your candidate lender list.
Consider these 3 do's and 3 don'ts as you find and qualify for a home equity loan with poor credit.