Home Equity Loan
Today, lenders have tightened their standards for home equity loans. Even bad credit mortgage lenders cannot always approve home equity loans. The best way to find out if you qualify for a bad credit mortgage is to enter your information on this page to receive quotes from lenders.
Home Equity Loan vs. First Mortgage
There are two reasons that poor credit home loans and home equity loans have become so difficult to find. First, home values have dropped, so bad credit mortgage lenders are less likely to receive the balance due if they have to foreclose. Second, a home equity loan is the secondary or “junior” loan, so these loans are even less likely to be paid in full if the property goes to foreclosure or a short sale.
How to Qualify for Home Equity Loans
There are two determining factors which allow homeowners to qualify for home equity loans. The first consideration is the value of the property. In previous real estate markets, lenders sometimes allowed homeowners, even those who needed bad credit mortgage refinancing, to borrow as much as 125% of their home’s value. Now that home prices have declined, many homeowners find themselves “underwater”, owing more on the mortgage than their home is worth. These owners, regardless of their credit, are unlikely to qualify for a home equity loan.Homeowners with significant equity in their homes, even if they need a bad credit mortgage loan, are in a better position than underwater owners. Find out if you can qualify for a home equity loan by completing the form on this page.
Some homeowners will need to take some steps before they can qualify for a bad credit mortgage.
First, they may need to wait until they can build their equity with rising home values and by paying down their mortgage.
Some homeowners will need to take some steps before they can qualify for a bad credit mortgage.
First, they may need to wait until they can build their equity with rising home values and by paying down their mortgage.
Second, they may need to improve their credit by reducing their debt, paying bills on time, and increasing their income. Sometimes a temporary second job can add just enough income to pay off some debt or to improve cash flow.
Third, review their credit reports and request that old information or inaccurate information be removed from the report. Even bad credit mortgage lenders review credit reports.
Taking steps now to improve your credit will improve your chances at qualifying for a home equity loan in the future.
Taking steps now to improve your credit will improve your chances at qualifying for a home equity loan in the future.
Home equity conversion mortgages
The FHA’s home equity conversion mortgage program (HECM) is designed to let older homeowners convert equity into cash without selling their homes. HECM loans are a type of reverse mortgage, and are made by banks, credit unions, and other typical mortgage lenders.
A home equity conversion loan (HECM) allows homeowners to convert a portion of their home equity into cash that’s paid back to them by the mortgage company. As long as they live in the home, they don’t have to repay the conversion mortgage. As a result, the HECM offers the opportunity to spend equity without selling or moving.
To be eligible for the HECM, a homeowner must be at least 62 years old and agree to receive free mortgage counseling from a HUD-approved agency. Conversion mortgage borrowers also have to either own their home free and clear, or have a low outstanding mortgage balance that can be paid off from funds provided by the home equity conversion.
A home equity conversion loan (HECM) allows homeowners to convert a portion of their home equity into cash that’s paid back to them by the mortgage company. As long as they live in the home, they don’t have to repay the conversion mortgage. As a result, the HECM offers the opportunity to spend equity without selling or moving.
To be eligible for the HECM, a homeowner must be at least 62 years old and agree to receive free mortgage counseling from a HUD-approved agency. Conversion mortgage borrowers also have to either own their home free and clear, or have a low outstanding mortgage balance that can be paid off from funds provided by the home equity conversion.
Receiving Home Equity Fund
Homeowners can elect to receive home equity conversion payments several different ways:
- Regular monthly cash advances for a specific number of years
- Regular monthly cash advances for life
- A line of credit withdrawn in increments, or in lump sum payments until the credit is exhausted
- A combination of the various payment plans outlined above
HECM withdrawals against equity are calculated by the owner’s age, the current rate of interest, and the value of the home. The older an owner is, the more valuable his property. As a result, the interest rate will be lower, and he’ll generally receive more money in exchange for his home equity conversion. Eligible properties must be a principal residence that meets FHA standards. If the home needs repairs to come up to those guidelines, the repairs can be financed by the home equity conversion mortgage.
Repayment of a conversion loan
A home equity conversion mortgage need not be repaid until the borrower moves, sells, or dies. But the borrower retains ownership of the home, and has the right to sell it and move if he wants to. In the event that he sells, he’s entitled to keep any sales proceeds that exceed the outstanding mortgage balance. At the same time, a borrower can’t be forced to sell his home to pay off the mortgage, even if the balance is more than the value of the property.
HECMs and Insurance
A mortgage insurance premium paid by the borrower helps protect lenders from losses; therefore, they can make HECM loans with less risk and at more affordable rates. Both lender and borrower enjoy special protections. FHA insurance will cover any balance that’s owed; in the event that a lender fails to pay what’s promised to the homeowner, the FHA will step in and pay. The conversion mortgage insurance premium, as well as other closing costs, can be paid with proceeds from the HECM loan, so the borrower won’t incur significant out-of-pocket expenses.
Why would I take out a home equity loan?
Customers have told us as many reasons for getting a home equity loan as the number of loans we've funded. You may choose to use an equity loan for home improvements, to buy a car, pay college tuition – or whatever you want.
Because home equity interest rates are typically lower than credit card rates, it may make sense to pay off your high interest debt with your equity loan. And, the interest payments on home equity loans are tax-deductible. Your tax advisor can give you the scoop on the tax benefits an equity loan can provide.
HomeLoanCenter.com offers flexible equity programs where you can borrow up to 125% of the value of your home. Tell us what you want an equity loan for, and we’ll find a good value for you.
Because home equity interest rates are typically lower than credit card rates, it may make sense to pay off your high interest debt with your equity loan. And, the interest payments on home equity loans are tax-deductible. Your tax advisor can give you the scoop on the tax benefits an equity loan can provide.
HomeLoanCenter.com offers flexible equity programs where you can borrow up to 125% of the value of your home. Tell us what you want an equity loan for, and we’ll find a good value for you.
Are there any application or approval fees?
No. Mortgage Loan does not charge an application or approval fee for any of our loan programs. You’re free to browse, research, and apply at your convenience.
What equity loan amount do I qualify for?
The amount of equity you can borrow depends on a couple of factors. We’ll check your home’s loan-to-value (what you currently owe versus its value), your credit and income. With Mortgage Loan’s flexible home equity programs, chances are you’ll find the loan that’s right for you.
How much equity do I need to qualify for a home equity loan?
Unlike some lenders, Mortgage Loan gives you options. We offer home equity loan programs where you can borrow up to 125% of the value of your home. If you want to find out how much equity you have, use our home equity calculator or call one of our Equity Specialists today.
How long does it take to get the cash to me?
In just a few minutes online or over the phone, we can get you pre-approved for your loan. All we need after that are a few verification documents, and we’ll start your loan process right away. In most cases, we can close your loan in as little as 10 days! As soon as your loan closes, we will overnight your check or wire the funds to a specified bank account. What loan term options do you offer for home equity loans?
Mortgage Loan has a strong selection of loan and payment terms to suit you. You could qualify for one of our fully amortized and interest only payment options with flexible terms of up to 30 years, or maybe one of our fixed-rate programs is more in line with your needs. With the variety of programs we offer, our equity specialists can help you figure out which loan program and loan term is right for you.
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How much money can I borrow?
Mortgage Loan funds equity loans in the range of $15,000 to $500,000 upon qualification. If you want a loan apply online or call one of our equity specialists today to find a loan that’s right for you.
Is there a penalty for paying off my home equity loan early?
You won’t pay a prepayment penalty on any Mortgage Loan equity line of credit product. Fixed equity, or installment loans can be assessed a penalty of up to six months of interest payments if the loan is prepaid within the first three years of the term. If you have questions about pre-payment or how equity loans work, look through our FAQs or call one of our equity specialists today.
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