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Poor Credit Home Equity Loan Tips – What Factors Do Lenders Consider?

Posted: March 8, 2006 at 2:06 pm 77,857 views No Comment

Home equity loans have many useful purposes. On average, homeowners select these loans as a way to reduce and eliminate their credit card debts. This is a wise tactic considering that home equity loans have lower rates than most credit cards. Homeowners also have the option of choosing an equity loan with fixed rates and terms. Even though home equity loans are easier to qualify for than most loans, lenders consider several factors before approving a loan.

Understanding Home Equity Loans

If applying for a home equity loan, homeowners must assess their personal finances beforehand. Home equity loans are very popular. Because of low rates, they present the perfect opportunity for becoming debt free or financing a home improvement project. Furthermore, those looking to start a new business may use their home’s equity as seed money.

These loans are secured by your home’s equity. Thus, mortgage lenders are more apt to approve a loan request. With this said, getting an equity loan with a low credit score is feasible. In this situation, choosing the right lender is very important.

Mortgage lenders have different lending guidelines. If you have poor credit, it may be unwise to secure a home equity loan with a traditional mortgage lender. Most likely, your credit score will fall short of their requirements for a prime loan. Hence, the rate obtained on a home equity loan will be slightly higher. However, you can avoid a high rate by using a high risk or sub prime lender.

Applying for a Home Equity Loan

Although poor credit mortgage lenders are flexible, they do not approve risky loans. For this matter, lenders carefully assess several factors before granting a poor credit home equity loan. For starters, lenders will review credit history. There are limits to bad credit equity loans. To qualify, a homeowner’s FICO score cannot fall below 540. Some lenders set the minimum credit score at 500. Also, mortgage payments must be current to qualify.

Furthermore, mortgage lenders require homeowners to be employed and able to repay the funds. Home equity loans create a second mortgage. If approved for a loan, you must be able to afford an additional monthly payment. The majority of mortgage lenders will not approve a questionable loan. Thus, homeowners will be asked to supply W2’s, tax returns, etc.
Carrie Reeder is the owner of http://www.abcloanguide.com. View her recommended sources for a poor credit home equity loan.

View her recommended bad credit home equity loan lenders online. Also, view her recommended credit card debt help companies online.

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