Are you thinking about buying a house? If you are, then you are probably wondering, can you get a mortgage on a house if already have an existing loan. The answer is yes. A mortgage can be obtained on a property even if the current owner has a loan against it. In other words, you do not need to start from zero.
Can You Get A Mortgage On A House If Already Own?
There are situations in which people have existing loans against their property. They may have bought it from a private sale, inherited it or refinanced it. In most cases, they have not taken on any new debt to pay off the existing one. However, there may be circumstances in which the lenders would want to know whether you have a mortgage or not.
This is known as adverse credit mortgage. Usually, people with bad credit history have a hard time securing mortgage loans. Lenders will feel threatened by this and will usually give out high interest rates. On the other hand, if you have a bad credit score but have an existing loan against your home, you may still be able to get a mortgage. This is because your credit score is lower than the value of your existing loan. If you have the ability to pay up the loan monthly, then you may be able to convince the lender that your home is worth more than the amount of money you owe.
Another possibility is to get a co-signer. This is someone who will vouch for you and vouch for your capacity to pay off the loan. If you are unable to do so, then the lender will have to get a guarantor to sign on your behalf. You will be able to get this type of arrangement, even if you have a previous personal bankruptcy or foreclosure.
You can also apply for a mortgage even if you already have bad credit. Just make sure that the terms of the mortgage include a provision that allows you to put your house up for sale if you are not able to pay for it. You can use the proceeds from the sale to pay off your debts. But remember that this may increase your debt to income ratio and affect your credit score in the long run.
The good thing about getting a mortgage even with bad credit is that you can still qualify based on your credit score. The problem is that most lenders consider the FICO score as their primary yardstick for determining credit worthiness. Thus, if your FICO is below the national average, you will have a hard time securing a loan.
However, you need to have a decent income or a lease agreement. A lease can help you convince a lender that you will be able to pay for the mortgage. This works better than a down payment because a lender does not want to take a chance on you defaulting on the loan. With some negotiation, you might be able to secure a lower interest rate or payment terms than you would get with higher credit scores.
Although a mortgage can help you get a house if already have bad credit, it does not necessarily follow that you should immediately plunge into the lending market. First, you have to be sure that your finances are in order. Second, find out if you can secure a loan with a lower interest rate. Once you have these two done, you can proceed with your mortgage application. Just make sure that you will be able to make the monthly payments. Once you do so, you can go on and look for a home.