Roadblocks for a Home Equity Borrower

Home equity is something that you must not take for granted at any time in your house owning life. This is a great way to gain some money for other projects that you might need to take on. There are some roadblocks that you need to jump over in order to make sure that everything you want to achieve gets achieved. Know what you are getting into before you finish up the process and make sure you are putting yourself in the best position you can.

Tight Requirements

The more people that default on loans and equity the tougher it is going to be for people to cash in, which is exactly what is happening at the moment. Even people with good credit scores are beginning to default. This means that the next few years are going to be a lot tougher to get home equity loans. It might have been easier the past three or four yearsl, but that is what caused the crack in the system. Just know that you are going to really have to prove yourself and make sure that they know that everything will be alright.

Less No Doc Loans

There used to be a lot of home equity loans that were no doc loans. This means no documentation, which meant that there was no required verification of the borrower�s income strength. As you might expect these loans come with strict rules thus making the default rate of these loans a lot higher than normal. This is a risk that the borrower and the lender are not willing to take on any longer. This required a lending decision to be based on asset value, and then foreclosure was the end game if you could not pay back.

Less Piggyback Loans

If you get a piggyback loan then you are more than 40% more likely to default then those with a stand alone first mortgage. This is especially true if you have a low credit score. If you want to piggyback on a loan then you can expect that people will want private mortgage insurance to play a role in this process. You also could see that a larger down payment is needed for you to go through with this. The key is to make sure you do not default and do have not caused any extra trouble for the lender. You will then be in good shape.