How to qualify for a second mortgage
6 minute read
February 3, 2023


A second mortgage allows borrowers to use their home’s value as cash. 

If you’re like many Americans, your home is your most valuable asset—one that can increase in value and be used to pay for unplanned or other significant expenses.

Many Americans are sitting on more money than they realize because of gains most real estate markets experienced during the past two years. 

Nationwide, home values grew 17.0% between 2021 and 2022. In other words, if your home was worth $382,600 in 2021 (the median price of a house in the U.S. in June 2021), it could be worth up to $65,042 more—and that’s extra money you can tap into for any necessary expense you choose. 

A second mortgage cash-out loan can be a great way to use the money in your home without selling your home to access it. 

How does a second mortgage work?

A second mortgage is a home loan that uses your home as collateral. 

It’s in addition to your current mortgage, i.e., borrowers make a second mortgage payment plus their existing monthly payment.

As a homeowner, you might decide to get a second mortgage cash-out loan for any number of reasons, such as:

  • Debt consolidation 
  • Down payment on an investment property
  • Paying for home improvements, renovations
  • Unplanned medical bills
  • College tuition
  • Starting a business
  • Or any other purpose you consider important

What’s your loan scenario?

With a cash-out loan from a private money lender, there are no restrictions on what you do with the money you receive.

When homeowners turn to a conventional mortgage lender for a second mortgage, the loan is considered a lien on their home. Leins are legal claims to a property if the borrower can’t repay the mortgage loan using the home as collateral. 

How much money you can borrow is determined by the percentage of equity you have in your home. Most conventional lenders will only allow you to borrow a maximum of 80% of the equity in your home. 

For example, if your home is worth $300K and you have $100K in equity, the maximum amount traditional lenders would generally approve is $80K.

While a second mortgage with a hard money lender works similarly—allowing homeowners to get cash from their home—it’s much less complicated. 

With a private money lender, you still use your home as collateral, but the amount you can borrow is based on your home’s current market value, the careful assessment of your proposed loan scenario, and its likelihood of success. 

How do I qualify for a second mortgage?

Traditional lenders offer second mortgages, typically called home equity loans, which require an application, supporting documentation, and hard credit report and more. 

Because most traditional lenders consider second mortgage loans to be riskier than initial home loans, the application and approval process is generally more laborious, and interest rates are typically higher. 

To qualify for a second mortgage with a traditional lender, most homeowners will need:

  • Enough equity in their home to retain 20% equity after the second mortgage closes 
  • Good to excellent credit
  • Verifiable work history and income 
  • Lower debt-to-income ratio

These conditions can be challenging for some homeowners to meet, especially if you’re self-employed, a full-time investor, or hit a rough patch in employment during pandemic shutdowns.

In contrast, hard money lenders like Marquee Funding Group look at the prospect of a second mortgage differently. We look at it on a case-by-case basis and evaluate it based on its merit. 

Because Marquee Funding Group evaluates each lender individually, there are no hard and fast minimum or maximum credit score or other eligibility requirements. 

Potential borrowers will need to provide a few basic details about their home, such as address and an explanation of what they’re looking for and why. Depending on your loan scenario, borrowers with low credit scores, DTIs of up to 60%, or LTVs of up to 70% can still qualify.

Added value for borrowers

A second mortgage from a hard money lender doesn’t show up on credit reports. That means it can actually help improve your credit rating. 

For example, borrowers considering a second mortgage from a private money lender to consolidate debt would see the total reported debt amount drop on their credit report. 

But because second mortgages with traditional lenders are included on credit reports, borrowers are just changing how the debt is reported—the amount of their reported debt remains the same. Credit scores typically increase when a borrower’s reported debt decreases.

Second mortgage FAQs

How long does it take to get a second mortgage?

Because traditional lenders regard second mortgage loans as more vulnerable to default, their application and approval process can be lengthier and more complex than hard money lenders. Borrowers could be looking at up to 60 days to get their funds through conventional sources such as a credit union, bank, or mortgage lender.

Marquee Funding Group’s same-day approval and fast closing—in as little as seven days—can be ideal for borrowers hoping to quickly access the funds in their homes.

Should I get a second mortgage?

A second mortgage with a hard money lender could be a way to get a lump sum cash payment fast using your home as collateral—without changing the terms of your existing mortgage, paying origination fees, or other closing costs. 

How do I get a second mortgage?

Speed and flexibility are just two of the advantages borrowers can expect with a hard money lender second mortgage

Hard money lenders are private individuals, investors, or groups interested in funding deals based on their areas of knowledge, experience, and expertise. 

At Marquee Funding Group, our team of expert loan originators and real estate investors offer borrowers loan amounts for as little as $50,000 or as much as $20 million. Single-family, multi-family, and land loans are also eligible.

And in addition to regular borrowers looking for a speedy way to borrow money, we thrive in loan scenarios that a traditional second mortgage lender can’t—or won’t—fund, like business owners, self-employed (entrepreneurs, gig-workers, etc.), and investors.

Submit your loan scenario today for a quick review. See for yourself how fast, flexible financing from Marquee Funding Group can help you realize your personal or real estate goals. If your second mortgage loan scenario is solid, we’ll approve it. 

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