Warning: include() [function.include]: URL file-access is disabled in the server configuration in /usr/home/ms/domains/hurryloan.com/html/answers.php on line 78 Warning: include(http://www.hurryloan.com/rightbar.php) [function.include]: failed to open stream: no suitable wrapper could be found in /usr/home/ms/domains/hurryloan.com/html/answers.php on line 78 Warning: include() [function.include]: Failed opening 'http://www.hurryloan.com/rightbar.php' for inclusion (include_path='.:/usr/local/share/pear') in /usr/home/ms/domains/hurryloan.com/html/answers.php on line 78   Go Back To Search Results Question Is having a 2nd mortgage (owner financing) considered to be a negative in the eyes of a bank? i am purchasing the property, the bank will have 1st position and the seller has agreed to take back a note 2nd position. i am wondering if having a second mortgage will reduce my chances of closing the first mortgage? i want to be clear, i plan to inform the bank and i have no intention to commit fraud by concealing the second mortgage. By Batfish Posted on 01/31/08 Total Answers 4 Answers- It depends on if the first and second mean that you own none of the house. 100% financing is not going over well when values are dropping. If you still made a reasonable down payment and your income to debt ratio is OK then you won't have a problem. Answer by : Landlord On Date 2008-01-31 18:00:55 Not usually a problem, as long as there's a subordination agreement signed. The bank won't care, and eventually you can get a refi to cover both loans so you only have one payment. Answer by : Teri D On Date 2008-01-31 18:01:49 The bank won't care as long as they are making an 80% loan. The main reasons they only loan 80% are that they want the buyer to have some of their own money in it so that they are more attached to the loan and also because they want to have the ability to do a short-sale to cover thier loan...if the seller takes a backseat to the bank, the bank will view it as "equity" to them... Answer by : Casey G On Date 2008-01-31 18:10:23 A subordination agreement isn't necessary because a second mortgage, by order of recording, is ALWAYS in second lien position. Subordination agreements are used ONLY when a first mortgage is being refinanced, because when that is dissolved, the 2nd mortgage moves up to first lien position...so the NEW first mortgage holder solicits the bank in second lien position to REMAIN in the 2nd position....that is why it's called a subordination agreement...b/c they are agreeing to subordinate...get it? NOW...with that out of the way, let's address your issue. The bank will want to see the following IN ADVANCE of the closing: 1. A note that spells out the terms of the second mortgage very clearly, payment schedule, interest rate, payment due dates, etc. It must be written by an attorney, and it must be recorded...the underwriter will REQUIRE the closing attorney to make sure it's recorded before they will fund the loan. 2. The bank reserves the right to limit your high credit line. In other words, if the second mortgage will take you to 100% financing....they may not allow this, even though the bank will be in first lien position. That is pretty much it. What you need to keep in mind is that you will need to keep copies of CANCELLED CHECKS (front and back) for all mortgage payments made to a private party b/c these loans don't appear on a credit report. Because when you go to refinance, if you cannot PROVE an accurate payment history, your refinance will be denied. I used to have to deny loans all of the time b/c the documentation wasn't available b/c the homeowner didn't keep the front and back of the checks....written receipts are NOT sufficient...as they are easily forged. Answer by : Mary B On Date 2008-01-31 18:15:16   Go Back To Search Results