How to Get a 3rd Mortgage
When a property already has a first and second mortgage, an additional mortgage is a third mortgage. A third mortgage is filed with the county recorder's office in third place behind the first and second. During a foreclosure, the third mortgage is paid from the proceeds of the sheriff's auction if money is remaining after the first and second mortgage have been paid. Third mortgages are difficult to receive because of the risk to the lender. Many lenders don't make third mortgages. To get a third mortgage, you need to apply with lenders that make third mortgages.
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Instructions
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Apply with a lender for a third mortgage loan. Call the lender of your choice and submit a credit application. The lender will need your personal information including your name, address, Social Security number, date of birth and place of employment. Any joint applicants will need to submit their information as well. The lender will take a look at your credit report to see if you are credit worthy. You will also need for the lender to order a title search to see if there are any other items on your mortgage deed besides a first and second mortgage. Any additional liens can reduce the amount of equity that is available for a third mortgage.
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Submit the necessary paperwork for processing. A lender will need documents from all applicants that verify income, such W-2 forms and pay stubs. Other documents include a copy of the homeowner's insurance policy. Those who are self-employed will need to submit profit and loss or cash-flow statements.
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Find out how much equity is in your property. The lender will order an appraisal, which the borrower will be responsible for, to determine how much equity is in the property. Lenders will loan money based on the amount of equity in the property using a percentage of the fair market value of the home. The percentage used will vary by lender. A home that appraises at $125,000 and has a first mortgage of $50,000 and a second mortgage of $10,000 provides a borrower with $15,000 for a third mortgage assuming the lender uses a loan-to-value of 60 percent ($125,000 x 60% - $50,000 - $10,000).
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Sign the paperwork. Upon approval you will need to meet with a loan closer and sign all documents. The loan officer will provide you with a copy of all paperwork.
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Tips & Warnings
To get a third mortgage, you will have to pay closing costs and other fees.
When you get a third mortgage, you are pledging your home as collateral for the loan. If you default, the lender can foreclose.
