Buying a home gives you stability, a sense of accomplishment; and since your home is your biggest asset, your home equity is the biggest part of your financial net worth. Equity is the difference between what you owe on the mortgage loan and the home’s value. If the bank appraises your home at $230,000 and you owe the lender $100,000, your equity is $130,000. Equity builds slowly over time as your home appreciates in value and as you pay down your mortgage balance. But even if you understand what equity is and how it works, you may not completely grasp the importance of equity. Here are five benefits of home equity. 1. You can use equity as down payment on a new home Buying a home requires a down payment, but it can take years to save between 3.5% and 20% for a purchase. The good news is that existing homeowners can use proceeds from the sale of a property as down payment on their next home. Your home’s equity determines your profit once you sell the property. The more… Read more
When applying for a mortgage loan, you have the option between a fixed-rate mortgage and an adjustable-rate mortgage. An adjustable-rate mortgage has an introductory fixed-rate, and then a rate that resets every year. A fixed-rate mortgage, on the other hand, has an interest rate that remains the same over the life of the loan. Fixed-rate mortgages are considered a safer alternative. But it’s important to understand the pros and cons before deciding whether this type of mortgage is right for you. Pros of a Fixed-Rate Mortgage Loan Predictable, fixed monthly payment With a fixed-rate mortgage, you don't have to guess or predict what your mortgage payment will be from year-to-year. Since the rate on these mortgages never change, your mortgage payment remains the same for the entire mortgage term, whether you choose a 15-year, a 20-year or a 30-year mortgage. When you know your housing expense, it's easier to plan ahead and budget for the future. You don't have to worry about mortgage rates With an adjustable-rate mortgage, you might worry about the possibility of a higher interest rate. There's… Read more
Owning a home provides a sense of permanence and stability, and it’s a big step toward growing your personal net worth. But in previous years, tough lending requirements made it difficult for some to get a home loan. Thanks to new guidelines, banks have eased its standards, making it easier for many to purchase a home. If you’re applying for a mortgage, here is what you can expect. Lower down payments on conventional mortgages Qualifying for a standard conventional mortgage typically requires a minimum down payment of 5%. New lending programs, however, now make it possible for select borrowers to get a conventional loan with less upfront cash. Both the Conventional 97 and the HomeReady mortgage only require a 3% down payment. These loans are available to first-time homebuyers, repeat buyers and low-to-moderate income borrowers. The HomeReady program requires completion of an online homebuyer’s education course. The down payment requirement has also been lowered for high-balance/jumbo mortgages over $417,000. These loans used to require a minimum down payment of 10%. Borrowers are now eligible with as little as 5%. Relaxed… Read more
According to the Consumer Financial Protection Bureau, “nearly half of all mortgage borrowers do not shop around when buying a home.” Some homebuyers make a lending decision based off a single loan quote, and they assume every lender will offer the same rate and terms. This couldn’t be farther from the truth. When looking for a mortgage, you should comparison shop as you would with any other purchase. Mortgages vary from bank to bank, and if you don’t know your options, you could end up paying more than necessary for a loan. 1. You Could Pay a Higher Mortgage Rate Shopping around and comparing rate information helps you gauge whether you’re getting a fair mortgage rate. Your interest rate affects your monthly payment and determines how much you pay over the life of the loan. The lower your mortgage rate, the lower your housing costs. Let’s say you borrow $200,000 for a home purchase. The difference between an interest rate of 3.98% and 4.3% is about $40 a month. Getting a mortgage quote will involve providing the bank with information… Read more
The process of purchasing a house isn't as simple as renting a house or an apartment. Mortgage lenders typically request more documentation than landlords; and whereas a landlord may overlook a poor credit history, lenders aren’t as forgiving. Mortgage applications are scrutinized, and unfortunately, banks reject a lot of applicants. If you’re rejected for a home loan, a bank may reconsider its decision if you re-apply with a co-borrower. A co-borrower appears on the mortgage loan with you, and the bank takes this person’s income, credit and assets into consideration when determining whether to approve the application. A co-borrower can be anyone such as a spouse, a parent, sibling or child. This person has ownership interest in the property and is equally liable for the mortgage debt. Having a co-borrower isn’t a requirement for a mortgage loan, yet it can be helpful if you’re having trouble getting a loan on your own. Before you proceed, here’s what you should know about adding a co-borrower to your mortgage. Adding a Co-Borrower Doesn’t Guaranteed a Better Mortgage Rate Mortgage borrowers with the… Read more
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