What is the difference between an Equity Line
of Credit and another type of second mortgage?
A HELOC is a secure line of credit using the available equity
in the applicant's residence as collateral. HELOC stands for
Home Equity line of credit. The interest rate is usually variable
and is tied to the prime rate. A second mortgage is a mortgage
that is in second position to the first mortgage. This means
that if the property goes into foreclosure, the first mortgage
must be paid in full before the second mortgage holder is entitled
to be paid
How can I find out how much equity I have
in my property?
Equity is basically a homeowner's financial interest in a property.
Equity is the difference between the fair market value of the
property and the amount still owed on its mortgage. You can find
out how much equity you have by using a simple calculation. You
subtract the total of the unpaid mortgage balance and any outstanding
liens against the property from the property's fair market value.
This equity will increase as the homeowner pays off their mortgage
or as the property appreciates in value
What are points and how many do I have to
pay?
Generally speaking, points are fees levied by the lender based
on the loan amount. One point is equal to 1% of your loan amount.
For example, two points on a $200,000 mortgage is $4,000. Discount
points are used to buy down the interest rate. Some points are
referred to as loan origination points; this is usually one point
and is charged by the lender. How many points you pay is determined
by several factors including your lender, your FICO scores and
others.
How do I qualify for a loan?
Lenders use specific criteria to determine if you qualify for
a loan, and the amount you can qualify for. You can use the Home
Equity Loan Source calculator to determine whether you can qualify
for a loan, the types of loan products that are best for you,
and many other things. Home Equity Loan Source allows you to
apply and get pre-approved right here online - it's fast, easy,
and free (Home Equity Loan Source charges no application fee).
What is the APR?
The Annual Percentage Rate (APR) is a measure of the cost of
credit, expressed as a yearly rate. Because APR includes points
and other costs such as origination fees, it's usually higher
than the advertised rate.
Do I get a tax advantage from having a mortgage?
Interest on a mortgage is typically tax
deductible but you should always consult a tax CPA or tax attorney
to determine what you can and can’t claim. Interest on
other types of loans such as credit cards is normally not tax
deductible.
Can I make extra principal payments so I can
pay off the loan more quickly?
Depending on the type of loan you have and which state you live
in, it can be advantageous for you to make extra payments on
the loan. Even one extra mortgage payment a year directly to
the principle can cut years off of you mortgage saving you thousands
in interest.
Can you refinance after bankruptcy?
These days with the new more liberal lending
practices you can actually find lenders that will refinance
your mortgage within a few months of your bankruptcy, even
if it hasn’t been
discharged yet.
If you currently have an FHA mortgage you can usually refinance
one year after filing a Ch. 13 and showing proof that you were
paying your trustee payments and your mortgage payments on time.
What are the typical lending ratios for a
home loan?
Most conforming loan lenders use a front end and back end ratio
to qualify candidates for home loans. Typically your total mortgage
payment cannot surpass 28% of your gross monthly income. Likewise
your total debt obligations including your mortgage payment cannot
typically surpass 36% of your gross monthly income. Non-conforming
lenders however have more lenient guidelines and will usually
only use one guideline. Typically they will qualify a candidate
whose total monthly obligation ratio is 50% or less.
Will my lender be the one that I make my
mortgage payments to?
Typically a mortgage broker will simply broker your home loan
on behalf of a large mortgage lender. This lender may or may
not service your home loan. Many times they will sell your loan
to a very large lender who is staffed and structured to service
your mortgage.
Can you refinance a house that is listed
for sale?
Typically your lender will not allow you to refinance a home
that is currently listed. Usually you will have to unlist your
property and have your realtor remove any advertising or any
ads in the multiple listing service. Lenders who service these
loans want to keep your loan for a long time in order to fully
benefit from the interest they charge for carrying the note.
If the property is listed they will expect the property to sell
at some point and they will lose money on the note.
How soon can you refinance your mortgage?
Most mortgage lenders won't allow you to refinance your home
loan for at least a year. Other lenders will refinance your loan
after a period of six months and sometimes less.
Can you really get a no closing cost loan?
You really need to be careful when hearing
claims about a “no
cost” home loan. The reason is that there are costs associated
with any home loan. There are third party fees such as the title
insurance etc that must be paid by someone. There is also the
cost of processing and underwriting your loan. The money to pay
the people who perform these functions must come from somewhere.
Some lenders will say there are no closing costs but will actually
give you a higher rate and use the overage in the loan to take
of these costs. So while you won’t see these charges you
are paying for them nonetheless with a higher interest rate.
What is a stated income loan?
Stated income loans are often used by
self employed people who make enough money to qualify for the
loan but due to extensive write offs for tax reason actually
shoe very little income coming into their pockets. Because
home loan institutions use tax records and paycheck stubs to
qualify your income these self-employed people will often have
too high debt ratios because they are claiming they make very
little income. As long s their FICO scores are high enough
they can claim any amount of monthly gross income they wish
as long as it’s typical within their profession. |
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