Posted on September 1, 2009 by admin
Owning a house is the Greatest American Dream. Additionally, having a house to save you from monetary needs adds up to the benefits of owning the greatest American dream.
You have tightened your belt during the time you are saving for your house. Now, that you have enough equity in that property, you may loosen up a bit by making use of your equity through Home Equity Line of Credit.
Home Equity Line of Credit or HELOC, can help you in myriad of financial necessities. It can help you have a fund when you need it and for whatever purpose you may need it.
Although, you should be careful because putting your house as collateral may cause you to loose your house if you fail to pay your debt. This should make you think many times before you embark on taking money through home equity line of credit.
However, if your purpose of taking out money by means of home equity line of credit is to pay for medical bills or children’s college education, these expenses are inevitable. Thus, taking out money by means of home equity line of credit can be your best bet.
Additionally, if you want to consolidate your debt, HELOC or home equity line of credit may also be beneficial. This is because compared to credit cards and other unsecured credit facilities, the interest rate in a home equity line of credit is somewhat smaller. Another benefit of this means of taking out money is that consumer credits interests are tax deductible.
However, having said the benefits you may have from acquiring a credit through home equity line of credit, you may also need to look at the possible consequences if you fail to pay your debt.
The most important consideration is the possibility of loosing your house to pay off the debt.
It is thus recommendable that while you are considering the flexibility of a credit line, if you need a lump sum fund, you may consider taking out a Home Equity Loan instead. This is because in a home equity loan, you pay the interest and part of the principal debt regularly.
This is in contrast to the variable interest rate that applies in a home equity line of credit. Additionally, in a home equity credit line, your payments balloons at the end when you need to pay the principal amount of debt.
The flexibility of the home equity line of credit extends up to paying only the interests and paying the entire principal loan at the end of the term.
This makes it quite hard, and if you are not ready for such balloon payment, the risk of loosing your house is intrinsic in this case.
This is the reason why financial experts recommend that before you sign any contract that puts your house as collateral, you may need to scrutinize yourself a bit.
Will you need the money lump sum? Ask about Home Equity Loan.
Do you need fund periodically? Ask about Home Equity Line of Credit.
Consider also asking for payments terms, interest rates and what conditions will make the lender consider you in default. These questions once answered may help you realize if putting your house as collateral is the best solution to your monetary needs.
There are other credit facilities, for this reason, you may need to do your research first before deciding.
Various debt management websites can help you understand the eccentricities of financial management that will help you avoid loosing your most precious asset.
Posted on August 27, 2009 by admin
You have found that dream home, now which of the home loan programs is right for you? There is no simple answer to that question; home loan programs need to be studied to choose what is best. This all depends upon your individual family preferences and financial circumstances.
Some factors to consider when choosing from the different home loan programs. Your current financial situation, do you expect this situation to change? How comfortable are you with a changing mortgage payment? A fixed rate mortgage can save you thousands in interest over the period of the loan, but it will also give you higher monthly mortgage rates. An adjustable rate will start you out with lower monthly payments but you could face higher monthly payments if the rates change.
You have decided which type of loan is best for you, now you need to choose which of the more popular home loan programs, is the best one for you.
Conventional loans are secured by government sponsored lenders. They are also known as government sponsored entities (GSE’s). They can be used to purchase or to refinance single family or 4 plex homes with a first or a second mortgage. There are limits that are adjusted annually if needed based on the national average of new homes. You would need to check what the current year’s limits are for an accurate amount if you were to choose this type of home loan program.
FHA loans are programs to helping low income families become home owners. By protecting a mortgage company from default they encourage companies to make loans to families that many not meet normal credit guidelines. Some of the highlights of these loans are. Lower down payments can be as low a 3% versus the normal 10% requirements. Closing costs of up to 2 or 3 per cent of the home value can be financed, this reduces the up front money needed. The FHA also imposes limits on the fees from the mortgage company such as the loan origination fee can not be more than 1% of the amount of the mortgage.
VA loans are available to military veterans who served on active duty and were discharged under conditions other than dishonorable. The dates for eligibility are WWII and later. World War II (September 16, 1940 to July 25, 1947), Korean conflict (June 27, 1950 to January 31, 1955), and Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days service. Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 day’s active service. There are other eligibility requirements. If you think you may be eligible contact your local or state veterans’ administration representative.
The biggest factor in a VA loan is that no down payment is required in most cases. There is no mortgage insurance payments needed, closing costs to the buyer are also limited. You can negotiate rates with the lender and you then have a choice of payment plans with up to a 30 year loan.
The last loan program we will mention is called a subprime loan. This is a loan for people with poor credit who would not qualify for a conventional loan or a VA or FHA guaranteed loan. These loans normally will require a higher down payment and have a larger interest rate. This is because of the risk involved to the mortgage company. These loans should normally be considered for a limited amount of time such as 2 to 4 years. It is a good way to improve your credit situation and then refinance with more favorable terms.
We have shown finding or planning that new dream house is just the beginning of the journey into your new home. The right answer to the question, which of the home loan programs is for you, takes research and a honest look at your personal situation.
