home mortgage loans

Harold asked:


My parents are giving me their current house and building a new one. The house needs some improvements (Kitchen, Bath, Carpets, etc) what is the best loan to get? I currently rent so I don’t have a mortgage. Do I get a home equity loan, first mortgage, home improvement loan? Please help.

EDWARD

JoeyGirl asked:


My hubby and I have a first mortgage, home equity loan, 2 auto loans and credit card debt. We are doing ok - but never have any extra money. We are interested in the combo loan from Countrywide - where they are combined.

I’ve heard that consolidation can hurt your credit. Will this do that to our credit? Since we are doing good, and just want to lower our payments into one, we don’t really NEED to do this, and don’t want to cause any credit damage.

Your insights please!

LON

Alan Lim asked:


The Loan

This is a type of loan wherein the equity of the borrower’s home is the collateral. Many a times, such loans are taken to finance various things like medical bills, or a college education amongst others.

You must have an excellent credit history if you are thinking of taking a home mortgage loan. Also, the ratio of the loan to value must be reasonable enough. This loan is secured against the value of the borrower’s property and is also called a second mortgage. A second mortgage is usually of a shorter term than a first mortgage.

The Types of Mortgage Loans on Offer



The Fixed Rate Mortgage Loan: A fixed rate mortgage loan has a fixed rate of interest. The fluctuating interest rates won’t have any bearing on your loan and you can repay your loan amount at a fixed rate through a fixed period of time.

Adjustable Rate Mortgage Loan: The opposite end of a fixed rate mortgage loan. Herein, the interest rate of your home mortgage rate will fluctuate and be dictated by the various economic indices. In most cases, at the beginning of the loan period, you usually have to pay a low interest rate.

The Closed End Loan

A closed end home mortgage loan gives a lump sum to the borrower at the time of closing. No other amount is further given to the borrower. The maximum amount that can be borrowed is dependant on factors like the appraisal value of the home, income, and credit history of the borrower.

If there are no liens on the property, most often, a borrower can borrow an amount equal to the appraised value of the home. However, various states have different laws that determine the amount that can be borrowed on equity.

The Open End Loan

This offers its borrowers revolving credit. This essentially means that you as a borrower can determine when and how often will you borrow against the equity of your home. However, the initial limit of the credit line is fixed by the lender, and are available for up to 30 years, very much like closed end loans.

In most cases, the open end home mortgage loan is available at a variable interest rate.

Credibility and Choice

We have mentioned the point that your credit history would be an important factor in determining the interest rates offered to you. However, don’t just take this as a one way mode. As a borrower, you must also check the credibility of the lender. You can do so through various banking sources, consultants, etc.

Also your choice of the lender must take into consideration the comparison of offers, negotiations on the rate of interest, and other conditions. Conduct an intensive study of the market and only then choose the perfect home mortgage loan that will suit your needs.

These are just a few home mortgage loan pointers that might just be able to guide you in the right direction. So take due cognizance of what we have mentioned, and make the right choice.



KENNETH

Alan Lim asked:


Home Mortgage loan can be an important event in your life. It will help define your credit history from that point on. Moreover, a home mortgage loan will help you to save equity in your house. Thus, it is important for you to know everything relevant about a home mortgage loan so that you can make the best possible decision. Home mortgage loans are classified in two ways:

1) Fixed Rate Home mortgage: In this type of a mortgage, the interest rate is fixed and thus your monthly payments will not change. This means that if you get a house mortgage for 20 years and your monthly payment is $760, then you will continue to pay $760 every month for 20 years.

2) Variable Rate Home Mortgage: This is a type of a mortgage in which your interest rates will vary. Usually your interest rates will be reappraised every 1 to 3 years. In this type of a mortgage, your monthly payments can change and you may end up paying less. However, you will need to take into account economic crisis etc. as in those situations you may end up paying more.

As far as the functionality of the home mortgage loans are concerned, there are two main types of mortgage.

1) Primary (First) Mortgage: This is the mortgage that you get, when you first buy your house. This mortgage will continue until you either pay off all your mortgage debt on the house or until you sell the house. When you sell the house, you will be responsible for paying off your debts so that the deed can be transferred to the new owner. If you default on your payments, then you may face a foreclosure on the house by the bank.

2) Equity Loan(Second Mortgage): This is the loan that you can get based on the amount of equity that you have on the house. It is called the second mortgage, as the creditor will be the second holder of the house, after the first creditor for the first mortgage. This type of a loan is generally used for debt consolidation purposes.

Now whenever you are thinking of getting a mortgage, then you should review your options carefully. Whether you are getting your first mortgage or a home equity loan doesn’t matter. You have many options that are available to you and you should use them to the fullest of your ability. You should search various banks and lender institutions for competitive interest rates. This is important as the mortgage will be with you for 10 to 30 years and thus it is not a light decision to make. You should review all of your options carefully. If possible, hiring a mortgage broker can help you solve your problems easily. This way you can make sure that you are getting all the information that you need in order to make well informed decision. In addition, you can save substantial money in the process.



TY

Carrie Reeder asked:


When applying for a mortgage loan, down payments are generally required as part of the financing. Many traditional mortgages will only finance 80 percent of the home price. Thus, homebuyers are obligated to provide the additional 20 percent. Having a down payment of 20 percent is ideal in a perfect world. In reality, few people have access to this type of money. For this reason, mortgage lenders are offering 80/20, or piggyback mortgage loans.

How Do 80/20 Home Loans Work?

The concept around 80/20 home loans is very simple. Ordinarily, if a homebuyer did not have a down payment of 20 percent, they would have to purchase private mortgage insurance, (PMI), to complete the home financing. On average, PMI increases mortgage payments by $100.

If accepting an 80/20 home loan, PMI is not required. Instead, homebuyers receive two loans to finance the home purchase. A first mortgage is approved to finance 80 percent of the home cost, whereas a second mortgage or home equity loan is approved to finance the remaining 20 percent.

Who Qualifies for an 80/20 Home Loan?

Any homebuyer hoping to avoid private mortgage insurance may qualify for an 80/20 option. Piggyback loans are especially beneficial for first time homebuyers. Young couples will also benefit from these loans. Usually, these individuals have not been able to build a large cash reserve. This way, they do not have to put off buying a home.

An 80/20 home loan is also offered to individuals with poor credit. Mortgage lenders vary in their loan qualification guidelines. Traditional lenders such as banks, credit unions, and mortgage companies prefer applicants that have a high credit rating. Thus, they may not approve loan requests for credit scores that fall below 640.

On the other hand, many lenders offer a range of bad credit mortgage loans. These consist of loans that provide assistance for down payments, closing costs, low mortgage rates, etc.

Applying for an 80/20 Loan with Bad Credit

Mortgage brokers are very effective with helping bad credit applicants find a fitting home loan program. To smooth the process, brokers have websites available, which offer explanations on various bad credit home loans. Moreover, you can request a mortgage quote online, and receive up to four offers from different lenders granting piggyback loans to people with bad credit.



MARQUIS