Joseph Kenny asked:




Home loans and mortgages are asset-acquiring facilities that relieve an individual from making immediate lump sum payments. A home equity loan creates a debt against the borrower’s house. According to this loan, the borrower has equity in his or her home as collateral. ‘Collateral’, here, refers to assets or properties that create a debt obligation. In real estate, the borrower’s equity in an asset refers to the difference between the market price of a property, and the borrower’s home equity loan. Equity is the interest that a borrower pays on the loan.

A mortgage, on the other hand, is a process of using property as security for debt repayment. It is a legal device used for securing an asset. By arranging for mortgage, a borrower can acquire residential or commercial real estate, without the need to pay the full price right away.

Choosing between Home Loans and Mortgages:

- Most home loans require the borrower to have a very good credit history. Hence, individuals with an average credit history are likely to be denied this loan.

- ‘Closed-end Home Equity Loan’ levies a fixed rate of interest for a period of up to 15 years. The borrower receives a lump sum amount at the time of settlement, in the final steps of a transaction. No further loan can be given to the borrower once the final settlement of a real estate transaction is executed. The maximum amount of money that can be given as loan to the borrower depends upon his/her income, credit history and appraised value of collateral, and other finance related information.

- ‘Open-end Home Equity Loan’ is a revolving credit loan that generally levies a variable rate of interest. The borrower can decide when and how frequently to borrow money against the equity. This again is determined on the borrower’s good credit history, consistent income and other such criteria. This loan is available for a period of up to 30 years.

- Mortgage loans are of two types: Fixed Rate Mortgage (FRM) and Adjustable Rate Mortgage (ARM). Individuals can choose between the two depending upon their requirements, and the capability to repay loans.

- FRM has a fixed rate of interest, and a fixed amount of monthly payments towards the loan amount. The term of FRM can be for 10, 15, 20 or 30 years. However, some lenders have recently introduced terms of 40 and 50 years.

- ARM interest rate is fixed for a period of time (generally 15 and 30 years), after which it is adjusted according to the market index. ARM interest rates are adjusted periodically on a monthly or yearly basis. The initial rate of interest in ARM is levied in the range of 0.5% to 2%.

- Lenders sanction an ARM loan depending upon a borrower’s credit report and credit score. They prefer to approve loan to borrowers with high credit scores, because low credit scores indicate greater risk of money to lenders. In order to compensate for this increased risk, lenders levy a high rate of interest on loans approved for less creditworthy borrowers.

- ARM loans prove useful to borrowers who own a lot of equity on their home. ARM loans relieve a borrower from heavy monthly payments, and provide them the flexibility to choose the kind of payment to make every month. These loans have a fixed amount of minimum payment to be made every year for 5 consecutive years.

Prospective borrowers should gauge their options carefully before choosing a loan. A well-calculated move can save a great amount of money over the term of the loan.

Julio

Peter Boyle asked:




USDA Home Loan Program offers more credit flexibility in this concerned housing and lending market than traditional lenders do. It also provides low fixed monthly mortgage payments to help low-moderate income households.

For those that have a desire to live right outside city limits you should check this program out. You can get 100% financing and no down payment within eligible property areas. You will be surprised how many semi-rural properties fall within the programs eligibility.

A large percentage of our country ‘s greatest obstacle to home ownership is the lack in funds for down payment. USDA provides a solution not many know about. It overcomes down payment issues for an individual or family by loaning up to 100% of the appraised value of the property. This eliminates the down payment requirement.

The USDA Guaranteed Home Loan program helps low-to-moderate income individuals and families purchase homes. The approval process is fairly easy and fast, and the funds for the program are basically unlimited. Best of all, this loan requires no monthly mortgage insurance, only a 2% up front fee and that can be financed in the loan.

The program offers a 30 year fixed rate mortgage and no prepayment penalty. Under the Guaranteed Loan program, it guarantees loans made by private sector lenders. If the borrower defaults the USDA guarantee pays the lender. Borrowers work with the lender and make their monthly mortgage payments to the lender, not the USDA. Borrowers must have a two-year primary employment history and the dependable income must not exceed the moderate-income limit guidelines for the eligible property area.

This program offers more lenient qualifying guidelines than traditional mortgages. No minimum credit scores or previous housing history is required. Non-traditional credit is acceptable if no credit is available.

The loans can be used on new construction, existing homes, and homes in need of improvements. The rates are very low and repairs to a home may be financed 100%. The repair work on the home must be done by a licensed contractor.

There is also help for funds to close. All closing costs and prepaids can be financed by the seller, and 100% gifting is available to borrowers. There are no minimum cash contributions from the borrower.

If you have not owned a home in the past three years you can use the USDA home loan and the HR3221 bill to get into a home with no out of pocket money and take up to $7500 off your tax liability.

The tax credit must be paid back over a 15yr period at $500 a month interest free starting the following year. Speak to your local lender about the Housing Rescue Plan and HR3221.

What does this mean to renters? Based on today’s USDA housing loan rates and average rental costs, people can buy a $175,000 home for basically the same costs they pay in rent. For a personal rent versus own analysis contact a local mortgage consultant. If you have a property you have selected you can verify the USDA program eligibility using the following link or just click to gain further knowledge.

Frances

Joseph Kenny asked:




When you need the cash out of the equity of your home you may wonder which one is better for you – a cash out mortgage or a home equity loan. The truth is that both have their advantages – but probably one will be better for your situation than the other. This will mean that you need to know a little about each in order to make up your mind. Here are some differences between the two.

A cash out mortgage will involve refinancing your first mortgage. This could be a great way to go, especially if you can get interest rates on the refinance that are at least one percent (two percent is to be preferred) lower than your present mortgage rates. So not only could you get the equity you want, but also you will save thousands of dollars by getting better interest rates, too.

You get the equity you want in a lump sum when your cash out mortgage is approved. All you need to do is to refinance for the amount of the mortgage that is still outstanding, and add the amount of cash you want from your equity. You will want to watch and make sure that you do not refinance for an amount equal to 80% of the value of your house – that includes the equity, as well. The reason for this is simple, you want to make sure that 20% of the value of your home is left intact so that you do not need to pay the Private Mortgage Insurance. This could add thousands of dollars each year to your payments.

You can enjoy further savings if you decide to shorten the term length, too. If you make the remainder of the refinanced loan to be about 5 years less than what you have now, you could literally save tens of thousands of dollars more over the life of the mortgage.

A home equity loan is another way to get to the cash in your equity that you want. A home equity loan is a second mortgage, and you may be able to get it as either an adjustable rate mortgage or a fixed rate mortgage. While it obviously does not require you to refinance your first mortgage, it will give you a new monthly payment – and the cash you want. As a second mortgage, there will also be closing costs and other fees – with the possible exception of going through your present lender.

The interest rate will be higher than on a first mortgage, when you get a home equity loan. The interest rate, as well as the amount you can borrow, will depend mostly on your credit rating, and your ability to repay the loan. Make sure your credit report is accurate before you apply. If there are inaccuracies on the report it can hurt you and give you higher interest rates than you might have otherwise, or even cause your home equity loan to be rejected.

Before you agree to either a home equity loan or a cash out mortgage, you will want to shop around to find the best deal. It will take some time to do it right – but you are the one who will benefit from the savings. Check the various features, such as the interest rate, the fees, and the terms of repayment – including the monthly payments.

The choice is now yours. It can basically be summed up as – do you want to refinance your existing mortgage, or get a second mortgage? Both have their benefits, but only you can decide which one will work best for you.

Stella