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Home Equity Loans and Refinancing
Does the term home equity loans scare you off. Here are a few tips that might make it a little less scary.
Be realistic as what can be accomplished and what can't. Most mortgage lenders require that the appraised value of the home be at least 20% higher than the mortgage. That gives them a cushion in case values drop. The appraisal is based on what comparable homes in your neighborhood have sold for. That's different than what homes are listed for sale at.
Check your credit scores. Don't be unpleasantly surprised. If there are errors, such as a debt showing up that has been paid, get it cleared up before applying for a new mortgage. There are home equity loans available for those with less than stellar credit but it's not at the low rates you might be expecting. You can check your credit scores online but you do have to sign up and provide some personal information. It's not instantaneous. Your identity has to be confirmed before you have access to your reports.
Don't wait until the last minute to get your home equity loan. Prepare the materials you think you'll need ahead of time. Most mortgage lenders want verification of income through tax returns, or paycheck stubs. They'll also want copies of bank and checking accounts, stocks, bonds, and other assets. If you're considering a major purchase put it off until you've refinanced your mortgage. Don't use your credit card or savings to finance that purchase.
Know what you want. There are so many alternatives from the standard 30 year mortgage. Home equity loan rates and terms vary. Don't let yourself be talked into terms which may sound good in the short term such as an interest only loan, but may turn out to be trouble in the long term. Refinance at a level that's comfortable for you. You may think that taking out a loan that is as high as possible is the best course of action, but remember you'll have a bigger monthly payment. Shop around and compare home equity loans providers before you decide. Check the fees they require, time it takes, application procedures, points, and interest rates. It's amazing the variance you can find.
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Dee Power & Brian E. Hill
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