Home Equity Loans - 5
Useful Application Tips
By: John Ross
Obtaining a home equity loan
does not have to be a major ordeal. Unlike your first mortgage, you are already
in the home, and usually time is not such a major factor. You can close the loan
at your own leisure, and take your time researching the different options available
to you. Below you will find five tips that will help you make the process as painless
as possible. Remember that your best defense is a good offense, so understand
the process and everything that is involved. Don't let your lender pressure you
into something that you don't understand.
1. Get pre-approved! This is
something that I would recommend for a first or second mortgage. The process will
vary depending on your lender, but you can choose to get pre-approved or pre-qualified.
The pre-qualification process allows both you and the lender to review your current
financial situation. The lender will then determine how much you can probably
borrow. There is no obligation and you are not locked into anything. Pre-approval
goes a step further and is a more formal process. You will actually fill out an
application, and a credit check will be run. The lender will then issue you a
letter outlining the amount that you can borrow. You can then use this to expedite
your loan, once you are ready to close.
2. Get your home appraised. When obtaining a home equity loan, the critical part
of the puzzle is how much your home is worth. Don't be fooled into thinking that
an appraisal is not necessary. Home values can fluctuate depending on the economy
and your own city demographics. Any improvements that you have added to the home
since its purchase can also increase this value. So find out at the very beginning
how much your home is actually worth. This will help give you a ballpark figure
of how much you can actually borrow.
3. Prepare yourself emotionally. A home equity loan seems like a simple way to
get needed funds. But, it is important to remember that you have something major
on the line with this type of loan. Your home! If you fail to repay your home
equity loan, they could take your home. So, it is important that you discuss the
process with everyone involved so they understand what this loan entails. Set
up a budget for a few months prior to the closing, and set aside the extra monthly
payment. You will also want to consider any life-changing events that may happen
during the life of your loan. Are you planning on having a child? Changing jobs?
Etc. All of these factors can alter your ability to repay your loan.
4. Do your homework. Knowledge is power. Make sure that you have all of the facts
when it comes to choosing a lender and a mortgage program. If possible get information
from several lenders, so that you can make an educated decision as to which one
is the best for your particular situation.
5. Get your break from Uncle Sam! In most cases a home equity loan is tax deductible.
So, make sure to keep all paperwork associated with your loan, including closing
cost allocations. You may be able to deduct both interest and principal in some
cases. Consult with your tax professional to find out how a home equity loan will
affect your tax situation.
With a little bit of time and effort, you should have no trouble finding the right
home equity product for your specific needs. By planning ahead and researching
your options, you can rest assured that you made the best possible choice for
you and your family.
About the author:
John Ross is a freelance author, providing tips and ideas relating to home equity
loans. You can find more of his articles at: home
equity loan company,
online home equity loans, and fixed
rate home equity loan. The Loanchbox is a user friendly website designed
to teach the basics behind home equity loans.
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