Mortgage Sacramento CA

A Home Equity Loan is one in which you use the collateral in your home in order to get a loan based on the equity that you own in your home. The equity is the part of the home that you own and is found by subtracting the amount still owed on the home from the value of the home. Suppose you purchased a home for $100,000 and put $20,000 down when you first bought the home. Immediately, that $20,000 down payment turned into the equity that you have in your home.

Now, you have to take more into consideration when you are trying to figure out how much equity you have in the home. Suppose you have paid on your home for a few years now and you have managed to pay $12,000 on your home. Let's further suppose that in these last few years your home has appreciated in value and is now worth $115,000. You would figure the equity as follows:

$115,000 (the value of the house) minus the amount left on the loan ($80,000 - $12,000 = $68,000) = the amount of equity you now own in your home which is now $47,000. For one thing, you can be happy that your $32,000 investment has turned into a whopping $47,000 so for a lender that is willing to lend 100% of the equity based on an appraisal of course; your home equity loan could be as much as $47,000.

There are some lenders that won't lend under $50,000 on a home equity loan so this is not the route to go if you only want to borrow five or ten thousand dollars. In some cases, you can arrange a home equity line of credit which allows you to borrow on the equity in your home as you need to, not in one lump sum. This HELOC is an effective option for many people, and is an alternative to other financing for home repairs and other expenses. In other situations, you would want to pursue a personal loan. Pursue a home equity loan when you need to borrow big bucks however make sure you can afford to make the payments or you will place your home ownership in jeopardy.

People take out home equity loans for a lot of different reasons. The commercials you see on television mention several things you can do with a home equity loan but the truth is, in most states anyway, you can do anything you want with the money. Your credit score, income and the amount of equity you have in your home will determine if and how much you can borrow, not what you will do with the money.

However, just because you can doesn't mean you should. You are putting your home in Sacramento up as collateral so you want to make sure you can afford this loan before you accept it. If you want to pay off credit cards that are costing you 14% interest and you manage to get a home equity loan for 8%, then that might be a good idea if and only if you have the discipline not to run the credit card balance up again. If you do, you'll have that to pay and your home equity loan payment. Using a home equity loan to reduce debt is only a viable option if you have remedied the situation that caused the initial debt. Keep in mind as well, that by consolidating your debt with a home equity loan, you do place your home at risk, whereas it was not before.

If you are wanting to make improvements to your home that will increase the value of your home and if you can afford to make the payments, then that would be a good reason to take out a home equity loan. By improving your home in Sacramento the equity you have in it will most likely increase and you may even come out ahead in the long run. Again, make sure you can afford the payments because it won't matter how valuable your home is if you lose it.

Sometimes people take out a home equity loan because they have an emergency such as medical bills or need medical treatment. You can't enjoy your home if you don't have your health so if this is something you need to do then a home equity loan might be a viable option for you.

Depending on your credit and your lender, you may have a choice between a line of credit and a lump sum. A lump sum of course, means you get the entire loan all at once and up front. You may have a 15, 20 or even 30 year loan depending upon the terms of the home equity loan. Like any other loan, you'll make payments every month.

A line of credit however is altogether different. The interest rates are similar but by taking out a line of credit, you won't have the amount of the loan to use all at once. You'll receive a checkbook or a credit card with which you can make "withdrawals" upon this line of credit up to a predetermined amount. You may still have as long to pay it back as with a lump sum if you choose.

Generally, you will have a small payment every month that may just go towards the interest and then you'll have what is referred to as a "balloon" payment where the bulk of the loan is due at the end of the loan term which could be 15 or 20 years down the road. This can sound very attractive however, that huge balloon payment will come due eventually and if you can't pay it you will lose your home.

A home equity line of credit, or HELOC may be the preferred method of home equity loan in several different situations. Suppose you're taking out the HELOC because you need expensive medical treatments but you only want to borrow as much as you absolutely have to. Or you're remodeling your home but again you only want to borrow as much as you have to.

Either of these situations would be appropriate situations to arrange a HELOC. By not borrowing the maximum amount of equity you most likely will be able to pay it back early yet the line of credit will be available if you need it. A HELOC is a useful option that allows you to tap into your home equity without incurring substantial debt.

Your credit worthiness will have a lot to do with the rate of interest you'll be able to get for your home equity loan. It is usually based on prime plus a certain amount of points. You may look at fixed and variable rates but realize if you take out a home equity loan with a variable rate of interest you are taking a chance that it could go much higher than it is when you first apply for the loan.

You'll want to look carefully at the types of interest and make the best decision for your situation. You may have different offers from different lenders so that will be something to keep in mind as you shop around for the best rate.

Don't get in any hurry when you are applying for a home equity loan or any other kind of loan for that matter. Don't stop by to sign the papers on your way to pick the kids up from school. You want to read every word of that loan contract and make sure you understand every word including the terms governing the rate of interest.

You'll want to know if you have a grace period and what will happen if you are late with a payment. Does the contract specify under what terms the loan would go into a default status? Make sure you understand all the terms of the loan before you sign anything. If you don't, take it to your attorney to look over. This is your home and far too important a transaction to assume the terms are one way when the reality is something much different.

Shop for interest rates as you would anything else. One point or even a half of a point can make a difference when you're dealing with 20 years of payments.

Before you even apply for a home equity loan, get a copy of your credit report from all 3 of the credit reporting agencies. You can obtain these free online and print them out or the website has a phone number you can call or you can request that they be mailed to you. You're entitled to 1 free credit report each year from all 3 credit reporting agencies: Experian, TransUnion and Equifax. Some states allow you to get 2 free credit reports a year. Check with your state if you are not sure.

If it has been longer than 6 months since you've obtained your credit report, get it again even if you have to pay for it. They only cost about eight dollars so it is more than worth it. You want to obtain your credit report before you apply for a home equity loan for several reasons.

First and foremost, you want to make sure the information on your credit report is accurate. Check it over carefully and if there are any discrepancies, write to the credit reporting agency as well as the original creditor. Also, if you have paid off a car or anything else significant recently you want to make sure that is on your credit report as well. Some people think credit reports are only comprised of "bad credit" but that just isn't true. Good credit, those bills you pay off, is also listed on your credit report and it is important that everything be included.

Another reason you want to obtain your own credit report is that it doesn't affect your credit score when you obtain it yourself but every time a creditor runs your credit, it lowers your FICO score which is the score the lender will consider when offering you the interest rate and other terms concerning your home equity loan. By taking your credit report along with you to meetings with lenders, you can find out what they can offer you without your credit being run.

If there is anything in your credit report that needs cleaning up, take care of it before you apply for your loan because in the long run the better your credit looks, the less interest you'll be paying for your loan. Dispute any questionable issues on your credit report, and contact your creditors to improve your credit if possible before applying for a home equity loan.

It's amazing that some of the same people that will look all over town for a good price on laundry soap won't think twice about accepting the first offer they hear when dealing with thousands and thousands of dollars. Realize that you can and should shop around for a loan in much the same way you shop and compare prices for other items.

You can literally save thousands of dollars by doing your homework, shopping around and asking questions. You should get a minimum of 3 offers when shopping for a home equity loan. Since you will have your credit report with you it shouldn't take long for you to get a quote as far as the interest and the terms of the loan. You should also take the last 3 or 4 check stubs and your latest bank statement with you.

List the 3 lenders you plan on shopping on a piece of notebook paper and write the answers to the questions you'll be asking under the appropriate heading. You'll want to ask about closing costs and if there is an annual fee. You'll also want to compare interest rates and whether or not they are fixed. Note whether you are dealing with a broker or a lender and any associated fees if you are dealing with a broker.

It may be worth your while to deal with a broker just to save yourself the legwork of going around getting 3 quotes. A broker will match you up with lenders and then you are free to take the best offer. Find out first though if you pay the broker or if the lender does. If you are expected to pay the broker just for finding you potential lenders you might want to reconsider and find your own lenders.

The Federal Truth in Lending Act was enacted to protect the Consumer against unscrupulous lenders. In a nutshell, this Act requires any lender to disclose all the terms of the loan to you at the time of the application. They have to let you know what the terms of the loan are, what fees will be due, and the APR.

The terms of the loan cannot change once the lender has provided you with this disclosure except of course if you have a variable rate of interest, which is most certainly going to change. You also have a 3-day right to cancel since you are using your home as collateral.

If there is anything you don't understand on this disclosure statement, by all means ask questions. Much of the same information and fees will be required as when you took out your first mortgage so some of this will be very familiar to you. In any case, make sure that you understand the terms of the loan agreement and also make sure they are followed according to the disclosure statement you have been provided.

Notice whether or not you are required to keep insurance on your home and if you are able to use the insurance company of your choice or if you have to use one approved by the lender. If you are taking out a home equity line of credit instead of a lump sum loan, notice if there is a huge balloon payment at the end of the loan term and make sure you have the means to make that payment.

It's almost impossible to get a home equity loan for a mobile home. Although many online sites advertise they do home equity loans on mobile homes when it comes down to brass tacks, it rarely happens. For one thing, almost no lender will lend money on a mobile home unless there is land attached. So if you live in a mobile home park you're out of luck. The only lenders that will lend money on a mobile home without having land attached insist on such a high credit score that if you did have that score you would have lots of options.

Almost any lender that does make a home equity loan on a mobile home won't do so on a single wide. It will have to be a double-wide to even be considered for this type of loan.

In many states when money is lent on a mobile home without land attached it works more like a car loan than a home loan. What this means is if you default on the loan or even are late making a payment past the grace period, instead of going through foreclosure, your home can simply be "repossessed." Make sure you know what you are signing when you take out any kind of loan on a mobile home.

As in any other kind of financial matter you need to know who you're dealing with and exactly what the terms of the loan are. There are unscrupulous lenders who love lending money to people they know can't afford a home equity loan and when they default they swoop down and take their home. Don't let this happen to you. If you can't afford to make the payments, don't even pursue a home equity loan. Look carefully at repayment terms, fees and rates associated with your home equity loan. Pursue a home equity loan only through a reliable lender.

There's always going to be some kind of scam to watch out for and then there are those "deals" that while not illegal, are certainly unethical. Read every single word of each paper you sign and do not sign any blank pages. If the agent or the lender states you don't need such and such in writing, disregard it right then because if it is not in writing, it didn't and won't happen.