Home Refinance

How Home Improvement Loans Work for You

2008-07-29T23:56:00.000-07:00

Many homeowners find after being in the same residence several years (and sometimes immediately after purchasing) that they need to start projects around the house whether to improve existing features or add more room as their family grows. The fixtures in the bathroom might be out of date, the plumbing might need to be changed over to plastic or copper, and that kitchen needs to be brought into the 21st century posthaste. Instead of tapping into savings to foot the bill for important and necessary improvements, many owners find that a home improvement loan can be a great option to help finance new projects around the house.

A home improvement loan is basically a loan against the equity you have in your house and can also be thought of as a second mortgage. If the loan is for your primary residence, the interest paid on the home improvement loan/second mortgage is tax deductible. Home improvement loan interest rates are usually reasonable and often lower than first mortgage rates. Also, qualifying for a home improvement loan is often easier because the guidelines are less stringent as these loans are considered less risky by lender. Banks do however like to see that your equity in your house is greater than 20% to view you as a good candidate for a home improvement loan.

Lenders usually view home improvement loans in a positive light as they add to the value of the borrowers home, and are often secured by a lien against the homeowners property, making them extremely low risk to the bank. Borrowing against the value of your home can be risky for you, the borrower, however. As you borrow against the value of your home, your equity is taken out, but if you happen to be in a market where house value is seeing a steady decline, this withdrawal of worth is balanced out by the increasing market value of your home. And let’s not forget, that a new bathroom, a freshly remodeled kitchen, or an extra bedroom do add value to your home when it becomes time to sell.

There exists a wealth of lenders that are available to lend money to qualifying homeowners needing financial stimulus to get home projects underway. Companies such as FreeHomeRefi.com will work hard to answer any questions you may have, and help provide the best home improvement loan package available to suit your particular needs.
About the Author: Jeremi McMaster is Chief Executive Officer of FreeHomeRefi.com, helping homeowners looking to refinance home mortgage. For information on a no closing cost refinance, go to
www.FreeHomeRefi.com.

Stated Income Mortgages Can Help

2008-07-25T23:46:00.000-07:00

Home ownership is a dream of many American couples and singles, but a large percentage of would-be buyers don’t believe they will be able to qualify for a loan. Many couples possess income or assets that just don’t show up in W-2s or tax returns, but are true sources of income and should be considered for loan qualification. The good news for borrowers in this situation is there are solutions. One option that might work for some is a Stated Income Mortgage. Like all loans, there are positive and negative aspects of this loan, so these should be carefully examined and considered.

Often times, small business owners don’t have the necessary documentation to prove to lenders because of a cashed based business such as a tavern or restaurant. Many lenders require copies of tax returns that show profits in order for a home mortgage or home refinance loan to be approved. In some situations, small business owners find it necessary to take from their home’s equity and invest in their business to keep above water. Lenders that offer stated income based loans often can look at bank deposits, allowing an average to be taken from in some instances, only the last twelve months, and base the loan amount upon an extrapolation of that average, allowing for businesses whose profits may ebb and flow over the course of the fiscal year to qualify for a higher amount.

Often times, couples have a spouse that might stay at home to watch the children and care for the household. This spouse might however work in spurts, for example seasonally, or per engagement, such as a performing artist, ski instructor, etc. Cash wages for this spouse can be qualified through submitted bank statements that show that in fact extra income is available to add to conventional income and increase borrower ability to qualify for a requested amount.

A stated income loan can help borrowers whose incomes are considered unconventional and unsupportable by many lenders qualify for the loan they need for their house or budding business. Unfortunately, this somewhat relaxed consideration of qualifications might allow some to borrow who are not going to be able to keep up with monthly payments slip through the cracks. In order to protect the greater risk taken by the lender, the interest rate might be steeper than with a conventional loan. Careful deliberation of all available options should occur before committing to any loan. Stated Income Loans are beneficial and just might be the way to make an unlikely dream of home ownership come true.

About the Author: Jeremi McMaster is Chief Executive Officer of FreeHomeRefi.com, leading provider of mortgage refinancing solutions. For information on refinancing online, go to
www.FreeHomeRefi.com.

Is an Adjustable Rate Mortgage Right For You?

2008-07-17T07:02:00.000-07:00

Many Americans, singles and couples, believe it is next to impossible to own a home due to bad credit because of poor financial decisions in their past. There are a myriad of options available to borrowers of all types; prospective home buyers should not count themselves out before carefully considering their options to see if one might be their ticket to home ownership. An excellent avenue for many would be buyers, an Adjustable Rate Mortgage, or ARM, possesses many advantages that make it an attractive option.

Adjustable rate mortgages are home mortgages with variable interest rates that are most often adjusted annually, often according to fluctuation of the nation and government’s economic patterns. Recently added limits on amount and number of interest raises per year and over the life of the loan make these loans a more viable option to more borrowers than ever before. Adjustable rate mortgages are most attractive to new home buyers and borrowers with less than favorable credit because their qualifying standards are less stringent than conventional fixed rate mortgages. Adjustable rate mortgages often possess lower interest rates than fixed rate loans initially, and most often for the first few years. So if an owner is not planning to be in a given house for more than five years, an adjustable rate mortgage often makes the most sense; if plans change, a refinance of the loan into a fixed mortgage is always an option that many borrowers may look to down the road.

There are, of course, many advantages for the lenders as they deal out adjustable rate mortgages. As earlier stated, lenders reserve the right to adjust the interest rate upwards as the state of the nation’s economy changes. This means that an ARM can often be higher than national interest rates. Lenders are also not required to lower their ARM interest rates if national rates see a decline. Also, because ARMs often are not required to follow governmental set guidelines such as those for FHA loans, many more applicants are accepted. Not all loan applicants are able to keep up with rising costs of monthly mortgage payments and some are forced into foreclosure because of financial oversight on their part. A foreclosed house becomes the property of the bank or other lender and will be sold to recoup costs in addition to the pre-foreclosure mortgage payment monies collected.

In summation, an adjustable rate mortgage has its advantages and disadvantages, as do all loans. If the positives outweigh the negatives in your specific financial situation, it is the type of loan you should choose. It is always best to take your time and weigh all options and remember, should better rates become available, a mortgage refinance with a reputable company such as FreeHomeRefi.com can help you switch to a conventional loan or other viable options when needs change.

About the Author: Jeremi McMaster is Chief Executive Officer of FreeHomeRefi.com, leading provider of home refinance solutions. For information on mortgage refi, go to
www.FreeHomeRefi.com.

Negative Amortization Explained

2008-07-17T07:00:00.001-07:00

When considering financing for the purchase of a new home or business, it is easy to get bogged down in all the details and options available. It is necessary, however, to consider all available avenues and lenders in order to assure an optimum package of financing is attained that will fit the particular need and budget. An available option that many first time homebuyers consider is a fixed loan with a clause providing for negative amortization for the early years of the loan. Loans that include this option are often referred to as graduate payment mortgages, or GPMs, and can be very useful to singles or couples just starting out that want to take advantage of investing in personal property in the present in order to build for their future, though their incomes might not be conducive for a large mortgage payment currently.

In a conventional loan, the payment a borrower makes is made up of two parts: the amount paid upon the interest of the loan and the amount that is applied to the principal. This amount toward the principal is referred to as amortization of the principal, and reduces the overall amount a borrower owes the lender. An example of amortization in action: A certain borrower’s loan from a lender is $200,000 at 5% interest. His or her mortgage payment each month of $1000 might apply $800 to the interest accrued, while $200 go towards the loan amount. This application or amortization to the principal brings the loan amount down to $198,800 after the first month. A negative amortization clause would allow the borrower to pay a much smaller payment; an amount less than the interest accrued. This can help allow buyers with smaller incomes qualify for a larger loan because they are agreeing to an option that could result in a longer and costlier payoff in the long run. Most negative amortization mortgages offer borrowers up to four payment options each month, ranging from a 30 year fixed payment, an interest only payment, to a less than the interest accrued payment. These flexible payment options are also attractive to buyers who need to have cash flow available for businesses or other sorts of investment ventures.

Borrowers should feel empowered to shop around and find the exact package that fits their needs perfectly. Lenders such as HomeRefi.com are willing to work with prospective buyers, providing them with all the information necessary to make an informed decision, making home ownership a reality.

About the Author: Jeremi McMaster is Chief Executive Officer of FreeHomeRefi.com, leading provider of home refinance solutions. For information on refinancing online, go to
www.FreeHomeRefi.com.