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home loans

Home Loans

Following is terminology you will want to become familiar with when applying for a home loan:

  • Annual Percentage Rate (APR) - Lenders are legally required to divulge the APR. This is a combination of the interest rate, points and other related fees you will be paying annually.
  • Loan Origination Fees - This is the fee a lender charges for their services, generally 1 or 2 points. 1 point is equal to 1% of the loan amount, 2 points are equal to 2% of the loan amount, and so on.
  • Discount Points - Discount points are charged when a borrower wants a lower interest rate. The borrower pays more points up front, which is referred to as buying down on the rate.
  • Title Search - This is a required search by lenders to uncover any liens, lawsuits, and/or legal claims involving the property in question.
  • Title Insurance - This insurance policy is required by lenders in order to protect the buyer and lender if complications with the title arise after the deal has been made.
  • Homeowners Insurance - An insurance policy protecting the contents of your home from theft and the structure from most disasters.

When you are in the market for a home loan it's suggested that you obtain a copy of your credit report to ensure that there are no surprises. If any errors appear on your credit report you should have them corrected prior to applying for a loan. Because information may differ between the three major credit bureaus, a 3-bureau merged report is recommended.

By using the internet you can search for the best loan rates any time you'd like in a secure, confidential and usually free environment. We recommend obtaining multiple mortgage loan quotes to allow you to shop for the best rate.

Home Equity Loans

One of the most popular types of loans today is a home equity loan, also called a second mortgage, wherein your home is used as collateral. Many companies now offer free, no-obligation home equity loan rates online. The benefit to this type of loan compared to various other loans is the tax advantages. The interest you pay on second mortgages is tax-deductible up to $100,000. By contrast, you get no deduction at all for interest paid on credit card debt, auto loans, many student loans or personal loans.

A traditional second mortgage works just like a first. You borrow a lump sum of money and pay back over a fixed term, usually 7 to 15 years. The interest rate may be fixed or variable.

Many people have chosen to use a slightly different type of second mortgage - a home equity line of credit. Instead of borrowing a fixed amount of money, you arrange for a fixed amount of borrowing power (minimum: $5,000 to $10,000; maximum: $100,000 to $250,000), available over the next 5 to 10 years. During that time you can take a loan anytime you want, with no further approval from the bank.

Different lenders provide different methods for you to access your credit. You might use a special check, put down a credit or debit card, attach the credit line to you regular checking account, or make a phone call asking that the funds be transferred into your account. You pay interest only on the money that you actually use, at a variable rate.

Home-equity lines are offered by commercial and mortgage banks, S&Ls, credit unions, consumer-credit companies, finance companies, even some large brokerage houses. Credit unions often have the best terms while finance companies generally have the worst.


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