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.
John Ross is a freelance author, providing tips and ideas relating to home
equity loans. You can find more of his articles at:
http://www.loanchbox.com/ ,
http://www.loanchbox.com/online- home-equity-loans.html and
http://www.loanchbox.com/fixed-rate- home-equity-loan.html The Loanchbox is
a user friendly website designed to teach the basics behind home equity loans.