Your Equity: Getting the Best Loan Possible
also see -> HELOC - Your Home Equity Line of Credit
a home equity loan is a good way to borrow money, but there are
some lenders that only bring problems.
home mortgage lenders look for people who may have financial difficulty.
They hunt for people who may be behind on property taxes, who
need to fix up their home, or who need money for medical bills.
Once they find these people, the lenders often use high pressure
sales talk, high interest rates, outrageous fees, and repayment
terms that the person can't afford.
Fast talkers can trick homeowners
into taking out loans that they can't afford to pay back. When
they can't make the payments, their homes are at risk of foreclosure.
Even if you
don't have financial troubles, no one wants to pay more than is
needed. Why pay interest rates higher than you need to? Why pay
unneeded fees or charges? Whether you have excellent credit or
not-so good credit, you want the best possible loan you can get.
Don't be fooled
by loan offers you see on television or receive in the mail. They
don't tell the full story. Be a smart
borrower. Don't get caught in a bad loan!
credit rating and credit score.
Sometimes people who have good credit are charged higher rates
and fees for loans because they don't know that their credit is
Getting your credit report and credit score may help you
negotiate the best loan for you so you don't pay more than you
should have to pay. You'll want to look for any mistakes in your
credit report and take steps to correct them.
You can get your
credit score on the Internet, usually for a fee, or a lender can
give you a free copy when you apply for a loan. Avoid lenders
who won't give your score to you. Most credit scores range from
300-850, and the higher the score, the better your credit. Most
lenders consider scores over 700 as "good" to "excellent"
Checking your own credit report will NOT lower your score. Make sure to check all three major reporting agencies. The score can vary depending on what information each of the reports shows. You will not know which agency your lender is checking.
Be prepared with clarification if there are questionable items on any of your credit reports! Under the Fair Credit Reporting Act you are entitled to receive an annual free disclosure of your credit report from each of the national credit reporting agencies.
major credit reporting agencies are:
1 (800) 685-1111
Request your annual free credit report:
By phone - 1 (877) 322-8228)
or contact them at the address on the web site.
You can request a credit report for a $1 fee that covers online access to your Experian credit report, your credit score and access to Experian's online dispute process with toll free support.
This agency offers credit monitoring with a free credit score. Asking for the score enrolls you in the 7-day Free Trial, then $16.95/month unless you cancel.
about using a home equity loan to consolidate credit card debts.
Loan offers may tell you how you can save money by paying off
credit cards with a home equity loan, but what they don't say
is that your home is at risk if you do it. Yes, sometimes this
type of loan is useful, but only if the loan's terms are very
good-and you won't run up another credit card bill. Even then,
if something should happen and you can't make the home equity
payment, your home is at risk of foreclosure.
difference: Credit card lenders can't foreclose on your home if
you don't pay your credit card bills. But, a home equity lender
can foreclose if you don't make the mortgage payment.
Get several offers and pick the loan that's best for you-not one
that is best for the lender or broker.
you want a loan or a line of credit.
Talk to several lenders-not just those who send you mail, call
you, or knock on your door. Start with several banks, savings
and loans, credit unions, and mortgage companies.
Understand the role of brokers if you decide to use one. Brokers
charge you to find a lender; they don't lend the money themselves.
Some lenders also pay the broker and then pass their cost on to
you as a higher interest rate. Since you are paying the broker
either directly or indirectly, using a broker may not get you
the least expensive loan.
Ask all lenders to explain the loan plan they have for you.
Pay close attention to the fees. Remember - the loan with the
lowest monthly payment might not be the best deal. There could
be hidden fees that may cost you more in the end.
See a housing counselor to discuss your options. You can locate
counselors certified by the U.S. Department of Housing and Urban
Development (HUD) by calling 1-888-466-3487 or visiting the HUD
Web site for advice.
Learn about reverse mortgages.
For homeowners age 62 or older, this may be a better option than
a home equity loan. These are loans you don't have to pay back
as long as you live in your home. With a reverse mortgage you
can get a lump sum of money, a monthly income, a credit line,
or a combination of payment options.
Once you've found the loan you want, make sure you get the deal
you were promised.
loan papers carefully before you sign.
Ask a lawyer,
housing counselor, or a trusted friend to help you go over the
you understand exactly what the lender is offering -and what
you're going to have to pay.
have all fees explained.
if you don't understand something.
Take your time. Don't be rushed.
that all blank spaces are filled in on all copies before you
options about credit life insurance. Only buy it if you really
need it. Many people don't. If you do want it, shop elsewhere
for the best terms. If the lender insists on it, find another
lender. Be sure to look for this item on the forms given you
you read in the loan is not what you wanted or expected, don't
sign the papers! Be prepared to walk out of the settlement (closing)
if you find surprises.
To reduce unwanted credit offers call 1-888-567-8688
and ask all three credit reporting agencies Equifax, Experian,
and TransUnion not to provide information about you to companies
wanting to send you loan offers.
home equity loans around the Web:
What you should know about home equity lines of credit - Federal Reserve guide to shopping smart for equity loans including questions to ask about interest rates and fees, points and fees credit insurance and other topics, with related resources.
Home Equity Basics - Bankrate.com tips on leveraging equity with information on cash-out refinancing, lines of credit, and fixed-rate loans with sample worksheet and related resources.