Home loan companies play a pivotal role in the housing industry. They provide advice to borrowers on purchase loans, refinancing mortgages and home equity loans.
Before selecting a lender, it’s wise to shop around and compare rates, fees and terms. Furthermore, make sure the company you’re considering is reliable with an excellent customer service record.
Home Equity Loans
If you have built equity in your home, home loan companies offer a range of products to access that cash. Often with lower interest rates than other debt types and paid back with fixed monthly payments, these loans may be the perfect solution for you.
The most popular home equity loan is the one-time, lump sum HELOAN (home equity installment loan) or HELOC (home equity line of credit). Under these arrangements, a lender creates a second mortgage on your property and issues you with a check for the full loan amount.
You can use this type of loan to pay off high-interest credit card bills, fund a home improvement project or consolidate debt. Unfortunately, it can also become an easy temptation for consumers who become trapped in a cycle of spending, borrowing and adding to their debt load.
To avoid this issue, be sure to get prequalified before borrowing any money. Doing so will enable you to determine how much is possible for you and how it could potentially impact your credit score.
Home Equity Lines of Credit
A Home Equity Line of Credit, or HELOC for short, is a type of revolving loan that allows you to borrow funds from the equity in your home. The amount available depends on the market value of your house, how much equity there is and your debt-to-income ratio.
Additionally, lenders take into account your credit history and income when determining whether or not to approve you for a home equity line of credit. In order to be eligible, borrowers must possess significant equity in their home as well as an excellent credit score.
Home equity loans and home equity lines of credit are excellent ways to finance renovations that increase your property’s value, or to handle an actual financial emergency. Both may be tax deductible and offer lower interest rates than personal loans or credit cards.
Preapproval
Preapproval for a mortgage loan is an essential step when searching for your dream home. It demonstrates to sellers and their real estate agents that you are serious about purchasing the property, as well as giving an indication of how much you can afford.
A lender will assess your credit score, income and debt-to-income ratio (DTI) when deciding how much you can borrow. They may also do a hard inquiry on your credit report to confirm all information provided during preapproval.
Becoming preapproved early in the mortgage process can help you identify any potential issues that might arise later. It also gives you time to make necessary changes in your finances, such as paying off debt or saving up for a larger down payment.
