If you’re considering getting a home equity loan to pay for home improvements or pay off your bills there’s more to consider than just how much it will cost you. The problem with home equity loans and second mortgages is that it’s a slippery slope to being upside down in your home. If you’re not careful you could end up owing the bank more than your home is worth. Here’s an article on MortgageLoan.com about qualifying for a home equity loan; keep in mind that answering the question should I get a home equity loan is a more important than just qualifying:
You don’t hear much about home equity loans these days. In fact, it sometimes seems that lenders have turned off the tap on the once-popular second mortgages that used to fund everything from home improvements to new cars to expensive vacations and more. But home equity loans are still around, they’re just not as common. Part of that’s because they’re harder to come by – falling property values have left homeowners with less equity to borrow against and banks have tightened up their lending guidelines considerably.
Declining home values make second mortgages and borrowing against your equity a risky proposition. Many homeowners that tapped into their equity during the early 2000s are finding they can’t qualify for today’s low refinance rates because they’re underwater in their mortgage loans, owing more than their homes are worth.
If you’re upside down in your home and have an FHA mortgage there is good news. As long as you’re making your payments on time you can qualify for an FHA streamline refinance. The main advantage of FHA home loans is that they’re relatively easy to qualify and you can refinance regardless of your Loan-to-value ratio. The FHA streamline refinance ignores your equity completely.
If you’d rather refinance without taking cash back to lower your payment it’s important to pay close attention to the loan origination fee and closing costs and you’ll have to recoup these out-of-pocket expenses before benefiting from your new home loan. The less you pay closing on your mortgage refi the better deal you’re getting and the more you’ll save in the long run.
You can learn more about getting today’s best mortgage refinance rates without paying unnecessary fees or markup by checking out my free Underground Mortgage Videos.