Home Equity Loan Approval Process
The following information on the Home Equity Loan application
Process is provided by Tim Gorman at Ezline Articles. This
is a great resource an can be accessed at:
http://ezinearticles.com
A home equity loan can be an excellent way to obtain
money in order to pay off high interest bills or consolidate your
current debt into one monthly payment. A home equity line of credit
is a form of revolving credit in which your home serves as collateral.
Because the home is likely to be a consumer's largest asset, many
homeowners use their credit lines only for major items such as education,
home improvements, or medical bills and not for day-to-day expenses.
Additional benefits include a nice tax advantage and the possibility
of an overall lower monthly payment. However before you decide that
a home equity loan is right for you make sure you do your homework.
Not all online lenders of home equity loans are
the same which means there are ample opportunities to save a few
more of your hard earned dollars.
The biggest obstacle to overcome is deciding on the appropriate
online loan lender. Make the wrong choice here and it could come
back to haunt you in the form of higher payments. I have compiled
a small list of items to check for when searching for the best online
loan lender. One item to be on the look out for is the annual percentage
rate or (APR) as it’s commonly known. This is the cost of
credit on a yearly basis expressed as a percentage. This cost is
based on the interest rate alone and will not take into effect other
fees and charges such as closing costs.
Most home equity loans or lines of credit revolve around variable
interest rates. In many cases lenders entice consumers with
an offer to temporarily discount interest rate for home equity lines.
This rate is unusually low and may last for only an introductory
period, such as 6 months.
Remember those pesky closing costs when you first bought your house?
Well there back in force when you apply for a home equity loan.
They include but are not limited to the following: Up-front charges,
such as one or more points (one point equals 1 percent of the credit
limit), application fees, appraisal fees and closing costs, including
fees for attorneys, title search, and mortgage preparation and filing;
property and title insurance; and taxes.
Typical information that a loan officer will ask you to provide
include a checklist for "Full Document" loan approvals,
1 month of pay stubs from your employer, the previous 2 years worth
of W2 forms, a mortgage coupon or copy of your monthly mortgage
statement, your homeowners insurance policy information, the mortgage
note on your current mortgage, your drivers license and social security
card. Having these items handy will help speed up the loan
approval process.
Once recommendation before applying for a loan would be to have
a plan in place describing how you intend to pay the loan back.
Some plans set minimum payments that cover a portion of the principal
plus accrued interest. Other plans may allow payment of interest
alone during the life of the plan, which means that you pay nothing
toward the principal. If you borrow $10,000 you will owe that amount
when the plan ends. You’ll need to be aware of the possibility
of a balloon payment. This means whatever your payment arrangements
during the life of the plan--whether you pay some, a little, or
none of the principal amount of the loan--when the plan ends you
may have to pay the entire balance owed, all at once. Failure to
complete the loan arrangement by making the balloon payment could
result in the forfeiture of your house. Take a look at these Loan
Calculators
Finally the federal Truth in Lending Act requires lenders to disclose
the important terms and costs of their home equity plans, including
the APR, miscellaneous charges, the payment terms, and information
about any variable-rate feature. You usually get these disclosures
when you receive an application form, and you will get additional
disclosures before the plan is opened.
These simple guidelines were meant to provide you some additional
information with the hopes of making you more comfortable and aware
of the issues involved when applying for a home
equity loan.
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