Stated-Income

How can you Use a Home Equity Loan?

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A home equity loan has many uses. It is up to the homeowner to decide just what to do with the money. The portion of your home that you “own” is called the equity. You can figure it out based on the current value of your home and the outstanding principal balance of your mortgage. The difference between the two is your equity. Because that money is not liquid; it remains in your home, you need to take out a home equity mortgage in order to tap into the equity. But just how can you use it? There are many different ways.

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Emergency Fund

Many people take out a home equity line of credit, which is a form of a home equity loan. This line of credit is like a bank account into your home equity. You have to qualify for the mortgage based on your credit, income, debt ratio, assets and the value of your home. Once the lender approves you and you close on the loan, the lender provides you with access to the funds, which are usually up to 80% or so of the full value of your home. Most lenders provide a checking account with checks or a debit card that you can use to access the funds.

If you take out the line of credit strictly to have an emergency fund, you can let the funds sit there untouched. You do not make any payments on the money unless you withdraw it. If you take money out with a check or the debit card, you then pay interest on those funds. Typically, this lasts for the first ten years of the loan, called the draw period. Once the draw period is over, you no longer have access to the funds and you must then pay the principal plus the interest back to the lender. It is nice to have that emergency fund available should something unexpected come up with your home or even your personal life.

Eliminate Debts

If you have large amounts of debt hanging over your head and you do not like paying multiple creditors every month, you can use the home equity loan to consolidate the debts. In this case, the lender will not give you access to the funds, but rather pay off your other creditors. You decide with the lender how much of your debt you can afford to include in the home equity mortgage. This will play a factor in your ability to obtain approval as well since it affects your debt ratio. Obviously, the more debts you pay off, the lower your debt ratio becomes, but you also have to figure in the new mortgage payment to determine if your debt ratio fits the mold.

If you end up paying off all of your monthly debts, you just make the one payment to your new home equity lender. The remaining debts get paid off at the closing with the proceeds of the loan. If you are financially responsible, you will keep those revolving debts at a zero balance and focus on paying down the home equity mortgage to fully get out of debt.

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Make Changes to your Home

Perhaps the most common use for a home equity loan is to make home improvements. This could mean many things – you could make necessary repairs, such as replacing a roof or an HVAC system; you could make cosmetic changes that you desire or make major renovations including room additions. The changes you make obviously depend on the amount of equity you have in the home and how much you qualify to receive. Because repairs and or renovations to a home can greatly increase its value, this is often considered the most valuable use of a home equity mortgage as it gives you a return on your investment.

Pay for College

Student loans are expensive and there is no way around it! If you have equity in your home, though, you can tap into that money to pay the costly tuition and room and board. Sometimes it makes more sense for borrowers to tap into the equity of their home than take out the costly student loans. If your household makes too much money to receive any type of financial support from the government, this is usually the best option. Because you get a tax write-off for a portion of the interest you pay on the home equity loan, it can be beneficial for you to go this route rather than taking out traditional student loans.

Starting a New Business

Starting any type of business can be rather costly, making it difficult to get ahead. A home equity loan can help you gain the capital you need to start the process, though. The good news is that with a business, you usually make the money back faster than you would with any other method. This means that you could get the home equity loan paid off faster than you would if you took the money out for another reason, such as debt consolidation or home improvements. As your business takes off, you can have the capital you need to keep going while still paying your mortgage down or off.

How you use a home equity loan is really a personal choice. Most lenders do not question how you will use it unless there are special circumstances to your loan. If you have a good reason, though, such as consolidating debt, it could help you qualify for the loan, especially if you have a high debt ratio. In general, though, you can take out the home equity mortgage in the form of a line of credit and use the funds as you see fit.

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Take Your Pick From These Government Mortgages for Buying Fixer-Uppers

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Fixer-uppers. Their affordable price makes them attractive to home shoppers like you but their state of affairs (read disrepair) might not appeal to banks. What to do? You can try government mortgages.

Aside from standard purchase/refinance loans, the FHA, VA and USDA back, insure or make (in the case of USDA) mortgages for buying and/or improving fixer-uppers. These government mortgages for home rehabilitation might just fulfill your dream of having just like that lovely home across the street.

Are you ready for homeownership? Let’s help you find an approved lender.

The Government Mortgages for Home Repairs

Government-backed loans are traditionally popular for their more flexible and lenient guidelines than most conventional/conforming loans. Their mandate is to help consumers buy a home despite their income, credit, or (lack of) down payment.

With prices for fixer-uppers a steal, it’s understandable why some opt for these homes, repairs and all. Moreover, these homes are financeable with the help of the government.

FHA 203k Loans

They are for purchasing and turning a fixer-upper home with scores of allowed improvements.

Simpler, less costly home projects can fit the bill of a streamline 203k loan of at least $5,000. These repairs usually include but are not limited to replacing roofs, upgrading HVAC systems, painting the exterior and interior of the house, replacing the septic tank, and installing appliances.

Then there’s the standard 203k loan that covers more complex repairs involving walls, room additions, and improvements that take more than 30 days and keep you out of the home until such time as the work is finished. These renovations are capped at $35,000.

The home will be appraised based on the work to be done, called after improved value. Still, the FHA’s down payment remains as low as 3.5%, credit doesn’t have to be stellar, and debt-to-income ratio can go as high as 31%/43%.

Shop and compare rates.

VA Home Loans

VA-guaranteed loans allow for the simultaneous purchase and improvement of a home.

For instance, Native American Direct Loans (NADLs) cater to Native American veterans to build homes according to their wishes.

These direct loans are also used to buy a home with repair or improvement costs that may be rolled into the loan.

Being VA loans, NADLs have no down payment, no private mortgage insurance, and low closing costs. They are 30-year fixed-rate mortgages with rates at 4%.

The VA also offers grants for veterans with disabilities to adapt their homes and make them more accessible (barrier-free).

USDA Repair Loans

Among the three government mortgages, USDA Section 504 loans are strictly to finance repairs on existing owner-occupied homes. These repairs can go toward removing health and safety hazards.

Families with very low income are the target borrowers of the loans up to $20,000, along with very-low-income elderly who may be eligible for grants not exceeding $7,500. Grants may be combined with loans if a borrower shows that he/she can’t repay loans fully.

Repair loans have fixed rates of 1% and repayment terms of 20 years. Grants must be repaid if the recipient sold the home subject to the grant within three years.

To recap,

  • FHA loans for purchase and deep rehabilitation
  • VA loans for veterans looking for construction/home improvement loans
  • USDA loans for repairs only, grants may be included

So, which government loan is it gonna be?

Click here to see the latest rates.

How to Actually Earn More Thru Your Side Gigs

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Money

How can you maximize income and productivity while taking side gigs?

 

Do you feel like your full time job is not satisfying enough? Do you have too much free time that you want to turn into something productive and profitable?

Take on side gigs!

It’s a good way to earn more income if you don’t want to leave a high-paying job. It’s also a challenging means of exploring your other skill sets and who knows, maybe through time, it can help you prepare to swing your career to something you think is a better fit for you!

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Taking on side gigs fails for most people. So, they end up burnt out. Every day feels like a never-ending nightmare, and the pay doesn’t almost feel like they’re worth it.

What shifts do you need to make in order for this whole part time thing to work out for you?

The passion factor

A lot of Americans feel unmotivated at work. They come, day in and day out, lacking the spirit and enthusiasm to the point that waking up each day actually feels painful.

Taking on part time work is an opportunity to work on areas that you’ve always been passionate about OR to discover one. It can be anything you want, from the craziest manual jobs to selling artwork on Etsy. The thing is, hard work cannot come from just going through the motions. To be good at something requires a kind of persistence that can only come from passion.

Learn something new

Once you find something you are interested in and begin work, it’s unsurprising for you meet some technical challenges. Instead of outsourcing the work, you can think about it as an opportunity to buff up your skill set. It’s never too late to learn.

Take on the challenge and set foot outside your comfort zone. If you’re the kind of person who’s up for challenge, this is the way to go.

You must take note, however, that this does not only require extra time but also money. But unlike monetary savings, it’s an investment that you can earn more from in the future. Learning a new skill set helps make your resume more diversified and attractive, and may provide a leeway to learning more advanced skills in the future.

Own your time

Do you ever notice how you mindlessly scroll through Facebook or Instagram, only to realize that you’ve wasted two hours passively looking through people’s lives? Have you ever experienced the pure joy of overcoming the temptation of going to social media to do other more real-world interactions?

Practicing smart time management habits can help you take more ownership over your life, and less on passive experiences that often leave you empty and unfulfilled.

It may be hard to adjust in the beginning but persistence and loyalty to your personal schedule can help you adequately organize your life and actually realize your more important goals.

Master yourself

As you go along the learning curve and tackle more tasks, you also get to learn more things about yourself – your strengths, your weaknesses, and how you respond to difficult situations. When it comes to part time work or freelancing, you usually have to be accountable for your own work.

Mastering yourself helps you manage situations better, helping you to move to a better path forward.

Don’t be afraid to reach out

Network with professionals. Learn more about others’ dynamics and see if you can learn something from them. Often, if we need help and don’t want to learn beyond our field, networking helps you reach out and collaborate to get work done. It’s also a fine way to make new friends and perhaps some potential business partners.

No doubt, taking on a side gigs can be intimidating. It may not be for everyone. But for those who dare take on the challenge, here’s a tip of the hat to you. Discpline yourself first. The profit comes later. Cheers to that success!

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When is the Best Time to Lock Your Mortgage Rate?

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When is the Best Time to Lock Your Mortgage Rate?

If you were to think of the one thing you worry about most with a new mortgage, what is it? Did you say interest rate? You aren’t alone. Many Americans worry about rising interest rates and how it affects their mortgage. Luckily, you have options when you take out a new mortgage. Whether you buy a home or refinance an existing mortgage, you can lock your mortgage rate. Now the big question is, when is the best time to do so? What is the magical timeframe?

We take a look at your options here.

The Typical Lock Period

First, you should understand the typical lock periods. Generally you have the option of 30, 45, 60, or 90 days. That is a lot of options! How do you know what is right for you? Some lenders even often different periods. This complicates matters even more.

The longer you lock a rate, the more you pay. But, you pay in different ways. For example, a 30-day period on a 4.5% rate may be available for 0 points. This means the rate costs you nothing. But a 60-day period at the same rate may cost 1 or 2 points. You pay these points at the closing. But, you may also take a slightly higher rate on the 60-day lock and pay no points. Either way, you pay for the longer period in one way or the other.

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What are Your Circumstances?

Before you decide when the best time to secure your rate is, consider your circumstances. If you are buying a home, do you have a contract yet? If not, don’t hold onto any rates just yet. You don’t know how long it may take to find a home. You also don’t know how long negotiations will go on with the seller. If you pass your lock period, you must either pay for an extension or take the current rates, which could be higher.

If you are refinancing, rely on the expertise of the underwriter. Ask how long they think the process will take. They know by looking at your file what they may need. They can provide a ballpark estimate on how long underwriting may take. You can’t close on the loan until the underwriter clears your file, so it makes sense to ask.

Is your debt ratio close to the maximum allowed? If so, it makes sense to secure the rate you need when you can. This way you know you won’t have a debt ratio issue in underwriting. If you know even a slightly higher interest rate could put your approval at risk, don’t take a chance.

What if Rates Lower?

There is always the risk of rates decreasing after you lock a rate. What should you do? In all honesty, you might not have to do anything. The only time you really must react is if rates change drastically. Given recent history on rates, this isn’t likely. If, however, you stand to secure a rate that is at least 0.5% lower than your current rate, you have two options:

  • Ask for a float down option – This is an option some lenders offer. This paid service allows you to take the lower interest rate. But, you have to pay for it. Make sure you do the math to see if it is worth it. Sometimes the cost outweighs the benefit of the lower rate.
  • Go to a different lender – This is not an ethical choice, but sometimes it’s necessary. If you know you can secure a much lower rate somewhere else, you may have to change lenders. Try not to make a habit of this after a lender does too much work on your file, though. Again, make sure the change will make a drastic difference in your payment.

Know your Risk Tolerance

What it really comes down to is your risk tolerance. Are you a gambler? Do you like being on the edge of your seat? If not, and you are a more predictable person, lock in as soon as you can. If, however, you like the fun in waiting, wait it out. See how low rates get. You have to pick a rate sooner or later, but if you want to wait, you are certainly welcome to do so.

No two people will have the same idea regarding when they should lock their rate. Some follow the ‘rules’ shown that rates stabilize at the end of the week. This gives the market time to digest any new information that occurred during the week. Others believe Mondays are the best day to lock. Honestly, there is no best day or time to choose a rate. They can change many times in one day, let alone an entire week.

You know your circumstances and what you can handle. Base your decision on your own situation. If you have a specific rate in mind, don’t let it go. If it comes, choose that rate and move on. Don’t follow rates after that you will just drive yourself crazy.

If you have volatile circumstances, wait for the right time. Waiting for a purchase contract to get finalized is one example. Another is waiting to see if your debt ratio will get accepted. You don’t need to secure a rate at any specific time. As long as you have the lock in place before you close, you are good. Talk to your loan officer and see what works best for you. This is the best way to make the most of finding the right interest rate for you.

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