Your Questions About Home Loan Rates

Donna asks…

Home loan intrest rate?

I am intrested in purchasing my first home. What is a good intrest rate for an above avarage credit?

John answers:

You need to shop for a loan. People often go with the first person they talk to when it comes to home buying…Big mistake. You wouldn’t just buy a car without shopping around for the better deal.

Go to several banks and let them know you’re shopping around. If you belong to a credit union or are able to join, sometimes thay have the better rates.
As for loan brokers, just remember you are paying them also, and if you have above average credit and will be able to show all documentation then you are probably better off going directly to the lender.

Paul asks…

How does a home equity loan work?

I have about 30K in equity. Like to do some home improvements. Current mortgage each month is 1200.00. How does the loan work in conjunction with the monthly payment? Is it seperate, bundled into the payment, etc? Is there a term to pay off the loan or is it part of my 30 year fixed? Overall would like to know how much more I will be paying over my 1200.00 for the loan each month with current assumptions. Fees to get the loan started? Thank you!!
It’s pitiful that I’m asking a question and I have people preying on my question with these fairy tale lenders. Give me a break people- did honesty and ethics fly out the window here? Have some humanity

John answers:

A home equity loan is a completely separate loan. It comes with it’s own interest rate, it’s own term and it’s own payment.

The amount you will have to pay (above and beyond) your current payment depends completely on how much is borrowed, the interest rate and term of the loan (just like your original mortgage payment).

There are fees to get the loan started. Similar to ones that you’d have when refinancing, appraisal, closing costs, etc.

You mention that you have $30k in equity. It was common practice in the recent past to allow second mortgages (which is what a home equity loan really is) to go to 100% LTV (loan to value). I would guess now that getting to 90% might be a stretch and most home equity loans would only let you go to 80% LTV. All of that $30,000 is not going to be available to you.

Good luck!

Betty asks…

how does a home equity loan work?

ok so we might try to get a home equity loan… but the house is in my uncles name he is a pain in the ass to get ANYTHING from like this is near impossible to get from him we are thinking… we live here my grandfather pays the mortage so could he get the loan sense he pays it? or ONLY the person the houses name is under? or how does it work… we only want about 3000$ -5000$ at most. we live in new hampshire me and my mom and my brother live in the house… my grandfather lives in his own house it was a 2nd mortgage long story.

we have lived here for 12 years now… also how much would the monthly payments be?

John answers:

A Home Equity Loan, also known as a second mortgage, allows you to borrow a one-time disbursement of funds, using the equity in your current home or property as collateral. Your interest rate is usually fixed and the loan is amortized over a fixed term. Like a traditional mortgage, you borrow a set amount, you receive the set amount of funds in one disbursement and then you pay that loan back with interest over a set amount of time.

You may borrow up to 80% of the equity in your home. Because you have the option to rescind or cancel your loan for up to 3-days following the closing, your money will not be distributed until the end of this 3-day rescission period.

Charles asks…

What is a Rate Spread Home Loan?

What is a rate spread home loan and how does it work? Thanks!!

John answers:

I’ve only heard that term when referring to a loan that has a high rate and/or high fees and only when being discussed in the same conversations as subprime loans and predatory loans.
Not a loan you want to get involved with. If your only options are these types of loans, you’re better off renting a few years and cleaning up your credit until you can get conventional mortgages.

Carol asks…

Home equity loans…?

How do home equity loans work? I need to know EVERYTHING about them….

Can you suggest any legitimate websites?

John answers:

There are 2 types of equity loan. Fixed rates and variable rates. You are always borrowing on the equity in your home. If you sell the deed of trust must be satisfied at close. So you may not get as much on the sale if you have not paid it ALL back. A fixed note is just that fixed for the life of the note so the principal and interest remain constant. The Variable rate is tied to an index. (prime rate, cost of funds London Interbank Offered Rate{ LIBOR} or some other index) These rates change on a monthly basis and go very high over the term of the note. For example notes tied to prime are based on your balance this month and The PRIME RATE as it was published the first business day of the month in the “Wall Street Journal”. There are cap restrictions on just how high it can go up so you must know the maximum amount it could reach over time. In some states it could be as high as the Prime gets. In other states like in Tennessee where I live and work it is maxes out at 18%. If it is just a small amount and you repay quickly then the variable may be your best bet. If a Large amount the I would recommend a fixed note. Hope this helps you.
I am a mortgage banker in TN & KY

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