Your Questions About Home Loan Rates

Thomas asks…

Home Improvement Loan?

I just purchased my house and am waiting to my home tax credit check. In the mean time I have a few home improvements to do. Unfortunately my credit is pretty rough right now due to a home and car purchase. Car to commute to my job so it was a necessity, But does anyone know what I can do to get a loan for around 3000 to 5000 dollars. I do not want to screw up my credit anymore but I don’t know how these unsecured personal loans work. Any ideas? THanks

John answers:

Finding a bad credit mortgage lender is easier than you probably think. Although several lenders and brokers advertise super low rates and different types of home loans for people with good credit, a variety of bad credit loans are available. It is possible to get approved for a home loan with a score as low as 500. Here are a few tips on how to find a bad credit mortgage lender.

Request Mortgage Information from Credit Unions, Banks, etc.

Even though a large number of banks, credit unions, and other lenders do not offer home loans to people with poor credit, it doesn’t hurt to inquire about their loan requirements. Some lenders have started offering a variety of mortgages, including low credit score home loans. This makes homeownership attainable. Because many traditional lenders favor prime borrowers, you may not meet some lender’s requirements.

Apply for a Loan with a Sub Prime Mortgage Lender

If unable to get approved for a mortgage loan with a traditional lender, consult a sub prime mortgage lender and request a mortgage quote. These lenders are very helpful because they work with a variety of credit situations. If acquiring a sub prime loan, good credit is not necessary.

Although sub prime lenders can get homebuyers with poor credit approved, there are drawbacks to these loans. For starters, bad credit will not qualify you for prime rates. Hence, a bad credit mortgage loan will consist of interest rates about two or three percentage points above the current average. An interest rate increase usually entails paying a higher mortgage payment.

Using Mortgage Brokers

There are numerous lenders offering sub prime mortgage loans. Prior to applying, all homebuyers should shop around and obtain several quotes. Comparing different mortgage lenders and loans is essential to obtaining the best home loan. Shady bad credit lenders prey on those with few options. However, having a low credit score does not mean you have to accept a home loan with outrageous fees and terms.

To avoid being deceived by a dishonest mortgage lender, use an online broker and obtain multiple quotes from reputable lenders.

Sharon asks…

Home Loans?

Does any body know of home loans/lenders who offer:
-no credit history
-20% down payment
-no inspection

John answers:

No lender I know of requires a home inspection. They do require an appriasal- these are two very different things.
Back in 2006 you could get things like this but not any more. Even high fees and high interest rates don’t offset the high cost of foreclosing on a bad loan and the government came down hard on all the investors and banks and these types of loans disappeared.

Mark asks…

Home Equity Loan?

I am considering a home equity loan to pay off just a couple of bills – – a student loan, car payment, credit card… But I don’t know anything about this type of loan! What can you teach me… are there closing costs required, etc??

John answers:

This can be a great way to pay off debt. In many cases, when do a home equity loan for a client, we can reduce monthly costs significantly.

Shop around for deals re: closing costs and rate. There is one offer available from a Canadian Bank now that will give you a rate of Prime or lower and cover the closing costs if your loan is $25,000 or more.

In Canada, interest on the home equity loan is tax deductible only if you are using it to purchase investments, so check with your accountant.

An equity line of credit is another way to go. This is a revolving loan similar to a credit card. You can use it and pay it off and use it again. This may also be a great way to go as long as you have to discipline to pay it off.

Sandy asks…

Home equity loan question?

I bought a house 2 yrs. ago, and my husband & I are thinking of getting a home equity loan. Good idea? Any advice on the topic? I’ve read up on the options. What we’re looking to do ultimately is to come up with 10k- 5k to pay off credit card debt, and another 5k for home renovations. Anyone with helpful experience? Thanks so much!

John answers:

A home equity loan is a financial tool. Like any tool you would get from a hardware store it can be helpful and valuable when properly used, and dangerous when it is not. In general, you can borrow at a much lower rate than you can with a credit card and there can be tax advantages as well. If you use it responsibly you can improve the quality and the value of your home with renovations and reduce your total expenses by paying off the credit cards. You don’t want to use an equity loan to extend current credit card balances by paying them over a 15 year term and running up the card balances again.
With most lenders, rates for home equity loans go up significantly when the loan amount exceeds 80% of the appraised value of your home which makes the option less appealing. You never want to put yourself in a position in which you can’t sell your home for the amount you owe on it.
If you have enough equity and you use it responsibly an equity loan can be a good thing. If you are not sure, talk to a trusted financial advisor.

Nancy asks…

Do you think rates will drop again for home loans?

We are looking at buying a home this year. Do you think because the last Gov cut didn’t do as well as they hoped it would that they will drop the rates agian?

John answers:

Probably not. The Federal Reserve cutting the Federal Funds rate has little to do with mortgage rates. The Federal Funds rate is an extremely short term loan (i.e. Overnight) between banks. Mortgage rates are long term loans, which are more influenced by the bond market.

I just put a blog post on this exact topic, which explains it in more detail. The website is:

http://nwarealestateblog.blogspot.com

Interest rates for mortgages are still really low–around 6%. Back in the 80s they were between 15% and 20%, and even in the mid-90s they were about 7%-8%, so consider yourself lucky that you are ready to purchase now rather than in years past.

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