What is a Gift of Equity?

When a homeowner sells their home to a family member at a price well below the market value, it is sometimes considered a gift of equity.

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What is a Mortgage Loan Officer?

A mortgage loan officer or mortgage loan originator (MLO) is someone who aides potential borrowers in getting a mortgage loan.

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Home Equity Loans for Bad Credit

Here are some of the most common questions about home equity & bad credit so you can decide whether one of these loans is right for you and your financial situation.

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How Do You Buy a Home In Foreclosure?

Buying a home in foreclosure can often be a way to get an incredible deal -- but the process can be complex.

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What are Interest Rate Caps?

When you get an adjustable rate mortgage, the interest rate changes at set intervals in accordance with the market. In order to keep the rate from rising too high too fast, interest rate caps were introduced, to ensure the rate could only change at a manageable pace.

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What was FHASecure Refinance?

In years gone, homeowners with adjustable rate mortgages who found it hard to make their monthly payments could count on an FHA solution to avoid foreclosure. The FHASecure refinance loan was the Federal Housing Administration’s answer to the growing foreclosure problem.

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What is a 1-Year Adjustable Rate Mortgage?

The 1-Year ARM, though rare, is yet another hybrid adjustable rate mortgage option available to borrowers. As the name suggests, a 1-Year ARM has an initial period of one year with a fixed interest rate. After the initial year, the fixed interest rate converts into an adjustable interest rate, that can be adjusted or “reset” on a yearly basis (annually).

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What is Forbearance?

Mortgage forbearance is a payment relief option offered in many mortgage modification programs that involves the temporary delay or suspension of monthly mortgage payments for an agreed upon amount of time. In some cases, it can be a temporary reduction of the loan’s principal amount.  

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What is the HECM for Purchase Program?

The Home Equity Conversion Mortgage for Purchase program is a part of HUD’s larger HECM program. It allows eligible home buyers to get a reverse mortgage and purchase a home, all under one single mortgage transaction.

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What is Imminent Default?

Many borrowers are unaware that lenders have the ability to determine and designate when borrowers reach a state of what is known as “Imminent Default”. This is when a borrower is more than likely to default on a mortgage loan agreement.

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The Ultimate Guide to Mortgage Insurance

Mortgage Insurance is a kind of insurance policy. It compensates an investor or lender for losses in the event of borrower default on a mortgage loan. In other words, mortgage insurance protects the lender if you fall behind on your payments.

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Can You Buy A Foreclosed Home with A FHA Loan?

The Federal Housing Administration, or FHA, insures mortgage loans to help home buyers who may not be eligible for a conventional home loan due to less-than-perfect credit or lack of savings for a down payment. An FHA loan can be used to buy almost any type of home including modular, manufactured, or mobile homes -- and can also serve to purchase homes facing foreclosure.

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What are Negative Points On A Mortgage?

Negative mortgage points, also known as rebates or yield spread premiums are portions of your mortgage fees that are paid by the lender, who in turn sets a higher interest rate on the loan. This is sometimes called a no cost mortgage. One negative point is equal to one percent of the overall home loan.

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What is Foreclosure?

When a homeowner is unable to make payments on their mortgage, the lender gains the right to take control of the property, evict the homeowner, and sell the home. This legal process is known as foreclosure.

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DTC: Debt to Credit Ratio in Relation to Home Loans

Your debt-to-credit Ratio (DTC), sometimes known as your credit utilization ratio, is a value that expresses the relation between the amount of credit you have used and your credit limit. DTC is often expressed as a percentage; the higher the percentage, the closer you are to reaching your credit limit. DTC is an important factor in many financial transactions, the most important of which is being one of the factors that helps determine your credit score.

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What is Hazard Insurance?

Hazard insurance is not only the most obvious portion of a homeowners insurance policy, but an incredibly important one when purchasing a home. Hazard insurance is the area of coverage that deals with the insurance of the actual structure of the home against covered perils as listed in the policy. Standard policies list common hazards such as fires, lightning strikes, windstorms and hail to name a few.

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What are Assumable Mortgages?

An assumable Mortgage is a home loan that can be transferred from the seller to be taken over or “assumed” by the buyer, becoming their responsibility to pay off. Of course, this requires the approval of the lender servicing the loan, and even then, not all loans are assumable.

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What Is A Piggyback Loan?

When purchasing a new home, you may need or want a “piggyback loan” which is  literally a loan that piggybacks off another loan. Basically, it’s two loans that are opened simultaneously. The first loan is generally 80 percent of the purchase price of home. The second is typically a home equity line of credit (HELOC) on top of the first mortgage.

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What Is a Community Seconds Mortgage?

If you want to get a home loan through Fannie Mae, but you don’t have a lot of cash to use for a down payment, a community seconds mortgage could be a great option. A community seconds mortgage is a subordinate, or second, mortgage that is used in combination with a Fannie Mae loan to finance the down payment on a home.

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What part of my closing costs are tax deductible?

Closing on your home can be a lot more expensive than you might think, so it’s a good idea to see if there’s any part of your closings costs that you can deduct from your taxes. While some costs are tax deductible, others aren’t, so it pays to stay informed.

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What Are the 97% LTV Loan Options?

If you’re looking to purchase a home and don’t have much cash on hand for a down payment, you might want to look into a 97% LTV loan. Fortunately, Fannie Mae’s Conventional 97 mortgage program offers such a loan -- and it’s a pretty great option for a lot of home buyers.

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What is an 80-10-10 Loan?

Private mortgage insurance, or PMI, is one expense that most homeowners would rather live without. While you can ask your lender to cancel PMI once you’ve accumulated 20% equity in your home, that could take a while. So, to sidestep PMI, many borrowers have decided to take out an 80-10-10 loan -- effectively taking out two mortgages at once in order to avoid mortgage insurance altogether.

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How Much of the Mortgage Interest Is Tax Deductible?

Owning a home can be pretty expensive -- so it only makes sense that you’d want to look into every possible way to save. One of the best ways to save is to deduct your mortgage interest from your taxes. But just how much can you deduct? Let’s take a look.

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APR: Annual Percentage Rate in Regards to Home Loans

Unfortunately, when you get a home loan, you pay for more than just the interest rate each month. This is because there are other fees and charges involved in the mortgage process. The APR (annual percentage rate) of the loan reflects these charges, and is a broader measure of the cost of borrowing money to purchase a home.

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Can I Get a Lower Rate Without Refinancing?

If you’re feeling the heat from paying a high interest rate on your mortgage, you might be considering refinancing your home. However, consider this: refinancing usually requires a ton of paperwork, a lot of time, and a whole new set of closing costs.

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Why Do Mortgage Payments Increase?

When you first get your mortgage, you’ll probably take into account the amount you’re paying as part of your overall expenses in your monthly budget, along with food, transportation, and other living expenses. But what if your mortgage payments increase?

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Is a VA loan Better Than a Conventional Loan?

If you’re a veteran or surviving spouse who qualifies for a VA loan, you might be wondering if it’s really the most cost-effective way to buy a home. Since VA loans do have a wide variety of benefits, most people would say yes. But, in reality, the truth can be more complex; while VA loans are often the best option for eligible borrowers, they aren’t always the smartest choice. Keep reading to learn when to use a VA loan and when to stick to a conventional mortgage, and why.

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Low First Time Home Buyer Down Payment Options

Down Payments can be a sore subject for most home buyers. Getting a mortgage requires borrowers to meet many different criteria already, and having to fork out cold, hard cash on top of all of that is the icing on the proverbial home loan cake. This is specially true of first time home buyers. Even so, there are a few ways to escape the worst of down payment woes.

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Are Interest Rates on Mortgages Negotiable?

Due to the expense of mortgage interest, it only makes sense that you would want to do everything in your power to pay a lower interest rate. But how? Oddly enough, you could first try by asking! Negotiating with your lender to reduce your potential interest won’t work in every situation; but it can pay to know when and why it might work -- and what you can do to swing the results a little more in your direction.

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What Are the Least Expensive States to Get a Home Loan?

When it comes to getting a mortgage, some states are simply more expensive than others. And, while you might not want to move to a completely different state simply to get a better interest rate, if you’re considering making a big move (and buying a home in your new home state), it doesn’t hurt to know which states are more affordable than others.

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Will Buying a Home in Foreclosure Reduce Neighborhood Home Values?

One of the best ways to find a home selling for well under its market price is to try to buy a home that’s in foreclosure. While buying a home in foreclosure may be able to get you a fantastic deal, it can also come with some serious risks and considerations. One of the most important things to consider is how homes in foreclosure may reduce neighborhood home values.

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Which States Use Judicial Foreclosure? Which Use Power of Sale?

When it comes to home foreclosures, some states allow lenders to sell a home without going through the court system using a provision in a mortgage called “power of sale.” States which don’t allow power of sale force lenders to attempt a judicial foreclosure in order to repossess and eventually sell the property.

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How to Save Your Home and Avoid Foreclosure

If you’ve fallen behind on your mortgage payments -- or you think you’re about to, you could be in a sticky situation. You want to keep your home and avoid defaulting (or contributing to default) on your mortgage, but you’re not sure what to do. One potential solution may be a loan modification program, in which your lender amends the terms of your home loan in order to make it easier for you to pay them back.

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How Does Rent-To-Own Work?

Rent-to-own is a rental agreement in which a property is leased, yet part of the money paid weekly or monthly goes to owning the property after a certain amount of equity has been accumulated. Rent-to-own is different from a regular lease agreement, in that the renter can buy the property at any time during the agreement (in a traditional lease agreement the renter has no such right).

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When Should You Refinance a Home?

When you refinance a home, you replace your mortgage with a new home loan with different terms. Many people decide to refinance to get better terms -- and, while there are a variety of refinancing options, if you like your mortgage, you probably don’t need to refinance.

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What Is Covered Under Homeowner's Insurance?

If you’re buying a home in the United States, one thing you can’t go without is homeowners insurance. Homeowners insurance protects you from a variety of risks -- and can help reimburse you if your home is destroyed. Despite the benefits of homeowner’s insurance, it doesn’t cover everything.

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What is a Mortgage Credit Certificate?

What’s a mortgage credit certificate? First, we have to talk about taxes. Nobody loves paying taxes -- and most people don’t love paying interest on their mortgage, either. Both are realities of life, but fortunately, you can use part of the interest you pay on your mortgage to reduce your tax bill.

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How do I check my VA loan eligibility?

Loans from the Department of Veterans Affairs, commonly known as VA loans, are some of the most attractive home loans out there -- offering the potential for zero down payments and qualification with credit scores as low as 620. If you served in any branch of the U.S. military and separated under any condition that is not dishonorable, you might qualify for a VA loan.

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What Is the Underwriting Process of a Mortgage?

Mortgage underwriting is a process in which a lender examines a potential borrower’s eligibility for a loan. To do this, lenders typically look at three major factors: credit, capacity, and collateral. Now that you know these factors, let’s take a deeper dive into each.

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How do you qualify for a jumbo loan?

If you want to buy a particularly expensive home -- one above the conforming loan limits in the state and county where you’re buying -- you’ll likely need a jumbo loan. While jumbo loans can often allow you to purchase a bigger and better home, they can also be more difficult to qualify for. Here are the basics of qualification for a jumbo loan.

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FHA 5/1 ARM: FHA 5/1 Adjustable Rate Mortgage in Home Loans

A FHA 5/1 ARM is a kind of hybrid mortgage in which interest rates remain fixed for a 5-year period, but can then increase after that due to changes in market interest rates. Unlike regular ARMs, an FHA 5/1 ARM is insured by the government, which can give you some serious benefits.

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All About FHA Construction Loans

If you can’t find your dream home on the market, you might just want to build it yourself! But traditional construction loans can often be complex and expensive-- so what if you could turn to the trusty FHA to get a home construction loan that won’t completely empty your bank account? Well, it turns out you can.

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Savings Comparison: 15-Year Fixed-rate vs. 30-Year Fixed Rate Mortgage?

While a 30-year fixed-rate mortgage is currently the most popular home loan product in the United States, another type of home loan, the 15-year fixed-rate mortgage, is growing in popularity. A 15-year FRM allows borrowers to save thousands in interest, while having their home paid off significantly faster. Of course, borrowers will have to fork over more each month in payments, but that can be well worth it due to the long-term benefits of this kind of loan product.

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Can Student Loan Debt Prevent You from Getting a Mortgage?

Today, more than 44 million Americans have student loan debt, with an average balance upwards of $37,000. If you’re one of them, you may wonder if that student loan debt can prevent you from getting a home loan. The answer: it depends. While you might not think that your student loan payment affects your ability to pay a potential mortgage payment, your lender might -- and that could spell trouble if you’re trying to buy a home.

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What is the Home Affordable Modification Program (HAMP)?

The Home Affordable Modification Program, or HAMP, was a U.S. government program designed to help homeowners avoid foreclosure by reducing their monthly mortgage payments. The program, which began in 2009 and expired on December 31st, 2016, was specifically implemented after the 2008 subprime mortgage crisis, in order to help struggling homeowners keep their homes.

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HELOCs and Credit Scores: What You Need to Know

A home equity line of credit, otherwise known as a HELOC, is a revolving line of credit that’s secured by the equity in your home. While you might know that HELOCs can be a good way to pay off recurring expenses without taking on high-interest credit card debt, you might not know that they can also affect your credit score. Here’s what you need to know about HELOCs and credit scores.

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What Is Underwriting for a Home Loan?

Loan origination for mortgages is a slightly more complex process that involves a step known as underwriting. Mortgage underwriting is a process in which the lender determines the risk of offering a home loan to a borrower, based on certain parameters. It is up to an underwriter to make the final decision on whether or not to approve a mortgage.

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What is Loan Origination?

The term loan origination encompasses the process that begins when a borrower applies for a new loan, through the processing of the application by the lender, and ultimately ends with either an approval and disbursement of funds, or a declination. If the loan is approved, the loan origination date is the date at which the loan is funded.

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What is Pre-Foreclosure?

Pre-foreclosure refers to a specific period of time early in the foreclosure process. Pre-foreclosure is when the property is in the infant stages of being repossessed by the bank. This period begins when the lender files a default notice on the property, effectively letting the borrower know that legal action will be pursued by the lender should the borrower not submit the delinquent payment.

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Mortgage Points: What are they?

Mortgage Points, sometimes referred to as “discount points”, are fees paid to the lender directly at closing in order to reduce the interest rate and the monthly payment. The act is also known as “buying down the rate”.

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What is a HUD home?

HUD Homes are one- to four-unit residential properties acquired by the United States Department of Housing and Urban Development through foreclosures on FHA insured mortgages. Once HUD is in full ownership of the home, they put it up for sale in order to cover the loss on the foreclosure. HUD homes are available for purchase to anyone with the required cash or who qualifies for a home loan, including investors. Eligible one- to four-unit properties, as defined by HUD, are either a single-family, duplex, triplex, or fourplex.

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What are 97% LTV Loans?

If you want to buy a home but have very little cash, Fannie Mae and Freddie Mac might have a solution for you. A 97% LTV loan allows you to make a down payment that’s as little as 3% of your home’s purchase price. That means these homes have an even smaller down payment requirement than FHA loans, which typically require at least 3.5% down.

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What Is a Rate Lock?

If you like the way interest rates are looking right now, you might want to consider a rate lock. A mortgage rate lock is a guarantee that your lender will give you a certain interest rate on your home loan, as long as your mortgage closes by an agreed-upon date. In addition to guaranteeing a specific interest rate, a rate lock can also “lock in” points, which are fees that you can pay to your lender upfront in order to obtain a reduced interest rate on your mortgage.

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What is a Payment Option ARM?

A payment option ARM is a kind of adjustable rate mortgage that provides a borrower with a variety of methods to pay off their loan each month. At first, borrowers will be required to make a specific payment based on a temporary, starting interest rate. After a certain period, they can switch to any other of the payment options, including a minimum payment, which often doesn’t cover the interest of the loan.

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What is Negative Amortization?

Most home loans are fully amortizing. This means that the borrower makes monthly payments of both interest and principal, typically, allowing the homeowner to build home equity over time. Despite that, some loans are negatively amortizing, meaning that the borrower is making payments that are actually less than the interest owed on the loan. This means that the principal owed on the loan increases over time -- which can often leave borrowers in a sticky position when it comes time to pay up.

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Can You Refinance a Balloon Mortgage?

Can you refinance a balloon mortgage? Thankfully, you can. And unless you’re simply rolling in dough, you may be forced to refinance. A balloon mortgage is a home loan with a short term, often 5 - 7 years, after which the rest of the loan is due in one large payment, called a balloon payment. Since most people don’t have this balloon payment sitting in a Swiss bank account somewhere, they usually either refinance the loan, convert the loan to a fixed-rate mortgage, or sell the home before the payment is due.

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How is Property Tax Calculated?

Other than paying your mortgage (and perhaps your utilities), property taxes can be one of the biggest expenses involved with your home. But how are property taxes calculated? Typically, property taxes are set by a specific percentage, often referred to as a multiplier. When multiplied by the assessed value of your home, this determines your annual tax bill.

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How Long Does It Take to Buy a House?

Maybe you’ve been scouring the web for home listings in your area, but how long does it actually take to buy a house once you’ve decided you’re ready? It’s an excellent question -- especially because the length of the home buying process can vary significantly. It all depends on the area you want to buy a home in, your eligibility, and several other variables.

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What is a 5-Year Balloon Payment?

When it comes to getting a traditional home loan, most home loans are fully amortized, meaning that each payment a borrower makes goes to paying off both the interest and the principal. At the end of the loan period, the entire loan is paid off. Some loans, like balloon loans, are not fully amortizing -- meaning that there is still money due at the end of the loan period. One kind of balloon loan, a five-year balloon loan, has a loan life of 5 years. At the end, the borrower must make a large payment (known as a balloon payment) in order to repay the mortgage.

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How Do Balloon Payments Work?

A balloon payment is a large payment due at the end of a balloon loan. A balloon loan is a short-term mortgage, often lasting between 5 and 7 years, but with a payment plan typically based on a 15 or 30-year mortgage. At the end of the mortgage, the borrower still owes the rest of the unpaid principal and is required to pay it as a lump sum. Since most borrowers can’t afford this, they typically either sell the home or refinance the balloon loan before the balloon payment is due.

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Loan Estimate and Closing Disclosure Forms

Any time a potential borrower applies for a home loan in the U.S., the lender is legally obligated to send them a Loan Estimate within three business days of their application. A Loan Estimate can provide you with a variety of important information about the mortgage you’re interested in, including an estimate of the interest rate you’ll be charged, an estimate of your monthly payments, and an approximation of the closing costs you’ll face. And, within a minimum of three business days before a mortgage closes, a lender is legally obligated to give the borrower a Closing Disclosure form. This explains the actual, real terms of the mortgage.

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How Do You Prepare to Buy A Home?

Buying a home can be one of the biggest financial decisions you’ll ever make-- so how do you make sure you’re ready to make the leap? First, you need to make a plan: that means figuring out how to get your finances in order, examining your potential budget, and setting a timetable for home ownership. Keep in mind that home buying process can be a rough ride-- or easy sailing, and a lot of that depends on how much preparation you do.

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What is an interest only loan?

An interest-only loan is a mortgage in which a borrower only pays the interest (not the principal) on their loan for a set period of time, usually between 5 and 10 years. Then, the borrower will either begin paying down the principal, make a lump sum payment, or sell the house.

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How long does it take to get approved for a mortgage loan?

It takes between 30 days and a few months to get approved for a mortgage loan. There are three steps to this process, but only the final two are required: prequalification, preapproval, and final mortgage approval.

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What do you need to qualify for a conventional loan?

Qualifying for a conventional loan varies by lender. Many different factors come in to play, such as credit score, employment history, debt to income ratio, how much you are willing to spend on a down payment, and even the amount you are trying to borrow.

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What is the best type of mortgage for me?

As a future homeowner, choosing the best mortgage for you is like choosing the best career path: there are tons of options, but only a handful that you’ll qualify for, and even fewer that will really make you happy. The good news is that by asking yourself which mortgage is best for you, you’re already thinking like a savvy consumer -- you recognize that you have a choice between many different mortgage products, and it’s just a matter of narrowing them down.

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What Is the Difference Between a Conventional Loan and an FHA Loan?

A conventional home loan and an FHA loan are both mortgage products that make it possible for home buyers to finance the purchase of a house. While they both help prospective home buyers to get the funding they need to buy a house, they have very different qualities, requirements, and terms.

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What is Property Tax?

Homeownership can be an expensive venture. A mortgage is easily one of the largest investments the average person makes in their lifetime, but it isn’t the only cost of owning a home. It turns out, paying back the principal and interest on a home loan is only the tip of the iceberg. Property tax is another cost of homeownership that is not often talked about, yet it is a fee you will need to pay long after your home loan is paid in full. So what is property tax?

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PITI: Principal, Interest, Taxes and Insurance In regards to Home Loans

Pronounced the same as pity, the acronym PITI is a common term when dealing with home loans. The letters in PITI stand for principal, interest, taxes, and insurance. The term, however is typically used as a blanket term that covers the monthly sum of the total debt service (principal and interest), homeowners insurance, property taxes, mortgage insurance, and homeowners association fees.

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What is a Growing Equity Loan?

A growing equity loan is a type of mortgage with a fixed rate where the amount paid monthly is increased over time in accordance with an agreed-upon pay schedule. This translates to more money applied to the principal of the loan, shortening its life and accruing less interest on the loan while increasing the equity in the home. Since the growing equity loan initial payment amount is higher than the monthly amount required to pay off the loan over time, the payments ensure that there would never be negative amortization of the loan.

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What Is the Mortgage Credit Certificate?

A Mortgage Credit Certificate (referred to as the MCC) is a federal tax credit that allows first-time home buyers to save money each year by receiving a conversion of a percentage of the annual interest paid on their mortgage into a dollar a tax credit. This program was created to assist first-time home buyers to qualify for a home loan by decreasing their tax responsibility. Typically this program is for low- to moderate-income families.

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What is the NHF Grant?

The grant, dispersed through NHF-approved lenders, is meant to assist homebuyers with down payments and/or closing costs that the home loan agreement may accrue. The NHF DPA Grant allows homeowners to build equity faster, and carry less of a financial burden by avoiding secondary mortgage options that are usually offered to cover the same costs, and involve pesky property liens.

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What is the Prepayment Penalty on a Mortgage?

There are clauses in mortgage contracts that stipulate penalties for repaying the loan too fast. That's right, you could get charged extra for paying back what you owe ahead of schedule. This can include paying off the loan through refinancing, or selling the home. Of course, the fee charged must clearly be stated in the loan agreement, as well as the period of time that prepayment fees may be applied. The details of the clause vary by lender, and not all mortgage agreements have prepayment penalty clauses.

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What Does a Mortgage Broker Do for You?

Mortgage brokers act as intermediaries whose job is to help connect buyers with investors and banks. Essentially, they collect your information and shop around for relevant mortgage options based on the information they collect from you. Mortgage brokers take care of all of the dirty work, so you don’t have to deal with the stress of finding lenders, getting quotes, and sitting in those highly uncomfortable waiting areas that most banks have.

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What Is a Floating Rate Loan?

A floating interest rate is also known as an adjustable or variable interest rate. The name comes from the fluidity of the interest rate that borrowers must contend with, as the interest percentage fluctuates throughout the life of the loan (for hybrid ARMs, the rate fluctuates after the introductory period ends). The interest rate is affected by the market’s margins or mortgage index.

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What is an FHA 245 Mortgage Loan?

Under section 245 of the FHA home loan program, home buyers with low income who expect their monthly earnings to increase may be eligible for a growing equity home loan. These home loans are designed to cushion the upfront costs for home buyers that may not be able to afford them. This is especially well-suited for first-time home buyers.

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Can you refinance a VA loan to a conventional loan?

If you have a VA loan on your current home, you can refinance it into a conventional loan-- but it might only make sense in a few, very particular situations. Since conventional loans typically have higher interest rates and charge monthly private mortgage insurance (PMI) premiums, you probably wouldn’t want to refinance your VA loan just to save money on your mortgage payments.

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Can you refinance a VA home loan?

If you have a VA loan, can you refinance it? The answer is a resounding yes. There are several reasons why a borrower might want to refinance their VA loan, including trying to get a lower interest rate, increasing or decreasing the term of their mortgage, and tapping the equity in their home in order to get some cash.

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Can you do a cash out refinance on a VA loan?

Unlike typical cash out refinancing, a VA cash out loan actually allows you to take out cash with a 100% loan-to-value ratio (LTV). That means you can take out all of the equity in your home and convert it to cash. For example, if you have a $300,000 home and you owe $200,000 on it, you could get the entire remaining $100,000 in equity at closing (minus any closing costs.)

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What is a Balloon Home Loan?

A balloon loan is a type of mortgage that doesn’t fully amortize over the life of the loan, leaving a large “balloon payment” due at the end of the mortgage. Home loans with balloon payments have lower monthly payments in the years leading up when the balloon payment is due, but the size of many of these payments often makes it difficult (or impossible) for borrowers to pay them off. For example, many balloon loans have a term of 5 to 7 years (after which the balloon payment is due), while the regular, monthly mortgage payments are based off a 30-year loan term.

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What are Graduated Payment Mortgages?

Graduated payment mortgages (GPMs) are a type of home loan with payments that start smaller and get larger as time goes on. These kind of mortgages have a fixed interest rate, and the payments often increase between 7-12% each year until a maximum payment amount is reached, which will continue for the rest of the life of the loan. Most GPMs are insured by the Federal Housing Administration (FHA).

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Can You Refinance An Investment Property?

If you own an investment property, you might be wondering whether you can refinance it like your primary residence. The answer is yes-- but it might be somewhat more expensive to do. Since investment property home loans are considered high-risk than primary home loans, you may have to jump through a few hoops to get a lender to go through with your refinance.

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Cash-Out Refinance in Relation to Home Loans

A cash-out refinance allows you to take out a mortgage that’s larger than your current home loan-- and you get to keep the difference, in cash. For example, if you own a $400,000 house and owe $150,000 on the current mortgage, you have $250,000 in home equity. If you needed $40,000 to pay an expense like medical bills or a child’s college tuition, you could potentially take out a loan worth $290,000.

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When to Consider a Reverse Mortgage

Reverse mortgages can be a useful tool for seniors and retirees for a variety of reasons. Much like with social security, the value of a reverse mortgage increases the longer you can hold out. The benefit of aging is qualifying for more money from your reverse mortgage. After all, the maximum amount you are eligible to borrow uses your age as one of the determining factors.

You must be 62 years of age or older to be eligible for a reverse mortgage, but that doesn’t mean you should jump at the opportunity right after blowing out your birthday candles. Remember, it pays to wait.

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30-year FRM: 30-Year Fixed Rate Mortgages Explained

What’s it mean to have a 30-year mortgage? Simply put, your loan rate, plus the principal and interest payments, are secured for 30 full years. Because your loan amortizes, it will be paid in full on that last payment in year 30. You’ll never have to pay another cent to the mortgage company after that. Your insurance, homeowners’ association fees, and taxes may continue to slowly climb, but those are the only expenses you’ll have to worry about if you never refinance or take out a second mortgage.

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Prime Mortgage: A Complete Guide

The Prime Rate is often confused with the Federal Funds Rate, a rate at which banks lend money to one another and is determined by the Federal Reserve. This is what you hear about on the news when the Fed meets. It’s not the same as the Prime Rate, though the Prime Rate often follows the Federal Funds Rate.

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Where Can I Find a Mortgage Consultant?

Just like finding a mortgage broker or mortgage banker, finding a mortgage consultant can start online or in the fleshy real world. Check out your favorite bank first to see if they have a Certified Mortgage Consultant on staff. Many banks provide access to these professional consultations for free if you’re interested in a mortgage loan. If you want to look at mortgage brokers who have on-staff consultants, your Realtor may be your best resource. There are lots of small brokerages, so digging through their websites to see what job titles are in their offices can be real drudgery.

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What are the FHA Lending Rates?

The major banks in the United States use the Federal Funds Rate as a rule of thumb for establishing their own Prime Rates. Most of the time, any individual bank’s Prime Rate is the FFR plus about 300 basis points, or three percent. So, if the FFR is 1.5 percent, the FHA lending rate might be 5.5 percent. Or it could be 3 percent. This all depends on how badly those banks want to do business with FHA borrowers.


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What is a Mortgage Loan Broker?

There are two main sources of mortgage loans for the general public: banks and brokers. A bank loans its own money to a borrower, even if they end up selling that loan later. Brokers, on the other hand, help connect buyers with investors and banks by acting as an intermediary. A broker, then, is a person who brokers your mortgage loan.

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How Do I Get a Home Loan Quote?

You’ve been saving money for awhile and working on your credit, and you’re pretty sure you’re ready to buy a house. But how do you get the ball rolling? Don’t you need a home loan quote or something?

Although getting started with a mortgage is both stressful and filled with paperwork you never knew you’d need, it’s not impossible. Let’s walk through what’s required for a home loan quote, otherwise known as a mortgage pre-qualification.

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Can I Get a Home Equity Loan Online?

You can get almost anything online these days, from a cheeseburger to a cheetah (statue). But those are both objects, which are significantly easier to ship out than something intangible like a mortgage. Is it possible, in this modern age, to get a home equity loan online?

The answer, it would seem, is yes -- with some caveats.

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What is a 15-Year Home Equity Loan?

One of the benefits of owning a home is that as you pay your mortgage down, you begin to build equity. Equity is that tidy little sum that your home holds in trust for you, like a big wooden piggy bank, catching both paid-down principal and value from increasing real estate market values and inflation.

Instead of smashing through the pantry door to access it, though, you simply need to contact a banker about a home equity loan.

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What is a 40-Year Mortgage?

If you’ve been house hunting before, or even paying attention to some of the commercials for mortgage products, you’ve no doubt seen tons of references to the 30 year mortgage. This is the gold standard and default mortgage for most of the industry, but it’s not the only loan out there. In fact, it’s not even the longest term mortgage available.

There’s another loan that no one really talks about these days: the 40 year mortgage.

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What is a 30-Year Mortgage?

The 30-year mortgage, the steak and potatoes of the home lending world, is the most common type of mortgage you’ll run into as a home buyer. It’s so common that the Consumer Expenditure Survey provided by the Bureau of Labor Statistics determined that between 2004 and 2014, 61.49 percent of all mortgages were 30 year fixed rate mortgages. The second most common type, 15 year fixed rates, only made up 14.64 percent of the market.

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Mortgage Lenders for People with Bad Credit

Having less than perfect credit is not only inconvenient, it can become a huge roadblock to large purchases like a home. Since the damage from a few mistakes or an unfortunate accident can affect you for years, many people choose to try to find a lender that will work with their credit, rather than wait until they can buy more house with the same money using a more traditional mortgage loan.

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Where can I Find a Mortgage Lender?

Shopping for a house is only slightly less stressful than shopping for a loan to pay for said house. Even if you don’t realize it right now, you’re in a world full of choices, from local credit unions to big mortgage brokers. You can find a mortgage lender almost anywhere, you just have to start asking!

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Home Loans with Bad Credit and No Down Payment

When you were in school, it was horrifying to hear that something would be put on your “permanent record.” But, as it turned out, that wasn’t such a big deal. The only permanent record you have to fear as an adult is your credit file. A rocky start or even a prolonged hard spot can make it very difficult to buy a home of your own. When you couple that problem with having a small or nonexistent down payment, there aren’t a lot of options for purchase.

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First-Time Home Buyer Credits for Home Loans

When you’re thinking about buying your first home, there’s a lot of information to process and way too many financial decisions to make. For a lot of buyers, coming up with money for a down payment or to fund closing costs can be a huge roadblock. These buyers may give up their home search because it just seems insurmountable.

There’s good news, though! There are plenty of home buyer assistance programs out there that offer first time home buyers like you grant money, soft secondary mortgages, or other types of credits to soften the blow of trying to save up a chunk that substantial.

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What credit score do you need to qualify for a conventional home loan?

Everyone’s heard tales of how difficult it is to qualify for one of the most coveted products in the mortgage world: the conventional loan. Although there’s nothing particularly exciting about these mortgages, they do offer lower mortgage insurance rates and fewer fees at closing than other types of home loans.

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Are mortgage closing costs negotiable?

First and foremost, it is imperative to remember that you ultimately choose your mortgage lender, which means, there are choices – and the lender has the primary impact on the charges tacked on to your closing costs. This fact is advantageous to the buyer and should be used as a tool to compare estimated closing costs that lenders detail in the Loan Estimate.

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Are closing costs included in the mortgage loan?

Closing costs are the fees charged for services provided by your lender to assist in closing on a property. The fees are typically required to be paid upfront at closing; however, depending on your specific loan to value ratio, and the equity in your home or loan type, you may be able to roll the closing costs into the mortgage loan. 

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How Much Does it Cost to Close on a House?

Closing costs are the charges paid to purchase and settle on a property and are unrelated to reducing the principal loan amount. Usually, the amount paid for closing is between two and five percent of the price of the home, and typically the fees are listed on an estimate provided by the lender in response to your submitted application for the home loan.

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What Happens the Day of Closing on a House?

Closing is primarily for the buyer and seller to review and sign the documents that transfer the ownership of the home, and to record the way the buyer would like to take title of the home. The buyer will sign off on a promissory note confirming the agreed-upon amount owed for mortgage and other legal documents.

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What do You Need to Bring to Closing on a House?

The specific items required to bring to your home closing are typically disclosed by the title company or the loan officer. In general you are asked to bring the following:

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How Long Does it Take for a Closing on a House?

Your offer was accepted and you’ve now entered the closing period (dun dun dun!). The window of time it takes to close on a home may depend on many variables – I know, as if the process could actually get any easier. Generally speaking, the time frame for closing on a home should be noted on your sale contract to give you an idea and will typically take 30-45 days on a home that is financed.

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What is a Partially Amortizing Loan?

Many of us are familiar with amortization and fully amortizing loans. But not all amortized loans are fully amortizing. There are actually a subset of loans that are partially amortizing. These loans are not especially common in the home loan market, but they do exist.

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What is the Meaning of Amortization?

Amortization refers to a type of payment schedule that some home loans utilize. The payment schedule is made up of equal payment amounts that are stretched over a designated amount of time (the loan term). For the purpose of an amortization schedule, each payment is divided into two portions. There is a portion that is made up of interest (the cost of the loan), and a portion that is made up of principal (the value of the borrowed sum).

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Amortized Loans in Relation to Home Loans

Amortized home loans have been the mainstream payment method for mortgages for a long time. They were introduced to the housing market thanks to intervention from the Federal Housing Administration (FHA), which led to the formation of a fully amortizing 30-year fixed rate home loan.

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What is an Interest-Only Mortgage?

When most homeowners get a mortgage, they start paying both the interest and the principal immediately -- but they don’t always have to. One kind of home loan, called an interest-only mortgage, allows the buyer to put off paying any of the principal for a number of years while they save money and strengthen their financial position. But, just because you don’t have to pay principal doesn’t mean you can’t; many homebuyers just like to have an option that frees up more cash for their budget.

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What Credit Score Do You Need to Get a Home Equity Loan?

Can you get a home equity loan with a bad credit score? You’re hoping so, now. When you bought your house, the pink bathroom was cute and retro, but after living with it for years, you’re about ready to spray paint the whole thing just to get a break. But with bad credit, what are your options when it comes to renovating?

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Acceptable Credit Score for a Home Equity Loan

Home equity loans can help homeowners pay for big expenses without having to refinance their homes or take out a personal loan. Instead, the equity in your home acts like a piggy bank, allowing you to take out a separate loan for a specific purpose (or, in the case of a HELOC, establish a credit line) and repay it over a longer period of time than other types of credit generally allow. It’s an affordable option for many people, but there are guidelines for underwriting home equity loans, and credit scores are included in that mix.

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DTI: Debt to Income Ratio in Home Loans

DTI, or debt-to-income ratio, is a measurement that banks and other lenders use to compare an individual’s debt payments to their overall income. They usually use this as a way to determine someone’s predicted ability to repay future debts. You can calculate DTI by dividing your total monthly debt (recurring expenses only), by your gross monthly income.

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Finding Home Equity Loans with Bad Credit

When the going gets tough, sometimes, the tough get a home equity loan. There are always going to be times in life when you could use an injection of cash, whether that’s because you’re trying to breathe life into a startup, needing to update your kitchen, or you just got a little behind on bills. A home equity loan can be an excellent weapon in your life improvement war, but if your credit is on the poor side, it can make finding a home equity loan tricky.

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What Is Jumbo Adjustable Rate Mortgage Loan?

An ARM jumbo loan is an adjustable rate mortgage that exceeds the Fannie Mae and Freddie Mac loan-servicing limits. This amount, for most American counties, is $453,100. For more expensive areas, that limit can go as high as $679,650. Right now, ARM jumbo loans are becoming incredibly popular -- with statistics suggesting that around 75% of ARMs currently issued are actually for jumbo loans. Of that 75%, 47% of those home loans are for more than $1 million.

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Hybrid ARM: Hybrid Adjustable Rate Mortgages in Home Loans

A hybrid ARM is a mortgage that combines elements of a traditional fixed-rate mortgage and an adjustable-rate mortgage. To do this, a hybrid ARM has two parts, or stages: during the first part of the loan, the interest rate is fixed, meaning it doesn’t change. During the second part, the rate will change based on a specific market index. 

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FHA 7/1 ARM: FHA 7/1 Adjustable Rate Mortgage in Home Loans

An FHA 7/1 ARM is a kind of hybrid home loan that’s insured by the Federal Housing Administration (FHA). If you get a FHA 7/1 ARM, your interest rate will be fixed for the first seven years of the loan, and can then be adjusted afterward when the variable interest rate portion of the loan begins. Like other ARMs, FHA 7/1 ARM variable interest rates are based on a index rate -- which is usually the rate at which banks in a certain area lend money to each other.

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3/1 ARM: 3/1 Adjustable Rate Mortgage in Home Loans

A 3/1 ARM is an adjustable-rate mortgage in which the rate is fixed for the first three years of the loan. As a hybrid mortgage, it has elements of both a traditional fixed-rate mortgage and an adjustable (or variable) rate loan. As with pretty much all hybrid rate mortgages, the shorter the period of the fixed-rate part of the loan, the lower the initial interest rate. That’s the bank’s way of compensating you for the increased risk you’re taking on when the adjustable part of the mortgage kicks in.

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10/1 ARM: 10/1 Adjustable Rate Mortgage in Home Loans

A 10/1 ARM is one type of hybrid adjustable-rate mortgage. Much like other hybrid loans, a 10/1 ARM has a fixed period (in this case, 10 years) during which your interest rate won’t change. That makes it one of the safest types of hybrid mortgages, as it gives you a lot of time to figure out your financial situation and determine whether you want to continue owning your home after the adjustable-rate period begins.

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7/6 ARM: 7/6 Adjustable Rate Mortgage in Home Loans

A 7/6 ARM is a hybrid adjustable-rate mortgage with a fixed-rate period of seven years. Unlike its cousin, the 7/1 ARM (which has one-year adjustment periods), the interest rates on a 7/6 ARM can be adjusted once every 6 months during the variable-interest part of the loan.

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7/1 ARM: 7/1 Adjustable Rate Mortgage in Home Loans

A 7/1 ARM is a kind of adjustable rate mortgage -- in this case, one that has a fixed interest rate for seven years. After that, the interest rate can change, usually depending on changes in the market interest rate. Like its cousins 3/1 ARMs and 10/1 ARMs, a 7/1 ARM is considered a hybrid mortgage because it has both a fixed-rate and a variable-rate interest period.

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5/6 ARM: 5/6 Adjustable Rate Mortgage in Home Loans

A 5/6 ARM is a kind of hybrid adjustable-rate mortgage in which the fixed interest rate period of the mortgage lasts for 5 years. After the fixed-rate period is over, the variable-interest rate part of the mortgage begins.

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3/6 ARM: 3/6 Adjustable Rate Mortgage in Home Loans

A 3/6 ARM is a type of hybrid adjustable rate mortgage in which the initial, fixed rate portion of the loan lasts 3 years, after which the adjustable-rate part of the mortgage begins.

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What are the Requirements for an FHA Loan?

In basic terms, an FHA loan is a government-insured mortgage. Due to the fact that these loans are being offered by the government, instead of a for-profit company, FHA loans have a variety of benefits that can make it easier for you to buy your dream home without breaking a big sweat.

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How do you calculate mortgage insurance?

Mortgage insurance is a type of insurance policy that covers the lender in case the borrower defaults on the loan. It is usually required in the form of private mortgage insurance (PMI) when borrowers don’t make a down payment of at least 20% on most conventional loans. For FHA loans, it’s called a mandatory mortgage insurance premium (MIP).  If you fit into either of those categories, then mortgage insurance is something you’ll have to deal with.

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HELOC: Home Equity Line Of Credit in Home Loans

A Home Equity Line of Credit, also known as a HELOC, allows you to use the value you’ve built up in your home in order to secure a revolving line of credit. Individuals and families often use a HELOC to pay for serious expenses (like healthcare or college tuition) or to consolidate high-interest loans (like credit card debt).

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Home Equity Loan Terms

Home equity loans, which are sometimes known as second mortgages, allow homeowners to take out a loan against the equity in their home. Home equity loans are divided into two types. The first is a home equity loan, which is a traditional, fixed rate loan. The other is a home equity line of credit (HELOC). Since one of our other FAQs addresses the details about HELOCs, in this one, we’ll stick to talking about regular home equity loans.

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Home Equity Loans (HEL) vs. Home Equity Line of Credit (HELOC)

Home equity loans (HELs) and home equity lines of credit (HELOCs) are both ways that you can use the value in your home to pay bills, medical expenses, or to finance home improvements and renovations. While home equity loans provide a large, lump-sum payment usually in the form of a check, a HELOC simply provides access to credit based on the equity in your home. As a revolving line of credit, a HELOC functions more closely to a credit card than a traditional mortgage -- and many HELOCs actually come with one.

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How Do You Get a Home Loan?

Getting a home, and the mortgage that comes with it could be the most important financial transaction you ever make. But how do you go about getting a home loan?

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What is Home Equity?

In basic terms, home equity is the amount of financial value that a homeowner has built up in their home. To discover how much home equity you have, take your property’s market value and subtract your outstanding loan balance. As you pay off your mortgage (or your home’s value increases), the amount of home equity you have increases.

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What Is a Variable Interest Rate on a Home Loan?

Much like vanilla and chocolate ice cream, home mortgage loans come in two main flavors: adjustable rate home loans, and fixed rate home loans. While the interest rate on a fixed rate loan stays the same throughout the entire life of the loan, an adjustable (or variable) interest rate loan can go up or down, depending on market conditions.

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Reverse Mortgages: How Much Money Do You Get (and When Do You Get It)?

The amount of money you get from a reverse mortgage is dependent on the type of loan and the method you choose to receive your payments. There are three types of reverse mortgages: Single Purpose, Proprietary, and the Home Equity Conversion Mortgage (HECM).

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How Much of a Down Payment Is Required for a Jumbo Loan?

A 20% down payment (the standard for conventional loans) is often required for a jumbo loan -- but this isn’t always the case, and some borrowers may be able to obtain loans with down payments as low as 10-15%.

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What Does It Take to Qualify for a Jumbo Loan?

While things have loosened up since the first few years after the crisis, requirements are still a bit stricter, and most potential jumbo loan borrowers should expect to make at least a 15% down payment. They should also carefully record and document their income. Plus, they may have to be okay with getting an adjustable rate loan, and making sure that their monthly payment does not exceed 38% of their income before taxes. 

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What Is Considered a Jumbo Loan in Each State?

A jumbo home loan is a loan that exceeds a specific amount, called the conforming loan limit. The conforming loan limit is actually calculated by county -- not by state, so depending on where exactly you live, you could face a different conforming loan limit. For most U.S. counties, the limit is set at $453,100, a nice increase from 2017’s $424,100.

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What is an FHA Jumbo Loan?

Just like private lenders, the Federal Housing Administration offers FHA jumbo loans for qualified borrowers. Much like regular FHA loans, FHA jumbo loans usually have significantly lower down payment requirements than their private counterparts.

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Is It Worth It to Take on a Loan with PMI?

Taking on a loan with PMI can often increase the amount of options you have, meaning that you may be able to take on a larger or riskier loan than you would regularly qualify for. Often, this means you can buy a home earlier, and start building up its equity without having to save up the full 20% of the home’s purchase price before doing so.

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What is Private Mortgage Insurance (PMI)?

If you take out a conventional mortgage loan with a downpayment of less than 20% of the home’s purchase price, you may be required to purchase private mortgage insurance (PMI). Private mortgage insurance is a type of coverage that protects the lender in the event that the borrower defaults on a loan.

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LTV: Loan to Value Ratio in Regards to Home Loans?

A loan-to-value (LTV) ratio is the ratio of a loan amount to the value of the asset it’s being used to purchase. Lenders often refer to a borrower’s LTV in order to assess the risk involved in entering a loan agreement with that borrower. The higher your LTV, the riskier the loan is for the lender. Generally speaking, LTVs of 80% and up are considered high. 

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How Do You Get Out of a Reverse Mortgage? Can You Sell Your House?

If you have a reverse mortgage, you can sell your home and repay the loan at any time without penalty. Upon selling the home, the loan must be repaid in full and the borrower can pocket whatever equity is left, assuming that all other loans, liens and associated fees with the sale of the home are paid.

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What Are the Closing Costs on a Reverse Mortgage?

The closing costs for a reverse mortgage are dependent on the type of reverse mortgage loan chosen, the lender chosen and the money taken out upfront. Here, find a list and brief explanation of typical fees at closing.

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What Is the Downside of a Reverse Mortgage?

Depending on your personal circumstances, there may be some downsides to a reverse mortgage. It's important to fully understand the terms of your reverse mortgage loan before closing, so here are the drawbacks of this type of home loan.

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How Much Does It Cost to Refinance Your Mortgage?

Your mortgage is great, but sometimes you wish you had something a little bit different. Maybe you’d like one that’s a little shorter, or one that had a little bit less interest or perhaps it’s not even about the mortgage itself, you just want to cash out your home’s equity. Before you tell your current mortgage that it’s not it, it’s you, it’s smart to figure out how much it will cost to get into a different loan. 

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Is Mortgage Insurance Tax-Deductible?

In 2006 to 2016 homeowners were in fact able to deduct mortgage insurance premiums per the Protecting Americans from Tax Hikes (PATH) Act. Congress must directly approve this deduction every year following 2016.

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How Does a Reverse Mortgage Work?

A reverse mortgage is when a lender takes the equity in your home and converts it into payments to you. Equity in your home is defined as the difference between what your home is valued and the debt owed on the home.

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What Is a Jumbo Home Loan or Jumbo Mortgage?

A jumbo home loan, or jumbo mortgage, is a type of non-conforming conventional loan. This means it’s a loan that isn’t backed by FHA, it has nothing to do with VA or USDA, and neither Fannie Mae nor Freddie Mac will buy it. It makes a person wonder why a bank would even deal in these, but the truth is that they’re reasonably low risk and very high profit from the lender's perspective. 

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Can I Refinance from a 30-Year Mortgage to a 15-Year Mortgage?

When it comes to getting a mortgage refinanced, you generally have plenty of options. Do you want an FHA or a conventional? Would you prefer a cash out refinance or do you just want to get a change in your terms? Do you want fries with that?One of the more common questions people have when they’re considering a refinance is if they can magically change their 30 year mortgage into a 15. And the answer, from pretty much every banker ever, is a resounding yes -- with some qualifiers.

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How Many Times Can You Refinance Your Mortgage?

In theory, you can refinance as many times as you want. Some lenders will want to see that you’ll make the payments first, so they’ll require a short period between mortgages to establish that you are actually capable of paying (six months is a common seasoning period). Others will charge you a penalty for paying your existing mortgage off before it was due.

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Is There a Difference Between PMI and MIP?

While private mortgage insurance (PMI) generally exists to protect lenders for all types of home loans, MIP specifically protects FHA government-backed loans.A MIP (Mortgage Insurance Premium) protects the lender regardless of the amount of the down payment.

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How Can I Avoid Paying Private Mortgage Insurance (PMI)?

There are a few options when looking to avoid paying private mortgage insurance on your conventional loan. Private mortgage insurance is tacked on to a conventional loan when less than 20% down payment is paid.

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What Happens to the Equity in Your Home When You Refinance?

When you’re considering your first refinance mortgage, you’re full of questions. How much will this cost me? Is it really the right move? What even happens to my equity during this transaction? The good news is that it probably won’t cost as much as you think, but the equity in your home is affected by the type of refinance mortgage you choose.

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Can I Refinance My Home with an FHA Loan?

No matter what kind of mortgage loan you have on your home now, if you’re considering refinancing it, the whole world’s your oyster. That mortgage can usually be refinanced into anything else, including the popular FHA program. Before you jump into an FHA refinance, however, let’s look at what it actually involves. There may be additional fees involved that aren’t part of your current financial picture.

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What Are the Pros and Cons of Refinancing Your Home?

Buying your house was definitely the right choice, but now that you’ve been paying on your loan a little while, you’re starting to wonder if you should take advantage of some of the mortgage rates that are being offered to homeowners willing to refinance.  After all, you, too, would enjoy a lower monthly payment and some cash in your pocket. But there has to be some sort of catch, right? 

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What Is the Federal Housing Administration (FHA)?

The Federal Housing Administration (FHA) is a branch of the U.S. Department of Housing and Urban Development (HUD) that insures private loans for buying and repairing homes. The FHA insures loans made by private lenders to borrowers who’d normally have a hard time getting favorable loans.

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Who Can Qualify for an FHA Loan?

FHA loans are federally backed home loans that are meant to encourage home ownership. They are really accessible because they are federally backed, so lenders do not mind taking on the risk. The FHA has guidelines on who may qualify for an FHA loan, but you should be aware that lenders often add their own standards.

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What is a Good Down Payment on a House?

A good down payment on a house largely depends on your circumstances and the loan you've applied for. Based on loan requirements and your risk profile the lender will determine the minimum down payment for the loan. In other words, it may not be up to you how much you pay -- though generally, a higher down payment will equate to lower fees and better loan terms.

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When Should You Refinance Your Mortgage?

Having a mortgage eventually leads to the inevitable question, “When should I refinance my mortgage?” The good news is that you don’t have to refinance your mortgage ever, as long as you like the terms and your payment is doable. However, there are certain situations that are pretty good reasons to go through the process.

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Definition of a Mortgage Insurance Premium (MIP)

What is a mortgage insurance premium? A mortgage insurance premium (MIP) is an insurance plan implemented in FHA loans regardless of the down payment amount you put down on the loan. The MIP is paid directly to the Federal Housing Administration (FHA) instead of a private company as Private Mortgage Insurance (PMI) is.

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Is Private Mortgage Insurance (PMI) Required?

Lenders want to know they'll get their money back when they lend it out. In the event that a borrower can’t produce at least 20% down for a traditional loan, lenders will impose mortgage insurance on the borrower in order to protect the lender in default. Lenders turn to private insurance providers for this, hence the name -- Private Mortgage Insurance (PMI). 

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How Does Mortgage Refinancing Work?

You’ve had your mortgage a few years now and have already built up some equity. Lately, you’ve been thinking it might be time to consider refinancing. You’re really hoping you’ll get a better rate, maybe shed that mortgage insurance -- the whole thing sounds pretty awesome overall. But how does mortgage refinancing work?

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The Beginning of the Home Buying Process

Before making a decision on the house to buy you have to take a practical and introspective look at your financial standing, your budget, and your aspirations. Before the work of looking for a loan and the house to buy begins, it is important that you have an understanding of your needs and means.

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What Kind of Credit Score Do You Need to Get a Home Loan?

Your credit score is an important measure of your financial stability and health. It's at the core of any loan or line of credit, including home loans. A credit score not only determines your loan approval but the terms of the loan, too.

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Can You Buy a House with a Home Equity Loan?

A home equity loan can be a source of funding for your next home. Although you are unlikely to be able to buy a home outright with a home equity loan, you may be able to put a substantial down payment on a second home.

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Which is Better: A Fixed Rate or a Variable Rate Mortgage?

Choosing between a fixed rate and variable rate mortgage largely depends on your needs and plans for the future. Each has its own benefits and drawbacks, depending on your financial situation.

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How is a Mortgage Payment Calculated?

A mortgage payment is what you will pay in total to service, or pay off, the loan. It primarily consists of both principal and interest payments, but may include closing costs or mortgage insurance rolled into the loan as well.

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How Do You Qualify for a Home Loan?

Loan qualification depends on which loan you are applying for. There are a variety of loans offered in the market, including conventional loans,  jumbo loans, USDA loans, VA loans and FHA loans. Each type of loan has its own advantages and disadvantages. Choosing the best loan for you will largely depend on your own circumstances and future plans. 

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What is a Home Loan?

A home loan or “mortgage” is a type of loan that uses property or real estate as security. Homebuyers exchange funds with a lender, who operates on the promise that the debt will be repaid before a designated time and at an agreed-upon cost (interest rate).

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The Different Types of Mortgages

There are many different mortgage options for homebuyers to choose from. For starters, mortgages are usually categorized as either a fixed rate or adjustable rate. Then there are various loan programs to choose from including FHA Loans, VA Loans, USDA Loans, or Conventional Loans

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Criteria for First-Time Home Buyers for Home Loans

To help first-time home buyers, federal, state and local housing agencies have programs to make the home buying process easier and cheaper. The agencies and lenders in your area can offer you various FHA loans, VA loans, down payment grants, and other programs to make it easier to qualify and buy your first home. The definition of a first time home buyer

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Variable-Rate Mortgage

A variable-rate mortgage is a loan with a variable (changing) interest rate. It’s also known as an adjustable-rate mortgage (ARM) or a tracker mortgage. The interest rate varies according to an underlying index like LIBOR, treasury bills, or the federal funds rates.

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What is a Fixed-Rate Mortgage?

A fixed-rate mortgage is the simplest and most common mortgage for homebuyers. It simply has a fixed interest rate, that does not go up or down, throughout its lifespan. Since it never changes, a fixed-interest-rate mortgage isn't associated with indexes, margins, floors, or caps. As the interest rate is fixed, the monthly principal and interest payment are the same throughout the mortgage’s lifespan.

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How to Calculate a Fixed Mortgage Rate

Calculating a fixed mortgage rate is relatively simple: You take the annual figure and turn it into a monthly figure. To calculate the monthly fixed mortgage rate, just do the following steps:

  1. change the annual rate to a decimal number by dividing it by 100;

  2. take the resulting decimal figure and further divide it by 12; and

  3. voila!, You have the monthly fixed mortgage rate.

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Home Loans for First-Time Home Buyers

Buying your first home is a challenging but important first step in securing your future. There are many financial products available on the market for first-time homebuyers. Each product has its target market, so it’s important to understand your needs so as to match them to the products on offer.

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Home Loan Down Payment Assistance Programs

Yes. These programs assist with providing funds for down payment, closing costs, prepaids, principal reductions, and/or repairs. How much you get depends on whether you qualify, the area median income, and home prices.

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How FHA Home Loans Work

A Federal Housing Administration (FHA) loan is a loan with less stringent qualifications and low down payments. It’s part of the U.S. Department of Housing and Urban Development’s programs to help first-time homebuyers buy a home.

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What is a Home Equity Loan?

A home equity loan (HEL) uses the part of the home that you own as security for a loan. For example,  if your home is valued at $300,000 and you have a $200,000 mortgage outstanding,  then you can use the $100,000 ($300,000 --$200,000) as collateral for a loan. Home equity loans are also known as equity loans and second mortgage loans.  

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First-Time Home Buyer Down Payments

Regular loans usually require a 20% down payment on a home. First-time homebuyer programs like the FHA loan reduce this to as low as 3.5%.

The amount can vary according to the program on offer and to what extent you qualify for the grant.

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Applying for a Federal Housing Administration (FHA) loan

Like with most housing assistance programs, you can start at your local housing agency. You’ll be provided with a breakdown of the FHA loan-approved lenders in your area, whom you can apply to. If you qualify for the program, simply apply to these lenders. If you get more than one quote, you’re more likely to find a better deal.

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Amortized Loans with Regard to Home Loans

An amortized loan is a debt that’s paid off over time in equal installments. Each payment pays off the interest and the principal.

In the beginning, the installments prioritize paying off the interest and a portion of the principal. Over time, the interest will become a small part of the installment, as the principal will have become a larger component. 

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How to Get a Home Loan

Financing your home is a large investment, which is why most people need long-term loans to buy a home. Before searching for a home to buy or financing options, first get a good idea of your financial standing. Buying a home is a huge financial obligation, so ensure that:

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Variable Interest Rates in Relation to Home Loans

A variable interest rate is one that can go up or down based on an index. A variable interest comprises an index rate and a margin rate.

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FHA 7 year ARM: Federal Housing Administration 7 Year Adjustable Rate Mortgage

The FHA 7 year ARM is a hybrid mortgage that is guaranteed by the Federal Housing Authority. It is deemed a “hybrid” mortgage because it has a fixed interest rate in the beginning for 7 years and then switches to a variable interest rate. As with all adjustable rate mortgages (ARMS) the rate is composed of an index rate and the lender's margins.

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7/1 ARM: 7/1 Adjustable Rate Mortgage

The 7/1 ARM is a hybrid mortgage, it comprises years with a fixed interest rate followed by years with a variable rate. The “7” is the number of years with a fixed interest rate, the “1” represents the annual adjustment period.

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Home Equity Loans (HEL) vs Home Equity Line of Credit (HELOC)

The interest on both HELs and HELOCs are lower than credit card rates as they are secured by your home, which makes them an attractive source of funds. The main differences between the home equity loans and home equity lines of credit are:

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HELOC: Home Equity Line Of Credit

A home equity line of credit (HELOC), is a pool of credit you can draw from using your home equity as collateral. Your home equity is the difference between the value of your home and the mortgage balance. So if your home is valued at $250,000 and your mortgage is $150,000 then your home equity is at $100,000 ($250,000-$150,000).  

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Home Equity in Relation to Home Loans

Home equity is value built up from paying down the mortgage of a home while it appreciates in price. It is the difference between the market price of a home and the debt attached to it like a mortgage. Home equity is the portion of your home that you actually own.

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Qualifications for Home Equity Loans

A home equity loan is a second mortgage. It uses the equity in your home as security for a loan. The low-interest rate and substantial loan amount make it an attractive source of funding for various needs. To qualify for a home equity loan generally requires you to have the following:

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Cash Out Refinance in Relation to Home Loans

A cash out refinance uses your home equity to issue a new loan to replace the old one and give you a cash payout. Say your home is valued at $400,000 and your mortgage stands at $250,000 which means that your home equity is $150,000 ($400,000-$250,000). Using your home equity as collateral you can take out a new loan of $320,000, which will cover the $250,000 mortgage and get a cash payment of $70,000 ($320,000-$250,000).

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Finding Home Equity Loans With Bad Credit

Home equity loans are more reliant on your home equity as security rather than on your credit score. So if you have equity in your home and bad credit you may still qualify for a home equity loan.You can get home equity loans from a vast number of lenders in the market.

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Accessing Your Home Equity

There are several ways you can access your home equity such as selling your home, doing a cash out refinance, taking out a home equity loan, or opening a home equity line of credit. Turn the equity in your home into a source of cash to use as you see fit.

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Uses For A Home Equity Loan

Whenever a large expense comes up, home equity loans are a very tempting source of funds. You can pretty much use a home equity loan for whatever you like, which is what can make it perilous for people with no control over their spending habits.

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Calculating the Value of a Home Equity Line of Credit (HELOC)

The value of a home equity line of credit (HELOC) is determined by the home equity and the lenders acceptable level of combined loan to value (CLTV). The home equity has to be large enough to cover the requested loan, and the CLTV has to be at a sustainable level

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Buying A Home With No Down Payment

Yes, it is possible to buy a home with no money down or down payment. There are a variety of loans in the market that cater to home buyers with different needs. To qualify for a no money down home loan you will need to have a good credit score and credit record

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Adjustable Rate Mortgages

An adjustable-rate mortgage (ARM), also known as a variable-rate mortgage or tracker mortgage, is a loan with an interest rate that can go either up or down depending on market conditions. These market conditions are based on an underlying index like the federal funds rate, treasury bills, or LIBOR.

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A Complete Guide to Balloon Mortgages

Balloon loans are usually short-term and only a small portion of the principal will be paid by the end of the term. They look something like this, a $400,000 loan is to be amortized over 30 years but due in 5 years. The borrower will make payments like they are on a 30-year amortized payment plan, but the loan will be due in 5 years. The amortized payments will pay for mostly interest and a small portion of the principle, the balloon payment is likely to be close to the principal.

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Conventional Home Loans

A conventional loan is a loan that is not insured or guaranteed by the government. A conventional loan may be a fixed rate mortgage, variable rate mortgage or a hybrid ARM. Conventional loans are either conforming or non-conforming loans.

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Applying for a First Time Home Buyers Grant

First time home buyer grants are issued by federal, state and local housing agencies to help borrowers purchase a home easily. The programs are designed to lower the hurdles of acquiring a home,  by paying the down payment.

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FHA 5/1 ARM: Federal Housing Administration 5/1 Adjustable Rate Mortgage

A 5-year ARM FHA mortgage is a loan with a fixed and variable interest rate that is guaranteed by the Federal Housing Authority (FHA). The loan is a hybrid adjustable-rate mortgage (ARM): it starts out with a fixed interest rate for the first five years, then the rate becomes variable. The loan comes with a guarantee to the lender that the FHA will pay it off if the borrower fails to pay.

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How Payments On A Fixed Rate Mortgage Can Increase

A fixed rate mortgage has a fixed term, fixed rate and is popular for its simplicity. The interest rate is fixed but the payment amount may change over time. This is because the payment amount includes interest and principal payment (which don’t change) along with taxes and insurance payments both of which may change

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