The Finance Blogger

Our last reader sent us a post about Home Equity Loans and whether they were taking the right approach to applying for a Home Equity Loan and if in fact they can be approved for loan.

In summary, they both have full time jobs which they have been at for over five years. Combined they make $3500 a month. They claim to have an excellent credit rating, zero balance on their credit cards. They also have a small car loan which they make monthly payments on. This auto loan has less than two years to run before the car is fully paid for. They also have $20,000 to put towards a down payment on the home they wish to purchase. Which is a good number depending on the value of the home they wish to purchase.

Home Equity Loans Strategy

The best part of their strategy in terms of purchasing a home is that they do not want to overextend themselves. They lived through the economic downturn in 2008 and spent 6 months on layoff from their jobs as the economy and the auto industry went downhill. They really want to place themselves in a situation were they will not lose their home under any circumstances.

The other key fact is that they recognize that homes in almost every state are at or near the bottom of their value and this is probably one of the best times to make a purchase. They have positioned themselves to take advantage of the current market and are ready to make a purchase.

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We received a question about home equity loans in Akron, Ohio from a reader and will answer his questions in our next post about Home Equity Loans. This client has provided a good deal of information, but we are not sure what their question really is. Perhaps they are asking how to avoid a repeat of the housing disaster in 2008 were many people lost their homes and a great deal of money. Many not only lost their homes, they also lost all of the contents of the homes, including furniture and any clothing they had left in the place.

Question to Debt Counselor about Home Equity Loan::

We live in Akron , Ohio and are planning to purchase a home in the near future. Housing prices are at the lowest we have ever seen and we think that it is time to purchase a home. We have saved up a down payment for the purchase and have steady jobs that pay well. We both work in the auto industry which as you know has rebounded significantly in the last two years. This is the best time for us to purchase a home since we also want to start a family.

Do you currently have a mortgage? :: No, we currently rent a home

Home/Mortgage Loan Amount :: the house we plan to purchase is ;listed at $150,000 and we have a down payment of $20,000 so we need a home equity loan of $130,000

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Our last question came from a reader in Lorain , Ohio. They are trying to understand why they cannot get pre-approved  for Home Equity Mortgage Loans. The information they provided can be summarized as follows – income is $65,000, mortgage equity request – $150,000, credit card debt is $0 and they are in stable jobs.  They currently rent and have 10 credit cards between them. they also have $10,000 as a down payment. They would like to know what the best plan would be for them, given this situation.

 Home Equity Mortgage Loans

To begin with a $150,000 over a 25 year period at prevailing interest rates is going to cost approximately $800 per month. Adding property taxes to this number assuming $2400 a year for taxes brings the monthly payment up to $1000 / month. This is of course an estimate since the actual tax amount will depend on the home that is purchased.  This level of monthly payment places then at the high end of what is normally considered by many banks.  The ratio of principal , interest and taxes should not exceed 40% and most banks are looking for a lower number.

With only $10,000 to use as a down payment, they are looking for what is called a high ratio  mortgage which usually attracts a higher interest rate driving their monthly costs even higher. Typically lenders are looking for a minimum of 15% of the cost of the home as a down payment. they should have closer to $23,000 as a down payment to meet the minimum down payment criteria.

They both hold stable jobs and have been at their jobs for a period of 5 years which is definitely in their favor.

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We received a question about  Home Equity Mortgage Loans from a reader and will answer his questions in our next post about  Home Equity Mortgage Loans. Many consumers have questions like these and we try to answer them as best we can. Everyone’s situation is a bit different. As a result we always encourage readers to obtain independent advice about their specific situation. We suggest that you talk to several people to get the best answer. Then make up your mind as to what you should do.

Question to Debt Counselor re – Home Equity Mortgage Loans::

We are looking for a  Home Equity Mortgage Loan and live in Lorain , Ohio. My wife and I have been married for 3 years and we both have jobs that give us a combined income of $65,000. We have been at the same employers for the past 5 years as well and have good stable jobs.

As far as we know our credit rating is good, yet we cannot seemed to get pre-approved for a  Home Equity Mortgage Loan for a home we want to purchase. Can you help us understand what our problem is, since the loan managers will not give us any information.

Do you currently have a mortgage? :: No, we currently rent

Home/Mortgage Loan Amount :: $150,000

Other Loans, Including Credit Cards:: We have a zero balance on all of our credit cards. We have between us 10 different credit cards.

Are you employed and for how long:: yes, for 5 years

Your credit rating to be – excellent, fair, or bad? :: Excellent as far as we know

Gross Amount Per Paycheck :: $2500 every two weeks combined

Do you agree to have this information published online, without your PRIVATE information of course? :: yes

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Our latest question was about home equity loan refinancing. The reader wanted to understand how refinancing worked and other information such as costs and how much they could borrow. They have an excellent credit rating and the reader is self-employed. The equity they have in the home is approximately $90,000 and they have a current mortgage of $15,000. They are in a very good financial situation and great candidates for refinancing.

This reader appears to be a perfect candidate for a home equity loan refinancing package. They have good income levels, they have a great credit rating and they have lots of equity in their home. As long as they do not have other loans that eat up their monthly income levels they should be approved for a home equity loan refinancing package with no problems.

Most banks would be happy to do business with them, however as always the deals they offer will vary depending on their business plans and availability of funds to lend.

The first question they asked was how refinancing works.

Basically the bank will want to obtain a real estate value assessment to confirm the value of the home, ensure that the current mortgage is dis-chargeable and review the finances of the applicant. The clients  may need to provide evidence of income to support the increased mortgage payments.

The fees could include Read the rest of this entry »

We received a question about home equity loan refinancing from a reader and will answer his questions in our next post. This couple are trying to understand the process of how they can take advantage of the equity in their home to use to complete a number of renovations on their home. They have sufficient equity in their home to either increase their mortgage or add a line of credit that they can draw on as needed.  They want to know about appraisals, legal costs and any other costs as well. This is a common question that many homeowners have especially if they have been in their homes for some time and have paid a significant amount towards reducing the existing mortgage.

Question to Debt Counselor:: Hello, we have a question about home equity loan refinancing. We have a small mortgage balance left on our current mortgage and have approximately $90,000 in equity in our home. We would like to refinance the existing mortgage and use the funds to consolidate some debt and also complete a number of renovations on our home. Our question is ” what is the process to refinance your home and take advantage of the equity in our home. Do we need to have our home appraised and also what would this cost us?

Detailed Questions : Home Equity Loan Refinancing

Do you currently have a mortgage? :: Yes

Home/Mortgage Loan Amount :: $15,000, this is the balance left on the mortgage that is currently on our home

Other Loans, Including Credit Cards:: $4,500 in credit card debt

Are you employed and for how long:: I am elf employed, and have been running my own company for the past 10 years, and the last few years have been very profitable. I am my own boss and have ten guys working for me full time.
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