How We Can Help You With Your Home Equity Line of Credit

We specialize in many different types of mortgages at Intercoastal Mortgage Company to get you into the house you desire; we also originate second trusts and home equity lines of credit. Many of you have more than likely heard the term, but are you aware of just how available it may be to you? You can't use a home equity line of credit (HELOC) on its own to purchase a house or for proof of funds, but it may be helpful to show you have available credit and your payment history. In this blog I discuss what a HELOC means to you and how you can use it to get into the house you want, pay for your child's education, or add that addition onto your house.

So what is a HELOC, and how does it work? A home equity line of credit is a loan from a bank or other lender, which has an limit amount determined by the equity in your home. Yet, this type of loan differs from others significantly. Some specifics and guidelines involved:

·         The lending institution establishes the amount of the loan based on the equity in your home. Rather than giving you a check for the amount, they make the money available to you like a credit card

·         Payment of the amount taken from the line of credit is made monthly. Payments are  based upon how much of the loan you have used plus an added amount of interest. While there may be a minimum monthly payment, you are only repaying on the amount you have taken from the account.

·         The interest rate on a home equity line of credit is usually variable. It can change over time because it is based on an index such as prime rate

·         While there are monthly payments, the loan has a period over which the entire principal  must be repaid

·         A home equity line of credit can be used by the borrower for whatever purpose they deem necessary

·         At the basis of the home equity line of credit is your home. So, just like a mortgage, failure to pay can result in foreclosure

·         A Home Equity Line of Credit can be very useful to a homeowner and in some instances the interest is deductible from your income tax.

The best time to apply for a HELOC is when it isn't needed. It will be available to you as credit should you ever need to borrow from it. With that being said, it’s also an available option if you come to a point where you do need a large sum of money fairly quickly. It is also great for help purchasing a house (mortgage down payment) and we specialize in this. Contact me to see if your home equityline of credit can be used to get you into the house you desire.

A Proper Closing

If you’re in the process of obtaining a mortgage loan then you are probably interested in getting to closing as quickly and efficiently as possible.  In previous blogs we have discussed how to get to closing; what you need to have and what you can expect through the process, but what happens when you get to the finish line? Your application for a mortgage loan has been approved and you have received a commitment letter from us. The final step before you can call the house your own is the closing, or settlement, of the purchase transaction and mortgage loan. You will have to sign a purchase agreement and your loan request will be approved, but you still have no rights to the property, including access, until the legal title to the property is transferred to you and loan is closed. You should have an understanding of what is involved in the closing process, and here I discuss what you need to do to finish up this process.

When you get to closing, you will sign the necessary documents, the seller will transfer the deed to the property, funds will be collected and disbursed and the closing agent will record the necessary instruments to give you legal ownership of the property. Settlement of a mortgage loan is a legal process, so specific procedures and requirements will vary according to state and local laws. This information applies to closing practices in our area.

As soon as you receive firm approval from us, the lender handling your loan, you will want to confirm the actual date of loan closing. An estimated closing date was probably specified in the sale contract, but a firm date needs to be set by your agent.  The loan closing date will include representation, either in person or through documentation, of all the necessary parties - the buyer, the seller of the property, the party’s agents, the title company, and your lender. Your loan commitment can expire, as can the rate lock agreement, so the settlement date should be set with that in mind.  The settlement date also has to allow adequate time to assemble all of the required documentation. The real estate agents involved in the sale transaction and the lender are often the best people to coordinate the closing arrangements, since they are the most knowledgable and experienced in this area. Most lenders require at least three to five days advance notice of the closing date in order to prepare the loan documents and get them to the closing agent.

Examples of documents that may be required for closing:

§  Title Insurance Policy

§  Termite Inspection and Certification

§  Survey or Plot Plan

§  Water and Sewer Certification

§  Homeowner’s Insurance

§  Flood Insurance

§  Certificate of Occupancy or Building Code Compliance Letter

Closing your home loan is a standard process in home ownership, but it there are variances for individual situations. Your process may be shorter or longer than your neighbors and this could be due to the documents needed, the seller’s specifications, the house’s necessary repairs, and your financial agreement. Contact me for only the highest quality lending and begin the process of homeownership.https://kbrown-icmtglo.mortgagewebcenter.com/

So You Want a New House But You Already Own

Many people are faced with the challenge of needing to buy a new house while they already own one. This is most often the case when a move warrants switching houses. What is the best way to handle this situation? Buying a house isn’t as easy as it used to be.  Buying your new home while maintaining your current living situation may be the preferred choice for ease of transitioning from one place to another, but this approach can be a bit tricky. In this blog I will address the proper technique for handling a situation like this.

There are many reasons why you may need to buy a house while you still own one; 

§   You need to relocate for work or personal reasons

§   You may have found the house of your dreams at a great price and you don’t want to let it go

§   Hotels can run you thousands if you stay in one after your house sells while waiting for your next

§   You want to meet the deadline for a specific tax credit

§   The mortgage rates are excellent and you want to take advantage of that to upgrade to a better house 

In the past, purchasing a new house before selling the old house was not a difficult task – you could rent the home and use the new rental payments to help offset the existing mortgage payment. Now it is more difficult because the laws have changed to protect lenders from losing money on “walk-away borrowers”, a person who strategically defaults on their mortgage to avoid foreclosure.

Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) have gotten tougher with their requirements for sellers who are in the market to buy and want to rent their existing homes. If you want to use the new rental payments to offset the existing mortgage, the lender will require that you have 30% equity in your home as evidenced by an appraisal (FHA requires only 25% equity). Again, this is to stop strategic defaulters. If you don’t have the required equity in your residence, whether you rent your home or not, you will have to qualify carrying the entire existing mortgage payment. Additionally, if you already have an FHA loan you will not be able to obtain another one as FHA, for the most part, only allows borrowers to have 1 FHA open loan at a time.

You may have enough equity in your home and the ability to carry your existing mortgage payment; you intend to sell your home, but you want to purchase your new home before you sell (thus having the ability to write a contract that is not contingent on your sale). In this scenario you may need to borrow funds until you can sell your current home. You have some options, such as a “bridge loan” - tapping into your home equity, or as your last resort, you could borrow from your retirement savings. You should run these numbers by your mortgage lender to understand the consequences of each action.

You may feel that you just don't have a choice and moving into a new home while you still own another is unavoidable. It is not impossible to do, just be prepared for some extra hoops to jump through, and let your mortgage lender guide you to the best options for your situation. This is a situation we handle frequently, and it's only one of the many things we're good at. Contact me and I can help you with the processof transitioning into your new home.