Many people hope to own their own home one day. The best way to borrow money is through a home equity mortgage. You might also feel like you need to use your home as collateral to get some money. Before you put your house up as collateral for a loan, you should look at a few important details.
First mistake: Dealing with the wrong people
You have heard enough about people who lie and steal. If you use dishonest people to pay for your needs, you could lose the equity you've built up and your home as a whole. Don't talk about money with anyone who tells you to claim more income than you have or to apply for more money than you need. People like this are also likely to sign forms that aren't completely filled out, won't let you keep a copy of the papers you sign, and, most importantly, will put pressure on you to pay huge monthly payments that you can't afford, usually at a later stage of the loan approval process.
Mistake No. 2: Not keeping a good credit score while applying for a home equity mortgage
Big purchases made right before you apply for a loan can hurt your credit score. If you don't care much about your credit score for a long time, it can hurt your score, and you won't be able to fix it quickly. To get a lower interest rate on a home loan, you should always have a good credit score. But giving in to the pressure of the first lender who says that your average credit score is why the interest rate is higher is also a big mistake you should try to avoid. Even if you can't pay back a loan because you're sick or temporarily out of work, you can still shop around and negotiate to get a mortgage with a low interest rate.
Number 3: Giving out too much credit Companies Look at your credit rating.
Credit rating agencies like Equifax, TransUnion, and Experian are the most important ones. It can cost you up to $40 to get your own credit score. Every time a lender checks your credit, your score goes down a little. If you shop around and let all the companies check your credit score, it could go down a lot, making it hard for you to get a mortgage with a lower rate. Let only the company you decide to work with to get the money you need check your credit score.
Number 4: Not giving your broker enough information about your credit history
If you decide to work with a mortgage broker to find a good home equity loan, you need to tell him if you've had credit problems in the past. If you try to trick the broker, it will hurt your chances of getting a loan. If you explain your situation well, he is more likely to find you a low-cost loan.
Mistake #5: Ignoring overages and giving up the ability to negotiate
Overage is the difference between the lowest available price for the mortgage and the higher price the buyer is willing to pay. Lenders or brokers can keep the whole difference or just a part of it as extra pay. Ask your broker (or brokers) how much he gets paid.
All rights reserved. Copyright (c) 2006 Joel Teo.
