Need Cash In a Hurry? Refinance vs. Home Equity Loan

Your home doesn’t just give you shelter from the elements. It can also buffer you from financial storms, by absorbing the blow from unexpected events like illnesses and job losses. Naturally, cashing out equity from your home should be a last resort. But, when it comes time to draw on your home’s value to keep your family going, will you get better results from a refinance or a home equity loan? Follow these steps to figure out which option works best for you.

Think About the Long Term. Estimate how long you expect to stay in your current house. Depending on the severity of your situation and the real estate market at the moment, you might even want to consider selling your home altogether and taking on a short-term rental in your new locale. If you expect to stay in your current home for a few more years, the flexibility of a home equity loan may work for you. Otherwise, a refinance can restart the clock on your fifteen or thirty-year term.

How Much Cash Do You Need? A flexible home equity loan or line of credit may allow you to write checks for only the amount you need to get by. If you experienced a job loss, you can borrow against your equity in smaller chunks and repay your loan quickly once you get back on your feet. If you or a family member suffered a medical emergency that will permanently reduce your income, you may want to refinance your house to accommodate your new budget.

Will Your Equity Drop Below Twenty Percent? In an extreme situation, when you need to borrow so much money that your equity will drop below twenty percent, you may have to accept a home equity loan to prevent expensive personal mortgage insurance from kicking in on your primary mortgage.

Can You Handle the Expenses? Refinancing may make the best long-term sense, but your current condition may leave you without the cash flow to accommodate fees and closing costs. If you can find a lender who can refinance your home with no closing costs, you may find yourself facing a higher interest or even a prepayment penalty that locks you into that mortgage for life. Although a short-term home equity loan may carry a higher interest rate, you may be able to pay it back fairly quickly and avoid some of the long-term expenses it brings.

Earl Baker is a writer for RefinanceFinds.com. For additional articles and an extensive resource
for everything about refinance, please visit us at:http://www.RefinanceFinds.com

Check Your Credit Before Shopping For That Home Loan

Too many consumers get frustrated when a ding on their credit score delays the process of closing on a mortgage or completing a home equity loan. Before you start shopping for financing, understand these four important tips.

Review Your Credit Score. Nearly every bank, credit union, and mortgage lender relies on a three digit score provided by one of the three major credit bureaus to help them make lending decisions. A credit score can range from the perfect 850 all the way down to the abysmal 300. Scores under 720
may not qualify for the best interest rates, so you should check your credit scores with all three bureaus before shopping for a loan. You may discover you have some cleaning up to do before you can take advantage of a great loan deal.

Scan Your Report for Mistakes. Though some consumers struggle with debt, many more would-be borrowers suffer needlessly because of mistakes they made in the past or mistakes that credit bureau systems made when compiling their reports. To avoid embarrassment and wasted time during the loan origination process, you should review your report carefully before you start shopping for loans. Dispute any inaccuracies both with the credit bureau and with the creditor using certified mail. If you find any long-lost bills you left unpaid, pay them. A bill as insignificant as 0 can actually stall or derail the closing process, costing you the chance to buy your dream home.

Avoid Credit Applications. In the weeks leading up to your home purchase, you may consider switching banks or responding to attractive credit card offers. Resist the urge to earn those frequent flyer miles, because a flurry of applications can show up on your credit report simultaneously. Therefore, lenders may grow concerned about potential identity theft. Even worse, lenders might assume you’ve lost control of your spending, making you an unsuitable candidate for a home loan.

Do All Your Shopping on the Same Day. For the same reasons, you should choose one day to make inquiries from your favorite mortgage lenders. A few weeks after your inquiries, your applications will show up on your report and drag down your score by a few points. Because the bureau assumes that
every application may result in an approval, the amount of your potential debt load increases significantly. In addition, the market changes so frequently that quotes made on different days cannot be compared directly. Be prepared to make your phone calls, run the numbers, and accept a
locked pre-approval all on the same day.

Kevin Adelsberg is a writer for FDLoans.com. For additional articles and an extensive resource
for everything about loans, please visit us at: http://www.FDLoans.com

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