For homeowners who need a home improvement loan, a remodeling loan or a rehab loan, they should weigh all of their options first. Home improvement loans and rehab loans are great alternatives for those who don’t have the cash on hand or don’t want to tap into their reserves. Remodeling loans will vary in terms and rates depending on which type of loan you select for your remodeling project. The lowest cost home improvement loans are the home improvement loans that are secured with a mortgage.

There are many choices for financing home remodeling projects. There is the 203K F.H.A. mortgage loan, a closed end second mortgage, or a home equity line of credit while others find it easier and less costly to refinance their first mortgage and include the remodeling project into the new loan. Each type of loan has its advantages and there are no rules that apply to everyone in every situation. For some, the choices will be limited due to underwriting restrictions while others will have a wide variety of types of loans to choose from.

The interest rates on all of these loans will vary daily with the market but mortgage loan pricing is risk driven. The greater the risk to the lender, the higher the rate on the loan. For instance, a mortgage loan that takes a second lien position will have a higher interest rate than a mortgage loan that is in the first lien position. This is because in the event of default, the first mortgage holder gets satisfied first and if there is anything left, the second mortgage holder may get paid. The greater the L.T.V. (loan to value) the higher the rate because a high L.T.V. means the loan has a greater risk for the lien holder.

Some homeowners may take the time to overhaul their finances and combine a debt consolidation loan with their home improvement loan. In some instances the savings of the debt consolidation may make the payments on their remodeling loan. The 203K loan above is interesting because value after improvement is considered when the loan is underwritten. Many times this is the perfect loan for major rehabbing of a property. Whatever your situation, the first step is to contact a mortgage expert who has many loan products available. In doing so, they will reduce their chances of being force fitted into a bad loan.

By: Bill Burress

Are you looking for a home loan, but you are not sure which one is right for you? There are many different types of home loans and it can be very confusing to try to pick the best option for yourself. Here are 7 different types of home loans and what they should be used for.

The first one is the traditional purchase mortgage. This is a home loan you get to buy an existing home. Be careful not to do the 100% financing option because you will start with no equity and it will take you 10 years or so to build any real equity. You should always put at least 10% down.

The second type of home loan is a refinance loan. This is a loan that is used to get a lower rate, pay off debt against your home, or to add on to your home. This is a first mortgage that is usually between 80% and 90% of the value of your home. Make sure the benefits of your refinance out weighs the loan itself.

The third loan is the second mortgage. This is similar to a refinance, but can go up to 100% and sometime 125% of your home value. These are used in emergency situations, especially the 125% loan because the rate is much higher and you will be tying up all your equity.

The fourth different type of home loan is the construction loan. This is a loan that is used to start building a home. It has 4 stages of funding as the home is build and if you are not quite wealthy, then you are wasting your time building. It usually takes a new home around 10 years to appreciate to the value of the original construction loan.

The fifth type of loan is the first time home buyers loan. This is a purchase mortgage that is designed for anybody that is purchasing their first home.

The sixth type of loan is the home equity loan. This is similar to a second mortgage, but many times the rate is prime plus a percentage. These are good for people that just need a little bit of money.

The seventh different type of home loan is a line of credit. This is a revolving account that works much like a credit card only your home is the collateral. These are good for people with a business or with an addition to their home because if either one gets more expensive than planned for you can take out more money on your line of credit.

There you have it, seven different types of home loans. Now you just need to pick the right one for you and start applying.

By: Gressly Stevens

With the current “mortgage meltdown” we hear so much about these days, your average consumer thinks that the days of 100% financing have gone by the wayside. True, you are hard pressed these days to find a bank or lender that will want to carry a second mortgage that combined with a first mortgage adds up to 100% financing. That’s because if there is a default, sitting in second lien position is particularly dicey. Too much risk is involved. And since, in recent history, that scenario of the 80/20 combo was the most common 100% financing vehicle available to a certain group of consumers (non first time homebuyers), there’s a misconception out there that 100% options are all but dried up.

But, a-ha! There is hope for someone who has great credit but prefers to invest his/her assets elsewhere when rates are so low. It’s called the Flex 100. And it can apply to purchases and refinance transactions.

I heard an analyst mention on television the other day that mortgage money is so cheap right now it’s like a sale at Macy’s. That made me chuckle, but it’s true. In which case, why not invest your money elsewhere if you qualify for 100% financing. After all, the homes are still appreciating in most areas, but not at the stellar rate we saw in the past.

The Flex 100 requires you to invest $500 of your own cash towards the transaction, so I guess it’s technically not 100% financing, but it’s pretty darn close. And no, you don’t have to be buying your first home to get this deal. You can actually have owned a home in the past three years! However, it does apply to financing your primary residence only. You can’t get this deal for that nice cabin in Gatlinburg you want to use on the weekends or for that great rental down the street you think you can get a good deal on. You’ve got to live in the house to qualify for this financing.

But you can do a refinance, as long as it’s not a “cash-out,” meaning you’re not paying off debt or taking equity out of the property. It must be a rate term refinance only. However, you can pay off that second mortgage or home equity line of credit you hate, IF you obtained that 2nd lien mortgage when you got your first mortgage (a piggy back closing, we call it). Or to make it clearer, you originally had that 80/20 combo mentioned earlier. If you got that home equity mortgage a month or two after your initial closing to build a deck or payoff a credit card, than it that won’t work for a Flex 100 refinance.

What about your credit score? Well, it will affect the price you get, but there is no “minimum” credit score required for this program. You just have to get an approval through the automated underwriting system required. But be realistic – if you’ve got “iffy” credit, you probably won’t get an approval. A borrower with a credit score below a 620 would probably have to have a low loan to value or debt to income ratio for a chance of an approval.

A Flex 100 may or may not make sense for you. But hey, at least you know it’s an option. Your lender should be able to help you determine if this opportunity to flex your mortgage muscle makes sense for you.




By: Kristin Abouelata – Home Loans