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Top 5 Mistakes People Make When Taking Out a Home Improvement Loan
Sun 04 Mar 2007 - 15:43
Top 5 Mistakes People Make When Taking Out a Home Improvement Loan
By Robert Pinzhoffer
1. Choosing a home improvement loan lender for the wrong reason (i.e., the lowest rate, your existing lender.)
People choose home improvement loan lenders for all the wrong reasons. Getting a low rate is important, but it's not the only consideration when you want to take out a home improvement loan. Lenders may offer the lowest rate but charge extra fees (loan fees, origination fees, copy fees) so that in the end you'll pay more for the home improvement loan even though your rate may be lower. The only way to protect yourself is to wait for the Good-Faith Estimate (GFE) which should list all the closing costs. Compare the GFEs from a number of home improvement loan lenders.
But comparing GFEs is not the only story when you want to take out a home improvement loan. If time is important, you want to choose a mortgage company that is capable of acting quickly. Ask each company to give you their average closing time for loans similar to yours.
Ask around among your trusted friends. Find out who took out a home improvement loan lately and ask them what they thought of the company. Don't assume that your existing lender is any better than a new lender. Since most loans are sold in the secondary market, everyone has to meet certain criteria, and your existing lender will probably require the same documentation as a new lender. However, once you have a commitment from a new lender, it doesn't hurt to ask your existing lender to beat it. Often times they will. We will get you the best rate available.
2. Not getting everything in writing when seeking a home improvement loan.
Get everything in writing. No matter what the Loan Officer tells you about your home equity loan, ask him/her to confirm it in writing. Don't believe someone when they tell you that your home improvement loan rate is guaranteed. Get it in writing.
3. Not knowing the difference between a home improvement loan and a home equity line of credit.
A home improvement loan is a loan, like a 2nd mortgage or a home equity loan. A home equity line of credit is a credit line - money that is made available to you to use when you need it. There's a big difference. Some credit lines have interest rates which are adjustable and which can go as high as 15% or more.
4. Not knowing the appraised value of your home.
Home improvement loans, home equity loans, 2nd mortgages, and home equity lines of credit are based on the difference between what you owe on your house and what your house is worth. Many people go ahead and try to get a home improvement loan on their home without knowing the true value. There are many places you can get an estimate of the true value of your home. Many realtor sites have home value estimators on their site. For the price of listening to a mortgage company try to sell you a mortgage, you can get an approximate value for your home.
Check the recent sales in your neighborhood and try to find a comparable house in a comparable location. Or you can ask the appraiser to do a drive by and give you a verbal estimate of the value of your home. If it's in the right ballpark, you can order a thorough appraisal.
5. Not doing the math on a home improvement loan.
Having a home improvement loan can be better than taking out a 2nd mortgage because the origination costs are less. However, the monthly interest rate may be more with a home improvement loan than with a 2nd mortgage. So, depending on how much you are going to need and how soon you are going to need it, you may find that a 2nd mortgage is a better way to go.
One of the biggest mistakes people make with home improvement loans is to take out a large amount of money and put it into their checking account. You may pay as much as 8% for the home improvement loan while the money you took out is only earning 2% in your bank account. Recommendation - only take out as much as you are planning to use.
If you need a home improvement loan, simply click APPLY NOW and select 'Home Improvement Loan' for Type of loan desired?
Peak Home Loans - Refinance With Bad Credit-We Get 4 Out Of 5 Approved-24 Hour Results-Learn The Ins & Outs-Apply Now With Peak Home Loans Thank you...
Robert Pinzhoffer
Managing Partner,
Peak Home Loans LLC
http://www.peakhomeloan.com
Article Source: http://EzineArticles.com/?expert=Robert_Pinzhoffer
http://EzineArticles.com/?Top-5-Mistakes-People-Make-When-Taking-Out-a-Home-Improvement-Loan&id=464757
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