Texas Home Equity Loan

| January 2, 2012

Getting a home equity loan in Texas is a little more challenging today. The housing market as most Texans know has suffered some significant financial losses over the last 3 years. Because of this people have seen losses in their home equity as well. In some areas however property values have stabilized a bit from the initial series of rather steep drops that occurred over 18 months ago. But values are in some areas still declining at a rate of between 3%-10% in some areas annually.

This can make getting an equity mortgage difficult as lenders are more concerned about securing their financial position in the home as a lien holder in the second position to the primary lender. Some people are not as familiar with how a home equity line works and this leaves them confused about how much money they can access to complete a home renovation, buy a new car or pay for a child’s college tuition. A home equity loan is based on the value of the property over and above the primary 1st mortgage owed. Therefore if a property is worth $180,000 and the first mortgage has a balance of $100,000, than the property owner has an equity value of $80,000 in the home. This amount is what the banks will lend on. Most banks will lend up to 60 to 80 percent of the equity in a home. However as property values are in decline, lending institutions have tightened the levels of equity they may give. So under this gauge most lenders are officially only lending up to 70% LTV( loan to value) so they allow themselves a buffer zone for potential continuous declines within the market.

The concerns of lending institutions today are pretty widespread across most of the real estate markets in America. For the home owner that is seeking to take out equity from their home and whose credit is in good standing, they are assured to have more opportunities to shop around for decent rates, loan terms and closing costs. Some home equity loans have very little costs to the borrower at closing, while other lending institutions can charge quite a bit for closing costs and rate guarantees. Consumers are urged to be diligent in reading the fine print and learning what their expected expenditures could be for a loan. For many borrowers seeking home equity loans a proper value of the home is essential for assuring that the correct amount of equity is given. Realtor’s town, county or city assessor’s, and appraisers are the best places for homeowners to go to obtain a basic value range of their property before they seek out a loan at a bank or lending institution.

When seeking an equity loan borrowers can often find a myriad of lending institutions that are willing to lend under the right circumstances. It is important that the borrower be thorough to find out what the terms and conditions are on the loan so that there are not hidden costs, terms or rate increases that the consumer is unaware of. Additionally many home equity loans will require an attorney to handle and prepare all the legal documentation for the loan. After the loan is approved borrowers need to be aware that there is usually an official closing that will occur and a new mortgage deed will be recorded on the property. This is done to secure the lenders position with the creation of a second mortgage on the property. Borrowers should be aware they will need to pay certain fees including an appraisal fee, an application fee, a processing and preparation fee and sometimes points as well. Points are equal to 1% of the mortgage amount loaned and an average of 1 to 2 points is not uncommon. This fee is what is known as the cost of borrowing the money up front and can sometimes be charged for securing a lower rate mortgage or better terms. As an additional note the points charged can alleviate the lenders charges for processing fees. This should be verified with the lender to find out what the points include.

Category: Home Loan

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