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Apache is functioning normally

November 15, 2023 by Brett Tams

As a landlord or property manager, securing the best possible tenants for your apartment is crucial. You want someone who’s not only going to pay rent in full and on time but will also be a model tenant. No noise complaints, no property damage beyond normal wear and tear, perfect. The screening process to find this ideal tenant all begins with the rental application form. Not only should this document be comprehensive, but also effective in helping you weed out applicants who just won’t fill those perfect tenant shoes.

While there are a lot of templates out there to help you draft a rental application form, you may want to create your own. If you do, make sure these essential elements come together to paint a complete picture of every person interested in renting your property.

Things to include in an apartment rental application form:

Start with the basics

It’s best to get the basic, essential information out of the way first. It’s an easy section to knock out when crafting a rental application form.

Begin this section with the day’s date. This is important because it lets you manage the first-come-first-serve style that most rental applications get reviewed. You can easily keep everyone in order if you have multiple viewings and multiple applications. You may even consider adding a timestamp once an application comes in for further organization.

The rest of the basics are all about the applicant themselves. Each person interested in renting a single apartment should fill out a separate application, so this area should focus on one person only. Include sections for:

Applicant’s full name
Current address
Home phone number, cell phone number and/or work phone number
Date of birth
Social security number
Driver’s license number (or any government-issued ID)

These last three pieces of information are necessary to run a background check on the applicant. You can explain that to them as they’re filling the form out if there’s concern about sharing this type of information upfront.

Include apartment information

Also within this section, or immediately above or below it, you’ll want to include a few bits of key information about the rental property. You want to add not just the address and unit number, but also details on fees and rent. Provide a space to write in monthly rent, security deposit fee, upfront costs and pet fees (if applicable.)

You can also insert the date the unit will become available or even allow the prospective tenant to fill in their estimated move-in date.

Putting this information here means no surprises for whichever applicant you decide to rent the apartment to. The information on the lease will match what they have here.

Dive into their employment history

The next section should focus on employment. Hopefully, your applicant is currently working somewhere, or at least can confirm a steady stream of income from some source. How else will they afford rent, right? You’ll collect information on their finances in more detail later on, but for now, establishing a work history and monthly income gives you a good snapshot.

In this section, you’ll want to ask for:

Name and address of current employer
Supervisor’s name and phone number
Applicant’s job title
Start date
Monthly income (after taxes)

Get all this information for their current position and ask for it all for their previous employer, as well. Just go one job back to establish a history of employment. It’s also OK if the applicant doesn’t have a previous employer. A first-time renter hasn’t had time to establish a job history, or they worked for the same company for a long period of time. You can look at each individual application to decide whether only having a single, current employer is OK with you.

Other sources of income

It’s also best to leave a space where the applicant can note other sources of income. You don’t need totals at this point, but it’s good to know what to research when doing a credit check. Other sources of income can include:

Inheritance
Annuity
Severance payment
Unemployment
Disability
Social security

A complete list of what types of additional income the applicant has coming in is helpful for you to total up whether they make enough to afford rent.

Gather rental history

Equally important to their finances is the applicant’s rental history. You want to know about their current and past landlord or property manager. You also want to know if they have any evictions on their record.

Collect the name and contact information from the current and previous landlord or property manager in addition to the monthly rent they paid/are paying, the date they moved in and the date they moved/are moving out.

Sometimes, the best resource to learn about a prospective tenant is to talk with other landlords or property managers who they’ve rented from before. You’ll get the inside scoop.

Ask for references

While it’s not a necessary section on your rental application, it’s a good idea to put in one asking for personal references. Your applicant can share names of friends, family or professional contacts that can vouch for their character.

This section should ask for reference names and contact information, although you can also allow your applicant to attach signed letters of reference directly to the application. You can also allow prospective renters to attach a rental cover letter or renter resume to add a little more depth to their application. If you decide to do this, add a note to the reference section that you’ll accept supplementary material.

Get a few extra details

Not all rental situations will need these extra bits of information, so you don’t have to include these sections in your rental application form if they’re not relevant, but it’s good to consider them.

Emergency contact

Having an emergency contact on file for your tenants is never a bad thing. While you don’t really need it this early in the process, it’s easy to work the question in here so it goes into the applicant’s file.

Ask for an emergency contact’s name, phone number and relationship to the tenant.

Other occupants

To make it easier to batch review applications, you should have people list any other occupants who will live in the apartment. This includes roommates and partners. This way, you can double-check you have applications for everyone.

Pets

If you have a property that allows pets, you’ll want to collect this information early. If you have any breed restrictions or limits on the number of pets, you can weed out applicants who don’t fit the bill.

Ask for pet type, breed, weight and age. Leave enough blanks for the total number of pets you allow, as well.

Vehicles

If your apartment has on-site parking available with the unit, you’ll want to know what vehicles will get parked on the premises. Ask for the make, model, color and year of each car, in addition to the license plate numbers.

Request permission for a credit and background check

This part of the application gets you to the next step in the screening process. Here, you’ll need to ask the applicant to give you permission to look up their personal information to run both a credit check and a background check.

Within this section, you can also collect relevant information such as:

Bank name
Bank address and phone
Checking account number
Credit obligations (loans) with a monthly payment

To get ahead of running these checks, also ask whether the tenant has ever:

Been convicted of a crime
Broken a lease
Declared bankruptcy
Been evicted

These are all potential red flags for renting, but don’t always mean an immediate “no.” Having a heads-up they’ll appear on the background check you’ll run is helpful. It also shows you this applicant is being honest about their past.

Sign on the dotted line

Rounding out any rental application form is the signature section. Start the section with a list of fees associated with completing the form and then both you and the applicant should sign and date it. The signatures will validate the document, but also serve as proof you’ve received the accompanying fee.

The application fee should cover specific costs — those of running both the credit and background check, as well as any administrative costs you’ll incur processing the application. This is not a way for you to make a profit on someone’s interest in the apartment for rent.

This section wraps up the application and confirms the applicant’s interest in the apartment. Now you can dig deeper to find out if they’re the right tenant for you.

A rental application form template

Just in case you want a ready-made rental application template, we’ve got you covered. Simply download our PDF or download our word document template and make edits as you need. Anything in italics is an optional section that might not apply to your property.

Are enough rental applications coming?

Now that you’ve got the right rental application form ready to go, the next thing to do is draw in prospective tenants. Make sure you’re finding the best potentials by listing your property in the right location. Go where the renters are looking!

By listing your property on Rent. you get access to in-market renters along with helpful reports to expedite your screening process.

The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.

Source: rent.com

Apache is functioning normally

November 7, 2023 by Brett Tams

Adding a garage to your property can make your life easier while also adding value to your home. But building a garage can be expensive — and if you can’t afford the cost upfront, some type of financing will likely be required in order to move forward with the project.

The good news is homeowners have several options to choose from so they can get the garage they want now and pay for the project over time — including a personal loan, a home equity loan or line of credit, or a cash-out refinance.

But how do you decide which type of garage financing is best for you? Read on for a breakdown of the different options, some of their pros and cons, and how to choose the right financial product for you when you decide to build your new garage.

How Do People Afford to Build a Garage?

Most people probably can’t afford to add a garage to their home without borrowing at least part of the money for the build. And even those who have enough cash to cover the cost might not want to dip into their savings to foot the entire bill upfront.

There are several ways to finance a garage build, and the option that works best for you may depend on several factors. Before you make your choice, it can be good idea to look at:

• How much equity you have in your home, and if you want to tap that equity for funding.

• Your credit score nd what kind of interest rate you might be offered if you apply for a loan.

• How long you want to make payments, and how those payments might affect your other goals.

• How much you expect the full cost of your project to be, and how much of that you want to finance.

💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

What Is the Average Amount Needed to Build a Garage?

According to HomeAdvisor, the average cost of building a garage is about $28,326. The typical price range in 2022 was between $16,424 and $40,287.

Of course, your costs may vary significantly based on the size of the garage, the materials you choose, labor costs in your area, and the type of structure you plan to build. Here’s a breakdown of what some garage projects can cost:

Carport

Average cost: $2,400 to $8,400 for one car; $4,000 to $14,000 for two cars, fully installed

A carport can be a great option if you’re looking to protect your car from the sun, snow, sleet and hail, pollen, bugs and birds, etc. A carport is typically less expensive than a fully enclosed garage.

Square footage is usually the most important factor when it comes to determining price. A fully installed (parts, labor, etc.) 12-foot-by-20-foot carport, built for just one car, averages between $2,400 to $8,400; while a two-car, 20-foot-by-20-foot carport would be around $4,000 to $14,000.

Here are some other factors that can impact the cost:

• Whether the carport is temporary or permanent

• The roofing and other materials used

• Whether it’s a prefab or custom build

• Whether it’s freestanding or attached to another structure or a concrete foundation.

Attached and Detached Garages

Average cost: $10,500 to $27,000 for one car; $14,500 to $40,300 for two cars, fully installed

If you’re looking to keep tools, bikes, or even a washer and dryer in your new space, along with your car or cars, you’ll probably want a completely enclosed garage with doors you can lock.

Your storage needs will help determine the size of the garage you build — and, yes, that size will figure into the cost. A standard one-car garage is 12 to 16 feet wide and 20 to 24 feet long, while a two-car garage is usually 22 to 26 feet wide and 20 to 24 feet long.

Keep in mind that if the garage is attached to your home, you may pay 10% to 15% less than you would if the garage is detached. The materials you choose for the walls and roofing will also influence the cost. And you can expect the price to increase if you add windows, plumbing, and/or electricity.

Storage Shed

Average cost: $2,500, fully installed

If you’re just looking for additional storage and not a place to park your car, a shed might be a more affordable option. The average price range for building a shed ranges from about $200 (for a small prefab shed) to $30,000 (for a custom structure that could serve as an office, man cave, or she-shed).

The size of the shed (both square footage and ceiling height) will make a big difference in the cost, as will the materials you choose, the type of foundation you use, if the project requires a permit or professional installation, and if you want to add plumbing and electricity.

Garage Doors

Average cost: $1,200, fully installed

The door you choose for your new garage can be important to your home’s curb appeal, but you may also want to consider energy efficiency and how the door will hold up against rough weather — or energetic kids who use it as a backdrop to their sports practice.

Factors that can affect the cost of a garage door include the style, materials, size, and the type of installation required. The cost can also increase if you opt for an automatic door with sensors, a keypad, and other bells and whistles.

Installation Costs

Unless you plan to build your garage yourself, your labor costs could add up to at least half of your project’s price tag — and your location could be an important factor.

HomeAdvisor found, for example, that if you live in Austin, Boston, or Los Angeles, you could end up paying twice as much for your garage as you would if you lived in Chicago, Oklahoma City, or Kansas City, Mo.

Permit Fees

Average cost: $150 to $500

Here’s a cost homeowners tend to overlook: Almost any building project requires a permit.

Permitting needs and costs can vary depending on the type of project and where you live. If you’re working with a contractor or installation company, they should be able to tell you what’s required and the cost. You also can contact your local government agency for information.

The average cost for a garage permit is $150 to $500, but if you’re adding electricity, plumbing, or air conditioning, the price could be as much as $800 to $1,500.

Recommended: The Cost of Buying a Fixer-Upper

Garage Builders Financing Options

Because the cost of building a garage can get pretty expensive, homeowners often decide to use some type of financing to pay for the project.

There are several options available if you prefer to break down the cost of your project (large or small) into affordable monthly payments. Here are some common choices:

Personal Loan

With a personal loan, you’ll get a lump sum of money that can be repaid in monthly installments, usually at a fixed interest rate that’s based on your credit score, income, and how much debt you’re currently carrying. This type of financing can be used for just about anything, but home improvement projects are among the most popular uses of a personal loan.

Borrowers typically aren’t required to provide collateral to get a personal loan (unlike a home equity loan or HELOC). This can make the approval process go faster, which means you can get your money sooner. Another plus: You won’t be putting your home or any other asset at risk if you can’t make your loan payments. But there’s also a downside in that your interest rate may be higher than it would be with a secured loan. And you may have less time to pay back the money you borrowed.

Recommended: 11 Types of Personal Loans and Their Differences

Home Equity Loan

Borrowers who have built up some equity in their home (at least 10% to 20%) may want to look into financing a garage build with a home equity loan. With this type of loan, you’ll get your money upfront and pay it back, with interest, in fixed monthly payments.

The upside to a home equity loan is that a lender may offer a lower interest rate because the financing is secured with your home as collateral. The downside, of course, is that if you default on the loan, the lender could choose to foreclose. And if you sell your home, you’ll be expected to pay off your loan balance. You also can expect a more complicated application process and to pay closing costs and other fees with this type of loan.

HELOC

A HELOC is like a home equity loan in that it allows you to borrow against the equity you have in your home. But with a HELOC, you don’t have to borrow all the money at once — you can use your line of credit to borrow just what you need as the project moves along. And you’ll pay interest (usually a variable rate) only on the amount you currently owe, much like a credit card.

The major drawback is that your home will serve as collateral for the line of credit, so if you default, the lender could foreclose on your home. And if interest rates increase, your loan payment could end up being higher than the amount you originally budgeted.

203(K) Loan

The Federal Housing Administration offers 203(K) loans as a way for current homeowners and homebuyers to refinance their home and roll the costs of a renovation into the mortgage. Because they’re backed by the FHA, these loans can come with lower interest rates and qualifying may be easier. But your home and your garage project will have to meet FHA requirements.

Construction Loan

Construction loans traditionally have been used to finance the building of a new home, but they also may be used to make substantial renovations to a current home.

These loans typically have a variable interest rate, and because they’re unsecured, the rate may be higher than other types of garage financing options. Construction loans also have shorter terms than most loan options: They generally must be rolled into a mortgage or paid off within a year.

Cash-out Refinance

With a cash-out refinance, borrowers take out a new and larger mortgage on their home, then pay off the old mortgage and keep the difference to pay for their renovation project.

If you can find a competitive, fixed interest rate and other loan terms that work for you, this might be an alternative worth considering. But again, the loan is secured with your home as collateral, the application and approval process can be more complicated and slower than with other options, and there may be closing costs and fees.

What Type of Loan Is Best for Building a Garage?

If you’re hoping to build a garage, it makes sense to thoroughly research all the financing possibilities. But you’ll likely find that a personal loan is among the top contenders.

Benefits of a Personal Loan

There are several benefits to using a personal loan to finance a new garage.

• You can borrow a fairly high amount (up to $100,000, for example, with a SoFi personal loan).

• With an unsecured personal loan, you won’t have to put up your home or any other asset as collateral.

• If you have a good credit history, you should qualify for a competitive interest rate.

• Personal loans typically come with a fixed interest rate, which can make budgeting easier.

• If you make timely payments and pay off the loan on time, it can help your credit.

• The application process can be faster than other options, so you’ll get your money sooner.

Qualifying for a Personal Loan

Personal loan requirements can vary from one financial institution to the next, but here are three things lenders typically look at when reviewing an application:

• Credit score and credit history: The higher your credit score, and the cleaner your credit report, the better your chances of qualifying for a loan with a competitive interest rate.

• Employment history and income: Borrowers should be prepared to provide recent tax returns, bank statements, and other documents to verify their employment and their wages or salary.

• Debt-to-income ratio: Lenders can have different requirements, but generally, the lower your debt-to-income ratio (how much you spend on monthly debt payments relative to your income), the better chance you’ll qualify for the loan terms you want.

Things to Consider When Applying for a Personal Loan

Before you apply for a personal loan, it can be a good idea to think about:

• How much you need: With a personal loan you’ll receive a lump sum of cash, so it can be helpful to have an estimate for your project’s overall cost — and how much what you’ll need to borrow — before you begin researching lenders.

• How much you can afford to pay back each month: You may want to run the numbers to see how your loan payments will fit into your monthly budget.

• How much time you’ll need to repay the loan: If you have big dreams — and a big price tag to match — you may want to look at a long-term loan (five to seven years) so the payments don’t overwhelm you. Keep in mind, though, that the longer the loan term, the more you can expect to pay in interest.

• Where you can get a personal loan that’s a fit for your needs: When you’re ready to look for a loan, your focus will likely be on finding the most competitive interest rate. But when you’re deciding where to get a personal loan, don’t forget to consider other costs — including origination fees, late payment charges, and prepayment penalties.

Alternative Garage Builders Financing Options

There are a couple of alternatives to financing your garage build with a loan or a secured line of credit. And like the other options listed here, they, too, have pros and cons.

Cash

If you have plenty of money to finish your project without financing, and you want to avoid interest charges, paying cash is definitely an option to consider. But if it would require pulling money from your emergency fund, or affect your budget or other important financial goals, you might want to look at other options. Of course, you could save up until you feel comfortable about paying for the project with cash. But depending on the total cost of the project, that might mean a long delay.

Credit Card

A credit card is a convenient way to pay for costs as you go, and this type of financing could be easier to obtain than a secured loan or secured line of credit. But unless you’re eligible for a card with a low or 0% introductory rate — and can pay off your balance before the introductory period expires — the interest rate could be much higher than with other borrowing options. If you’re building a storage shed or DIY carport, a credit card might be an appropriate financing tool. But for a pricier project, you may find there’s a more affordable option.

The Takeaway

Building a garage — whether it’s a prefab shed, standalone carport, or attached garage — can be an expensive project. Depending on the scale of the project and where you live, you could easily spend close to $30,000.

Most people opt to finance their garage build project, either with a personal loan or a line of credit. This allows them to break up the cost over several months and keep their cash in savings for a rainy day.

If you know what kind of garage or similar structure you hope to build, and you need or want to find financing to help pay for it, a personal loan can be a solid option.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.

FAQ

How do people afford to build a garage?

If paying cash to build a garage isn’t feasible, there are several financing options available, including a personal loan, home equity loan, or home equity line of credit (HELOC).

Can you finance a garage?

You can finance a garage if you can’t pay cash — or don’t want to. There are several financing options available, whether you’re planning to DIY a small carport or you’re working with a contractor to install a super-sized garage with all the amenities.

What type of loan is best for building a garage?

If you have solid credit, a personal loan may be the best type of financing for building a garage. You can borrow the money you want upfront, get the funding quickly, and make fixed-rate monthly payments while enjoying the benefits of adding a garage where you can keep your car, boat, tools, toys, and more.

Photo credit: iStock/PC Photography

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com

Apache is functioning normally

November 2, 2023 by Brett Tams

A higher resale value of your home is one of the many rewards for carrying out home improvements and renovations. But remodeling projects cost money, and financing them can be expensive, depending on the amount you borrow and the type of loan you use.

Options for home improvement financing include home equity loans (HELOCs), home equity lines of credit, and cash-out refinancing. These types of financing allow homeowners to borrow against the equity they have built up in their home. Other financing options are personal loans, credit card financing, and government programs. Any of these could be the best option depending on the circumstances.

Here’s what homeowners need to know about the different types of home improvement loans and what factors they should consider before settling on a lender.

1. Home Equity Loans

If you have built up equity in your home, which means you have paid off a portion of your mortgage, a home equity loan could be the right choice to finance home improvements. To find out how much equity you have, subtract the balance due on your mortgage from the assessed value of your home. For example, if your home is worth $400,000 and you owe $200,000 on your mortgage, you have $200,000 in equity. A bank will let you borrow up to a certain percentage of that amount — up to 100% in some cases.

A home equity loan acts like an additional mortgage, where the homeowner pays back the loan in monthly payments. The payments are in addition to the original mortgage payments. Home equity loans often have low fixed interest rates because the home is used as collateral for the loan. However, there are closing costs to consider that could be between 2% to 5% of the loan amount.

On the plus side, home equity loans usually qualify for the mortgage interest tax deduction as long as the funds are used to substantially improve the home.

If you have plenty of equity and need a sizable amount to finance a big project, a home equity loan could make sense. You will receive a lump sum payment, and the improvements you make may increase the value of your home.

Advantages of a Home Equity Loan	Disadvantages of a Home Equity Loan
Low interest and terms from five to 30 years	There are origination fees and closing costs
You can borrow up to 100% of your home’s equity	Funds are disbursed as one lump sum, so borrowers need to budget carefully
The interest is tax deductible	The monthly payments add to existing mortgage payments

💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.

2. Home Equity Line of Credit (HELOC)

A home equity line of credit also borrows against the equity you have built up in your home. But the funding works more like a credit card and is not distributed as a lump sum payment. A bank will allow a qualified homeowner to borrow up to a preapproved limit and then pay it back. HELOC loan terms are typically between five and 20 years.

Interest rates differ for HELOCs because they are adjustable and rise and fall over the life of the loan. However, interest is only due on the outstanding balance — the amount borrowed — not the full credit limit.

The amount you can borrow through a HELOC depends on your credit score, income, and the value of your home. Your lender can change the loan terms, too. For example, if your credit score drops during the loan term, your lender may reduce the amount you can borrow.

One advantage of a HELOC is that you can use funds from the line of credit, make payments, and then borrow again. A HELOC is a better option if you have smaller projects to do over a longer term. You can borrow as you go, only pay interest on how much you use, and avoid paying closing costs.

Advantages of a HELOC	Disadvantages of a HELOC
No closing costs	Interest rates may go up and down
Interest payments are tax deductible	Interest rates are typically higher than those for a home equity loan
You only pay interest on the amount you use	Your lender can change the amount you can borrow and the repayment terms

3. Cash-Out Refinancing

Another option to fund home improvements is cash-out refinancing. In the case of cash-out refinancing, a homeowner takes out a new mortgage that is higher than their original mortgage. The borrower then pays off the original mortgage and uses the leftover cash to fund home improvements. The amount of cash they can access depends on the equity they have in the home.

For example, let’s say the homeowner currently owes $100,000 on a $300,000 mortgage. They take out a new mortgage for $350,000, pay off the old mortgage ($300,000), and now have $50,000 left to spend on home improvements. The catch is that their new monthly mortgage payments will be higher because they have increased the size of the loan, and they will have to pay origination fees and closing costs.

Money from refinancing does not have to be used to improve a home; it can be used to consolidate debt, pay for school, or anything else the borrower wants to use it for. Also, the cash is not considered income from the IRS and is not taxable.

Cash-out refinancing may be a good option if interest rates have dropped since you took out your original mortgage. You can take out cash and pay a lower interest rate on the new loan. You might also be able to reduce the term length of your original mortgage and pay off your home loan sooner. This will be the case if the total cost of your new loan including closing costs is less than the total cost of your original mortgage.

Advantages of Cash-Out Refinancing	Disadvantages of Cash-Out Refinancing
You will still have one monthly mortgage payment	Your new mortgage will have a higher balance
You might be able to lower your interest rate and loan term	Your loan term will start from the beginning, so you will be paying off your mortgage for longer
You can use the cash for anything	If interest rates have gone up, your monthly payments may be higher

4. FHA 203(k) Rehab Loan

An FHA 203(k) rehab loan is a loan taken out at the time of the home’s purchase. These loans are typically used for a fixer-upper, when the owners need funding right away for improvements. This could be the best type of loan for home improvements for big projects. The advantages of this type of loan for the borrower are that they have funds available for improvements from the outset, and they only have to pay back one loan with one set of closing costs.

These loans are also backed by the government and come with benefits. Borrowers can qualify with a less-than-stellar credit score (typically, a minimum of 620), and the down payment expected is lower than it would be for a traditional mortgage loan (as low as 3.5%).

Two things to remember are that the renovation costs must exceed $5,000 for the borrower to qualify for this type of loan, and the closing process can take a long time. Lastly, work covered under an FHA 203(k) loan must start within 30 days of closing, and projects must be completed within six months.

This type of loan may be worth considering if you are buying a fixer-upper that requires significant work, and your credit score qualifies you for this type of loan.

Advantages of a FHA 203(k) Rehab Loan	Disadvantages of a FHA 203(k) Rehab Loan
One loan and one set of closing costs	Only old homes or homes in bad repair may qualify
Federally-backed with low interest rates and low closing costs	You are likely to be charged costly monthly mortgage insurance
You can qualify with a lower credit score	Cash must be used for specific home improvements

5. Personal Loans

If you don’t have sufficient equity in your home to take out a home equity loan or a HELOC, a personal loan is an option. A personal loan will come with a higher interest rate, adjustable or fixed, because this type of personal loan is unsecured. Your home is not used as collateral. These loans are processed much quicker than home equity loans or HELOCs, sometimes the same day.

Personal loan terms are shorter, from two to five years, which will mean higher monthly payments, and you’ll have to pay closing costs.

These loans may work if you lack equity or if you have an emergency, such as a broken water heater or HVAC system. That said, they are probably one of the most expensive borrowing options.

Advantages of a Personal Loan	Disadvantages of a Personal Loan
Fast financing	Higher interest rate than mortgage loans
You can qualify for a good interest rate even with an average credit score	Shorter terms, which increases monthly payments
Your home is not used as collateral and is not at risk	Fees and possible prepayment penalties

6. Credit Cards

A credit card can be used for financing, and it’s a fast, simple way to access funds. The amount you can spend on improvements will depend on your credit limit (although you could use multiple cards), and the interest charges are likely to be much higher than other financing options.

A credit card can be a good option if you think you can finish your renovations quickly and pay off the balance on the card. Look for cards with an introductory 0% annual percentage rate (APR). Some cards allow you up to 18 months to pay back the balance at that introductory rate. If you can pay off the balance by the deadline, that’s interest-free financing. However, check for fees and other hidden costs.

The danger here is that if you don’t pay off the balance by the end of the interest-free rate, the interest charges can skyrocket. That’s why credit cards should not be used for long-term financing.

A credit card can be a great option for home improvement financing if you can find one with a low introductory rate, low fees, and you are confident you can pay off the balance within the introductory rate period.

Advantages of Credit Card Financing	Disadvantages of Credit Card Financing
Fast financing	High interest rates, particularly after a low introductory interest rate period has expired
Some cards offer 0% introductory rates	Possibly low credit limits
Less paperwork	High fees

7. Government Assistance Programs

The federal government has grants and programs that can help homeowners pay for renovations. Two home renovation loan options are Title I loans and Energy Efficient Mortgages. Lenders for Title I property improvement loans for your state are listed on the U.S. Department of Housing and Urban Development’s website.

Title I Loans

An FHA Title 1 loan is a fixed-rate loan used for home improvements and rehabilitation. Loans under $7,500 are usually unsecured, but bigger loans may use your home as collateral. These loans may be used in conjunction with a 203(k) rehabilitation mortgage.

The maximum loan terms are between 12 and 20 years, and loan amounts are $7,500 to $60,000, depending on the home’s size and type.

The loan must be used for property improvements, and an FHA mortgage insurance premium of 1% of the loan amount will be added to your interest rate. There is no minimum credit score required, but your debt-to-income ratio may factor into your loan terms.

Energy Efficient Mortgage

FHA’s Energy Efficient Mortgage program (EEM) finances energy-efficient improvements with their FHA-insured mortgage. The borrower must qualify for the loan amount used to purchase or refinance a home. However, they’re not required to be qualified on the total loan amount that includes the amount used to finance energy-efficient improvements. The FHA insures the loan to protect the lender against loss in the event of payment default.

Starting in 2023, homeowners can also get tax credits for some energy-efficient updates, including windows, insulation, new doors, heat pumps, and air conditioners.

These types of programs will reduce the cost of financing for home improvements and are great options if you meet the criteria.

Advantages of Government-Assisted Financing	Disadvantages of Government-Assisted Financing
Low interest rates	Financing must be used for property improvements.
Broad range of loan terms	Strict qualification standards
Tax credits	Larger loans may require your home as collateral.

How to Decide the Best Type of Home Improvement Loan for You

If you’re trying to decide what home improvement loan is best for you, consider the following factors:

Are You Purchasing a Fixer-Upper?

If you are buying a fixer-upper, check if you qualify for either an FHA 203(k) rehab loan or a government-assisted program. You may get cheaper financing this way.

Do You Need Funds Right Away?

If you need funds quickly — for example, you have a broken heat pump or HVAC system — a personal loan or credit card financing are options to explore.

Do You Have Equity Available?

If you have built up equity, a home equity loan or line of credit will provide cheaper financing than a personal loan and over a longer term, so that your monthly payments will be lower. A cash-out refinancing loan might also mean that you could lower your payments and reduce your term if interest rates have dropped significantly since you took out your original mortgage.

How to Get a Home Equity Loan

The first step in getting a home equity loan is to decide which loan is best for your situation. Next, find a lender with the best terms and fill out an application to see if you qualify.

1. Check Your Financial Health

The better your credit score, the better the loan terms will be. If you can boost your credit score before you apply for financing, you’ll boost your chances of getting a better deal. Lenders will also look at your debt-to-income ratio when setting the interest rate and term, so lowering your debt before you apply for a home improvement loan can help lower the cost of your financing.

2. Compare Lenders

You should contact a few different lenders to compare their rates and loan terms. Look for benefits, such as rate discounts for enrolling in autopay, and watchouts, such as late payment fees and minimum loan amounts.

3. Gather Documentation

You will need to submit a few basic pieces of information when you apply for a loan. As a general guide, you will need:

• Proof of income, such as W-2s or 1099s, bank statements, pay stubs, or tax returns.

• Proof of residence, such as your Social Security number and utility bills.

Your current debts, housing payment, and total income will also play a role. Be sure to have all the information your lender may need on hand when you apply to speed up the application process.

💡 Quick Tip: With home renovations, surprises are inevitable. Look for a home improvement loan with no fees required — and no surprises.

4. Apply for Prequalification

Some lenders will prequalify you, which will tell you your interest rate and how much your monthly payments will be. Prequalification should not affect your credit score, whereas a formal loan application could. Applying for too many loans in a short space of time could lower your credit score.

5. Complete the Loan Application Process

Your loan application might be fully online, via phone and email, or in person at a local branch. In cases where you are borrowing against equity, your lender may require a home appraisal. Provided your finances are in good shape, the lender should approve your application, and you’ll receive funding.

How Your Credit Affects Your Home Improvement Loans

Your credit score will affect the total cost of a home improvement loan. The higher your score, the less of a risk you pose to a lender, so the better the loan terms will likely be for a mortgage or long-term loan. The same goes for credit cards and personal loans. Also, if you have good credit, you’ll probably have an easier time securing a home improvement loan.

Can You Use Home Equity Loans for Non-Home Expenses?

Home equity loans and HELOCs are flexible and can be used for anything, not just home expenses or renovations. However, these loans are best suited for long-term, ongoing expenses like home renovations, medical bills, or college tuition.

The Takeaway

The types of loans for home improvements include loans based on the equity you have built up in your home, such as a home equity loan, a HELOC, or cash-out refinancing. You can also use personal loans, credit card financing, and government programs. Loans based on equity tend to cost less over the loan’s lifetime, but they also tend to have longer loan terms. Equity-based loans also tend to be best when you need to borrow a larger amount, because you can spread out the cost over a longer period.

A personal loan will have a higher interest rate and a shorter term, but the higher your credit rating, the better the interest rate tends to be. Alternatively, credit card financing is favorable if you need funds quickly, the amount you need is not too high, and you can take advantage of a 0% introductory rate and pay off the balance before the rate expires.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.

FAQ

What type of loan is best for home improvements?

The type of loan that is best for home improvements depends on your finances and how much you need to spend. If you hold a fair amount of equity and need a sizable amount of cash, a home equity loan, HELOC, or cash-out refinancing may be good options. Cash-out refinancing might be particularly appealing if interest rates have dropped, and you can refinance with better loan terms.

If, on the other hand, you have a smaller project that you expect to complete in a short timeframe, using a credit card that gives a 0% interest rate for a period could be the way to go.

What is the best renovation loan?

If you’re taking on a big project, buying a fixer-upper or planning to renovate an older home, you may want to consider the FHA 203(k) mortgage. The 203(k) rehab loan lets you consolidate the home and renovation costs into a single remodel home loan and avoid paying double closing costs and interest rates.

If your home is newer or higher-value and you have equity, cash-out refinancing can be a good option, particularly if interest rates have dropped.

Should I use a personal loan for home improvements?

Personal loans are a more expensive option for home improvements, especially if your credit score is average. However, using a personal loan for home improvements might be the best option if you don’t have a lot of equity to borrow from.

Are home improvements tax deductible?

Home improvement loans are generally not tax deductible. However, if you use a refinance or home equity loan, some of the costs might be tax deductible. Check with a CPA or tax specialist.

What credit score is needed to get a home improvement loan?

Credit score requirements for a home equity loan depend on the lender. A credit score in the mid-600s might be enough to be approved by some lenders, while others might not approve you with a score above 700. Lenders consider many factors, including your debt-to-income ratio and equity in the home, when considering you for a home equity loan.

Photo credit: iStock/Hero Images

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

SOPL0423002

Source: sofi.com

Apache is functioning normally

October 19, 2023 by Brett Tams

Buying a home is one of the most expensive purchases you’re bound to make in your life. That’s why it’s so important to get the right mortgage before you sign on the dotted line.

A few differences in mortgage rates or other terms can equate to tens of thousands of dollars either spent or saved. But with so many options available on the market, it’s hard to know where to start.

There are traditional lenders and online mortgage lenders, local ones and large multinational ones. Plus, many lenders specialize in different types of loans.

To get started, browse some of the best mortgage lenders and find a few that match your needs.

Best Mortgage Lenders & Online Loan Marketplaces of 2023

You have several great options available, from online lenders to brick and mortar branches, from excellent credit to bad credit lenders. Check out the complete list of lenders to find the best choice for your next home loan.

loanDepot

Offering home loans in all 50 states, loanDepot works with a wide range of borrowers. The minimum credit score for most loans is 620. However, some government-insured programs may allow your credit score to be as low as 580.

LendingTree

LendingTree is the best if you want to compare multiple offers as they partner with the largest network of lenders who compete for your business.

Rocket Mortgage

Rocket Mortgage is a great pick if you prefer applying for a mortgage online and has excellent customer service when needed.

Rocket Mortgage provides FHA loans, USDA loans, and Freddie Mac and Fannie Mae loan products that come with down payments as low as 3%.

New American Funding

New American Funding offers conventional, FHA, and VA loans. You can also explore options for a mortgage that includes a home renovation loan.

Alliant Credit Union

Alliant Credit Union offers both fixed and adjustable-rate mortgages, and you can qualify with a down payment as low as 3% of the home price.

Guaranteed Rate

Guaranteed Rate originated about $24 billion in mortgages for 2018, which is no surprise. The website allows you to get an idea of your qualifying interest rates easily.

First Internet Bank

Solely based online, First Internet Bank is an online mortgage lender that allows you to complete the entire mortgage application from your own home.

Carrington Mortgage Services

If you have a question about a loan, you can chat with a Carrington representative from 7 a.m. until 6 p.m. PST. They’ve even been featured on Lifetime’s Designing Spaces.

Truist

Truist has a significant online presence for mortgages in addition to its physical branches throughout the country.

U.S. Bank

Prequalify online within minutes, and from there, you can start making intelligent decisions about your future home. U.S. Bank offers conventional, fixed-rate loans, VA loans, ARMs, and FHA loans.

Other Top Mortgage Lenders to Consider

Didn’t find one on the list that you liked? Read our reviews of some other good lenders:

How to Find the Best Mortgage Lender

To find the best mortgage lender, it’s wise to compare mortgage rates and terms from multiple lenders. This will help you find a lender that offers the best deal. The lending standards may be similar across lenders, but the way they implement them may vary.

You might be surprised at how much variation you see in your different offers. Plus, mortgage loans can be structured in various ways to accommodate your financial situation or personal preferences.

If you don’t have a lot of spare cash on hand, you may be able to pay a higher interest rate to avoid higher closing costs. If you want to lower your monthly payments, your lender may let you pay for points to qualify for a lower rate.

It’s also helpful to understand where mortgage rates are right now and where they’re headed. A good real estate agent may be able to help you with this as they usually know the market quite well.

Know your credit score and the type of rate you should qualify for so you can negotiate the best deal possible. Some credit card issuers give you your FICO score for free.

How to Compare Mortgage Lenders

Here are some questions you may want to ask when searching for the best mortgage lenders:

How is their customer service?
What can they tell you about their closing costs and other associated lender fees?
How much do you need for a down payment?
How quickly can you close once you find a home?

These are all questions you should pose to at least two or three separate mortgage lenders.

Compare answers and determine which lender can offer you the best financial deal and meet any other expectations you have surrounding the loan process.

What should you look for in a mortgage lender?

Finding the best mortgage lender for your needs can take a while, so give yourself time. If you’re interested in a particular type of loan, such as a VA loan or an FHA loan, make sure the lender actually offers it.

Mortgage Interest Rates

Pick at least two or three mortgage lenders with good customer satisfaction ratings to compare pre-qualification offers. Then, take a look at the interest rates they offer you, whether the rate is fixed or adjustable, and what your monthly mortgage payments will be.

Taxes and Mortgage Insurance

Make sure they include an estimate for taxes and mortgage insurance, not just your principal and interest because that can make your payment increase by at least a couple hundred dollars.

Property Taxes

If you live in a more expensive area like a major city, expect to pay even more for property taxes. Of course, you can always refinance to get a lower rate down the road, but it’s expensive because of closing costs.

Fees and Closing Costs

Next, compare the closing fees of each mortgage lender. Some of the expenses won’t change from lender to lender. A title search, for example, will cost about the same amount regardless of what lender you go through. Origination fees, on the other hand, can vary greatly.

Expect to pay 3% to 5% of the loan amount for total closing expenses. Which end of the spectrum you end up on can make a huge difference in how much cash you’ll need.

A good lender will help you explore your options based on how much cash you have and how long you plan to be in the home.

Mortgage Points

If you have extra money and intend to make your new place your “forever home,” it may be worth paying extra points at closing in exchange for a lower mortgage rate. Ask each lender for different scenarios to see which best fits your individual needs.

How can you get pre-qualified for a mortgage?

There are two ways to start the mortgage process: a pre-qualification and a pre-approval.

Getting prequalified is an informational step to get an idea of what rates to expect and how much you can borrow based on your income and debt levels. You don’t have to supply any documentation at this time.

The quotes you receive are not set in stone and are subject to change with your official application. But it’s good to find out what types of loans you should consider, how much cash you’ll likely need, and what price range of home you should look at.

You’ll need more to actually make an offer on a home because most sellers don’t view a pre-qualification as official enough to indicate likely financing.

What is a pre-approval letter?

A pre-approval letter takes the pre-qualification process one step further. You essentially submit your entire application and all the accompanying documentation.

This includes things like your tax returns from the last two years, bank statements, explanations of any negative remarks on your credit history, and employment verification.

The mortgage lender also performs a hard credit pull to determine your mortgage interest rate. It takes a bit of time, but once you’ve been pre-approved, the lender provides a letter stating how much of a loan you qualify for and how much down payment you can provide.

When you submit an offer on a house, this addition makes it much stronger because the seller knows that you’re likely to get approved for the mortgage. Once your offer is accepted, you can lock in an interest rate with your mortgage lender for a certain number of days.

What type of mortgage should I get?

Some quick introspection is necessary to answer this question. Start by examining your financial position, household needs, and long-term goals. How secure is your income? Where do you want to live in the next few years? How much money can you raise for the down payment?

Answering these questions helps you pick the most appropriate mortgage type for you. Typically, the choice boils down to a conventional or government-backed mortgage. Conventional home loans have stricter requirements, such as a high credit score and sizable down payments. Government-backed loans allow lower credit scores and little to no down payment to qualify.

There are eight different types of mortgages spread across the two categories. Dig in as we explore each of them below.

8 Types of Mortgage Loans

Conventional Mortgage Loans

Conventional mortgages are home loans that the government doesn’t insure and fall into two categories: conforming and non-conforming.

A conforming loan means the loan falls within limits set by the Federal Housing Finance Agency. Non-conforming loans, such as jumbo loans, exceed the FHFA limit, which varies between counties.

Conventional Loan Requirements

Conventional loans have stringent credit score and debt-to-income ratio requirements. Mortgage lenders approve borrowers with a credit score of at least 620 and a 20% down payment. Buyers who can put at least 3% down may also be eligible but must pay primary mortgage insurance.

Pros

Cheaper than unconventional loans
Can qualify by putting 3% down

Cons

PMI on deposits less than 20%
Strict credit score and DTI ratio requirements

Best for: Buyers with large down payments, high income, stellar credit scores, and excellent credit history.

Fixed-Rate Mortgage

A fixed-rate mortgage is a home loan that carries a fixed interest rate over its lifespan. Once the interest rate is locked in, it’s not affected by changes in market rates.

Fixed-rate mortgages are the most popular home loans, thanks to their predictability. Knowing your mortgage payment every month helps borrowers more easily plan their finances. As a result, you can be sure that there are no surprises month-to-month.

Fixed-Rate Mortgage Loan Requirements

Lenders use your credit score, debt-to-income ratio, credit history, income, and down payment to determine eligibility and set mortgage rates. Credit scores are a primary determinant, and most mortgage lenders approve borrowers with scores above 620.

Credit scores above 740, low DTI ratio, stellar credit history, and a significant down payment command the most competitive mortgage rates. Conversely, low credit scores lead to higher interest rates, and a down payment of less than 20% triggers the need to pay private mortgage insurance (PMI).

Fixed-rate mortgage terms range from 10 to 30 years, but 30 and 15-years loans are most popular. The length of your mortgage also determines the interest rates and monthly payments.

Pros

Predictable monthly payments
Nonfluctuating interest rates
Easy qualifications
Large tax deductions

Cons

Higher mortgage rates
High-interest amount
Slow equity growth

Adjustable-Rate Mortgage

As the name suggests, adjustable-rate mortgages carry an adjustable interest rate set by the prevailing market rate. An ARM starts with a fixed interest rate for a few years then changes to a variable rate for the remaining loan term.

An ARM can be locked for one, three, five, seven, or ten years, but 5/1 ARM loans are most common. With a 5/1 ARM, the interest rate is locked for the first five years and then adjusted annually for the remainder of the term.

Typically, the interest rate on an ARM adjusts upwards because the initial interest rate is often lower than the prevailing market rate.

Pros

Predictable and low initial monthly payments
You can save a considerable amount of money at first

Cons

Increased mortgage rates
Monthly payments can be expensive

Best for: Borrowers who are likely to secure a pay hike in the future but want to lock in lower rates when their income is lower.

FHA Mortgage

An FHA loan is a mortgage guaranteed by the federal government and insured by the Federal Housing Administration (FHA). You can only secure an FHA loan from an FHA-approved lender. The agency insures home loans are issued by accredited lenders such as credit unions, banks, and mortgage companies, protecting mortgage lenders if a borrower defaults on payment.

FHA Loan Requirements

These loans help modest-income households buy a home. You need a 3.5% down payment, a credit score of 580 or higher, and a DTI less than 50 to qualify for an FHA loan. You can be eligible with a 500 credit score if you raise a 10% down payment.

Since the government insures FHA loans, FHA lenders can extend favorable terms to people who wouldn’t otherwise qualify for a mortgage. FHA loans carry a mortgage insurance premium (MIP) for at least 11 years, and FHA mortgages with less than 10% down must carry FHA insurance over the life of the loan.

You can use an FHA to buy or refinance a condo, single-family home, 2 to 4-unit multi-family home, and select manufactured homes. In addition, some FHA loans can finance new construction and home renovation.

The limits on FHA loans vary by county, and as of 2021, you can borrow between $420,860 and $970,800. Your county’s living costs determine the limit on FHA loans.

Pros

Requires a 3.5% deposit
High loan limits
Accommodates low credit scores

Cons

Mandatory mortgage insurance
Only finances primary residence

Best for: Low and moderate-income households and borrowers without a large down payment.

VA Mortgage

VA loans are guaranteed by the U.S. Department of Veteran Affairs but issued by private lenders such as mortgage companies, banks, and credit unions. VA loans help veterans, current service members, and eligible spouses buy a home without a down payment.

The government guarantee allows VA accredited lenders to extend favorable terms to borrowers without a deposit. Although VA loans carry attractive terms, they have stringent qualification requirements. Only qualified active-duty service members, veterans, and surviving spouses can apply for VA loans.

VA Loan Requirements

While a VA loan offers 100% financing when buying a home, VA lenders will consider credit score, DTI, and income level when issuing a loan. There are no minimum credit score requirements, but you typically need a credit score of at least 620 to qualify.

In addition, veteran and surviving spouses can only use a VA loan to finance their primary residence. But active-duty service members can use the loan to buy a second home if they plan to move into it within 60 days of closing.

Your county of residence determines the VA loan limit. As of 2021, the county limit on VA loans ranges from $548,250 to $822,375, depending on the cost of living. However, you can get a VA loan that exceeds the county limit if you make a down payment.

Pros

No down payment
Competitive mortgage rates
Lower closing costs
No private mortgage insurance

Cons

Can’t finance an investment property or vacation home
Carries a VA loan funding fee
Strict property requirement

Best for: Eligible veterans, active-duty service members, and surviving spouses.

USDA Mortgage

USDA loans are zero-down payment government-backed mortgages guaranteed by the U.S. Department to help rural homebuyers. The loans help people with modest incomes who can’t buy homes using traditional mortgages.

USDA home loans are offered under the USDA loan program or USDA Rural Development Guaranteed Housing Loan Program. The program aims to bolster the economy and improve the quality of life for people in rural America. It waives the down payment, offers competitive mortgage interest rates, and is highly accessible.

You can apply to any of the three USDA loan programs, including:

Loan guarantees: The USDA guarantees a mortgage issued by a local lender. That allows you to access a loan with attractive terms without a deposit.
Direct loans: These are subsidized home loans for low and very low-income borrowers with interest rates as low as 1%.
Home improvement loans and grants: These are loans or outright grants to help homeowners upgrade or repair their homes. Some loan packages pair the loan with grants of up to $27,000.

USDA Loan Requirements

Qualifying for a USDA-backed home loan depends on the income and size of your household. The income limits vary by location and depend on your county of residence. Only U.S. citizens or permanent residents can use these loans to finance an owner-occupied primary residence.

You can qualify for a USDA mortgage with a credit score of 640 or higher, a DTI of less than 41%, and if the monthly repayment won’t exceed 29% of your monthly income. The USDA may consider a higher DTI for applicants with credit scores above 680. Applicants with scores lower than 640 may still qualify but are subject to more stringent borrowing conditions.

You also need to demonstrate a dependable income over two years, have a good credit history, and have no account in collection within the last year.

The USDA loan limit is a moving target that varies between counties, based on the cost of living. The loan can be as high as $500,000 in high-cost counties like Hawaii and California and $100,000 in rural America.

You can only access a direct loan from the USDA if your home is less than 2,000 square feet and has a market value below your county loan limit. The USDA program excludes metropolitans but covers some suburbs.

Pros

100% financing
Ultra low fixed interest rates
Includes financial grants
No private mortgage insurance

Cons

Geographical restrictions
Finances single owner-occupied residences

Best for: Borrowers with limited financial resources or those wishing to live in rural areas.

Jumbo Mortgage

Jumbo loans finance homes that exceed the FHFA limits of a conventional mortgage. Jumbo loans are considered non-conforming mortgages and are considered high-risk loans.

Since they exceed the FHFA limits, Freddie Mac and Fannie Mae do not guarantee jumbo loans. That means the mortgage lender may incur losses if the borrower defaults. Jumbo loans can carry an adjustable or fixed interest rate and have strict requirements.

Jumbo Loan Requirements

You need a credit score of 700 to 720, a DTI of less than 45%, and plentiful cash reserves in the bank to qualify for a jumbo loan. Lenders require extensive documentation to show excellent financial standing. You’ll need W-2s, complete tax returns, and 1099s as well as your investment accounts and bank statements.

The minimum down payment on jumbo loans is often higher than traditional loans because they lack a government guarantee. Most mortgage lenders require a 10% to 30% deposit. Jumbo mortgage rates depend on your finances and your lender.

Some lenders charge higher rates on jumbo loans than conforming ones, while others offer lower rates. The closing costs and lender fees on a jumbo loan are often higher because of extra qualifying steps and the high loan amount.

You can use a jumbo loan to buy a home, refinance an existing mortgage for cash-out purposes, or purchase an investment property and land. However, since FHFA doesn’t govern jumbo loans, the loan limit could run into the millions.

Pros

Higher loan limits
Can finance investment property
Competitive interest rates
Flexible uses
High loan amounts

Cons

Requires high credit scores
You need high income
Requires plenty of cash reserves

Best for: People buying expensive property and homeowners looking to refinance a large loan.

Interest-Only Mortgages

Interest-only mortgages are relatively short-term loans, usually structured as ARMs for 5 to 10 years. During the loan, borrowers pay interest on the loan without repaying the principal. Since you’re not paying back any borrowed money, you’re not building equity in the home. Your equity in the house remains the value of the down payment and any appreciation in the home’s market value.

At the end of the loan term, your loan amount remains the same unless you’ve made separate payments to offset the principal. Once the initial term lapses, you can pay off the loan, switch to making amortized payments, refinance, or sign up for another interest-only term.

Interest-Only Mortgage Loan Requirements

An interest-only loan requires a good credit score, 700 or higher, a large deposit, and a low debt ratio. There are no standard requirements, so they vary widely between mortgage lenders. But you’ll need to demonstrate an ability to pay and own ample assets to qualify.

Pros

Low initial monthly payment
Low initial mortgage rates
Variable loan terms

Cons

You don’t build equity
Your equity declines if property value drops

Best for: People with high disposable income, large cash reserves, rising incomes, or borrowers who receive large annual bonuses.

Best Mortgage Lenders FAQs

Which lenders have the best mortgage rates?

Mortgage rates can vary significantly from lender to lender, and can also fluctuate over time. It’s difficult to say which lender has the “best” mortgage rates at any given time. It can depend on a variety of factors, such as your credit score, the type of loan you’re looking for, and the location of the property you’re buying.

That being said, some lenders may offer more competitive rates than others. One way to find the best mortgage rates is to shop around and compare offers from different lenders. You can do this by visiting the websites of different banks and mortgage companies, or by working with a mortgage broker.

Another important factor to consider when shopping for a mortgage is the fees associated with the loan. Some lenders may have lower rates but charge higher fees, while others may have higher rates but charge lower fees. Make sure to compare the total cost of the loan, including the mortgage rate and fees, when shopping for a mortgage.

How do I get the best mortgage rate?

To get the best mortgage rate, you should:

Have a good credit score. The higher your credit score, the more likely you are to qualify for a low mortgage rate.
Shop around for rates from multiple lenders. Compare rates from banks, credit unions, and online lenders to find the best rate.
Make a large down payment. Putting more money down on the home can lower your mortgage rate.
Consider different loan types. Adjustable-rate mortgages and shorter-term mortgages typically have lower rates than fixed-rate mortgages.
Consider paying “points” or additional fees to lower your rate.
Get Pre-approved for a mortgage before you shop for a house.
Be prepared to provide extensive documentation to the lender to show you can afford the loan and can make the payments.

It’s worth noting that interest rates are not the only thing to consider when shopping around for a mortgage. You should also compare other terms, fees, and loan programs that lenders offers. It’s always a good idea to consult a mortgage expert or a financial advisor for guidance on this matter.

How much house can I afford?

A widely accepted method for determining how much you can afford to spend on a home is the 28/36 rule. This rule states that you should not spend more than 28% of your gross, or pre-tax, monthly income on housing expenses.

Additionally, the rule states that you should not spend more than 36% of your income on all debt payments, including your mortgage, credit cards, and other loans, such as auto and student loans.

For example, if your gross monthly income is $5,000, you should not spend more than $1,400 (28% of $5,000) on housing expenses, including your mortgage payment, property taxes, and insurance. And you should not spend more than $1,800 (36% of $5,000) on all debt payments, including your mortgage, credit cards, and other loans, such as auto and student loans.

So, if you have $500 in existing debt payments, your monthly mortgage payment should not exceed $900.

Source: crediful.com

Apache is functioning normally

October 14, 2023 by Brett Tams

There is a sinking feeling in your gut that comes with credit card debt, especially when it starts to feel unmanageable. While negotiating a credit card settlement might not sound like a fun solution, there are scenarios when it may make sense. Let’s dive in.

The Difference Between Secured and Unsecured Debt

First, let’s talk about the type of debt a credit card typically is. When a credit card company issues a credit card, it’s taking a big chance on getting its money back, plus interest. It’s more than likely that the credit card you have is considered “unsecured.”

All that means is that it isn’t connected to any of your assets that a credit card company can seize in the event that you default on your payments. Essentially, the credit card company is taking your word for it that you are going to come through with the monthly payments.

Secured debt works a bit differently. They’re backed by an asset, like your car or home. If you default on a secured debt, your lender could seize the asset and sell it to pay off your debt. Mortgages and auto loans are two common types of secured debt.
💡 Quick Tip: With lower fixed interest rates on loans of $5K to $100K, a SoFi personal loan for credit card debt can substantially decrease your monthly bills.

Credit Card Debt Negotiation Steps

The process of negotiating credit card debt usually begins when you have multiple late or skipped payments — not just one. A good first step is to find out exactly how much you owe, and then research the different options that may be available to you. Examples include a payment plan, an increase in loan terms or lowered interest rates.

Once you have that information, you’re ready to negotiate. You can start by calling your credit card company and asking for the debt settlement department. Or, you can send a note by email or regular mail.

You may have to go through a number of customer service reps and managers before striking a deal, but taking the initiative can show creditors that you are handling the situation honestly and doing what you need to do.

When you do reach an agreement, be sure to get the agreed-upon terms in writing.

Types of Credit Card Debt Settlements

Lump Sum Settlement

This type of agreement is perhaps the most obvious option. Essentially, it involves paying cash and instantly getting out of credit card debt. With a lump sum settlement, you pay an agreed-upon amount, and then get forgiveness for the rest of the debt you owe.

There is no guarantee as to what lump sum the credit card company might go for, but being open and upfront about your situation could help your cause.

Workout Agreement

This type of debt settlement offers a degree of flexibility. You may be able negotiate a lower interest rate or waive interest for a certain period of time. Or, you can talk to your credit card issuer about reducing your minimum payment or waiving late fees.

Hardship Agreement

Also known as a forbearance program, this type of agreement could be a good option to pursue if your financial issues are temporary, such as the loss of a job.

Different options are usually offered in a hardship agreement. Examples include lowering interest rate, removing late fees, reducing minimum payment, or even skipping a few payments.

Why a Credit Card Settlement May Not Be Your Best Option

Watching your credit card balance grow each month can be scary. Depending on your circumstances, a settlement may be the best solution for you.

However, it’s not without its drawbacks. For starters, a settlement may result in your credit card privileges being cut off and your account frozen until a settlement agreement is reached between you and the credit card company.

Your credit score could take a hit, too. This is because your debt obligations are reported to the credit bureaus on a monthly basis. If you aren’t making your payments in full, this will be noted by the credit bureaus.

That said, by negotiating a credit card settlement, you may be able to avoid bankruptcy and give the credit card company a chance to recoup some of its losses. This could stand in your favor when it comes to rebuilding your credit and getting solvent again.

Solutions Beyond Credit Card Debt Settlements

Personal Loan

Consolidating all of your high-interest credit cards into one low-interest unsecured personal loan with a fixed monthly payment can help you get on a path to pay off the credit card debt. Keep in mind that getting a personal loan still means managing monthly debt payments. It requires the borrower to diligently pay off the loan without missing payments on a set schedule, with a firm end date.

For this reason, a personal loan is known as closed-end credit. A credit card, on the other hand, is considered open-end credit, because it allows you to continue to charge debt (up to the credit limit) on a rolling basis, with no payoff date to work towards.
💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

Transferring Balances

Essentially, a balance transfer is paying one credit card off with another. Most credit cards won’t let you use another card to make your payments, especially if it’s from the same lender. If your credit is in good shape, you can apply for a balance transfer credit card to pay down debt without high interest charges.

Many balance transfer credit cards offer an introductory 0% APR, but keep in mind that a sweet deal like that usually only lasts about six to 18 months. After that introductory rate expires, the interest rate can jump back to a scary level — and other terms, conditions, and balance transfer fees may also apply.

Credit Consumer Counseling Services

Credit consumer counseling services often take a more holistic approach to debt management. You’ll work with a trained credit counselor to develop a plan to manage your debt. Typically, the counselor doesn’t negotiate a reduction in debts owed. However, they may be able to have your loan terms increased or interest rates lowered, which would lower your monthly payments.

A credit counselor can also help you create a budget, offer guidance on your money and debts, provide workshops or educational materials, and more.

Many credit counseling agencies are nonprofit and offer counseling services for free or at a low cost. You can search this list of nonprofit agencies that have been certified by the Justice Department.

The Takeaway

When credit card debt starts to become unmanageable, negotiating a credit card debt settlement may be an option to consider. There are different types of settlement options to consider. Understanding what’s available to you — and what makes sense for your financial situation and needs — can help you make an informed decision. If a settlement isn’t right for you, there are other solutions, such as a personal loan or credit counseling services, that may be a better fit.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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Source: sofi.com

Apache is functioning normally

October 6, 2023 by Brett Tams

The other day I wrote about how adjustable-rate mortgages might soon make a comeback, given how high fixed mortgage rates have become.

Now that the popular 30-year fixed is priced in the 7-8% range, some home buyers might be looking at alternative products.

This may include the 5-year or 7-year ARM, both of which provide a fixed interest rate for a lengthy period of time before becoming adjustable.

Given how much mortgage rates have increased in such a short time span, these could be viewed as short-term solutions until a refinance makes sense again in the future.

But if for whatever reason you keep your ARM once it becomes adjustable, it’s important to understand how it works.

Adjustable-Rate Mortgage Caps Limit Rate Movement

Today we’re going to talk about caps on adjustable-rate mortgages, which limit how much the rate can move once it becomes a variable rate loan.

As noted, many ARMs are hybrids, which means they offer a fixed-rate period initially before becoming adjustable.

Two of the most popular ARM option are the 5/1 (or 5/6 ARM) and the 7/1 (or 7/6 ARM).

They are fixed for 60 months and 84 months, respectively, before becoming adjustable for the remainder of the loan term.

That loan term is the usual 30 years, so there are still 23-25 years left once it becomes adjustable.

If there’s a 1 after the 5 or 7, it means the loan is annually adjustable. So it can adjust just once per year.

If there’s a 6 after the 5 or 7, it means it can adjust semi-annually. So two adjustments per year.

Once an adjustable-rate mortgage becomes variable, the initial rate is replaced by the fully-indexed rate, which is a combination of a fixed margin and variable mortgage index.

For example, an ARM might feature a margin of 2.25% and be tied to the SOFR, currently priced at say 5.25%. Combined, that would result in a rate of 7.50%.

While a rate adjustment is probably the most frightening aspect of an ARM, note that there are  “caps” in place that restrict rate movement.

The purpose of these rate caps is to limit interest rate increases as a means of avoiding payment shock.

So even if the associated mortgage index tied to the ARM skyrockets, the homeowner won’t see their monthly payment become unsustainable.

Of course, these caps can still allow for a big payment increase, so they’re more a buffer than a full-on solution.

There Are Three Types of Caps on Adjustable-Rate Mortgages

Now let’s discuss the different types of caps featured on ARMs, as there are three to take note of.

There is the initial cap, which limits how much the rate can go up (or down) at first adjustment.

There is the periodic cap, which limits how much the rate can go up (or down) at subsequent adjustments.

And there is the lifetime cap, which limits the total amount the rate can go up (or down) during the entire loan term.

For the record, the lifetime cap may also be referred to as the “maximum interest rate,” which is how high an adjustable-rate mortgage can go.

And the “minimum interest rate” is how low an adjustable-rate mortgage can go, which will often either be the margin or the start rate.

So an ARM loan with an initial rate of 4.5% might have a minimum rate of 4.5% as well, or it might have a minimum rate set to the margin, which could be as low as 2.25%.

As for the maximum, it might be 5% higher than the initial rate. So if the initial rate was 4.5%, it could go as high as 9.5%. Ouch!

But both the initial and periodic caps would apply as well, which could limit the speed at which the rate climbs to those levels.

For example, if the caps were 2/2/5, which is common, the rate could only go to 6.5% after the first 60 or 84 months.

And then it could adjust to 8.5% six months or a year later, depending on if its annually or semi-annually adjustable.

That could effectively slow down the rate increases if the associated mortgage index was surging, as they have been lately.

Of course, it can work against you too if the indexes are falling, limiting rate improvement by the same measure.

Check Your Disclosures to See What the Caps Are On Your ARM

If you elect to take out an ARM instead of a fixed-rate mortgage, it’s imperative to know what your interest rate caps are (and also what index the loan is tied to).

Fortunately, this information is readily available on both the Loan Estimate (LE) and the Closing Disclosure (CD).

It will tell you whether your interest rate can increase after closing, and if so, by how much.

You’ll see the maximum mortgage rate possible, along with the maximum principal and interest (P&I) payment listed.

The year in which the rate can adjust to those levels will also be displayed for your convenience.

A more in-depth “Adjustable Interest Rate Table,” known as the AIR Table, can be found on page 2 of the LE and page 4 of the CD.

As seen in the image above, you’ll find the index, the margin, and the caps, including first change, subsequent change, and the change frequency.

All the details you need to determine how your ARM may adjust will be in that table. This way there are no surprises if and when your ARM becomes adjustable.

Remember, it’s also possible to refinance your mortgage before it becomes adjustable, given these ARMs are often fixed for five to seven years.

So you’ve got time to watch mortgage rates and jump on an opportunity if one comes along while the initial interest rate remains fixed.

This gives you options if you’re hoping for mortgage rates to come down. Just be aware that there’s no guarantee rates will improve and you’ll still need to qualify for a refinance in the future.

This is why the date the rate, marry the house strategy can backfire if the stars don’t quite align.

Still, with ARMs beginning to price a lot lower than the 30-year fixed, they could be worth looking into finally.

Just take the time to educate yourself first before you dive in as they are a bit more complicated than your plain old 30-year fixed mortgage.

(photo: Midnight Believer)

Source: thetruthaboutmortgage.com

Apache is functioning normally

September 30, 2023 by Brett Tams

Very few of us can freshen our home design on an endless budget. But you don’t have to feel constrained by your wallet. That’s because not every piece needs to be the highest quality.

We asked Dallas interior designers where they splurge and where they save to help you stretch your home-decorating fund.

Invest in key parts of your bedroom.

No surprises here. We spend a third of our lives sleeping, so your bedroom matters — even though it’s an area guests may not see.

“Your main bedroom is where you should splurge on yourself,” advises Denise McGaha, owner and principal of Denise McGaha Interiors. “A lot of my clients leave that to the last, and I think it’s so important for you to have a really luxurious, amazing night’s sleep. If you don’t sleep well, you’re not fun to be around the next day.”

Your sleeping environment is key, so invest in a great mattress and high-quality linens. You can save on your accent pieces. This bedroom was created by Nikki Watson of The Design Quad.(Courtesy The Design Quad)

McGaha says the mattress is key, but linens are too. So that’s where to concentrate your funds. What about the rest of your bedroom design? Consider buying lower-tier antiques or quality used pieces instead of brand-new furniture.

You can also look for deals on lamps, rugs and throw pillows, creating a designer-approved look that is budget friendly. “Every time you walk in that space,” McGaha says, “I want it to make you smile.”

Chairs trump table in your dining room.

McGaha used an antique table in this dining room. She advises concentrating your budget on striking dining chairs. A statement light fixture is another good investment.(Stephen Karlisch)

What about the star of the show in the dining area: the table? McGaha says don’t spend a lot, even though it’s one of the biggest pieces, size-wise, in your home.

“I want to encourage people to buy vintage or used tables, because the chairs are where it’s at. People are paying attention to the chair and they’re going to see the back of the chair. Do they even see the base of the table? Especially if you love to entertain, you’re going to put a tablecloth over it a lot. So let’s get you a beautiful antique or vintage table, or use your grandmother’s table, and get new chairs.”

When it comes to what’s over the table, that’s another place to go all out. “Lighting is where you want to spend money,” says Nikki Watson, founder of The Design Quad. “Especially with a new build, people will put in basic fixtures. But if they want to update the space and make it look awesome, then lighting makes a big difference.”

How to redecorate your house for free — using items you already own

In the living room, spend money where people sit.

The living room is all about the return on investment — or in designers’ terms, “seat time.” The more time someone is likely to sit there, the more you should invest in the piece, says McGaha.

So spend time and money picking out a great sofa that will last a long time, but go for less expensive pieces when it comes to to accent furniture. “Like a lounge chair that goes in the room with your really great sofa, you don’t have to spend nearly as much money on that. That way if you get tired of it, you can change it out,” McGaha notes.

“I wouldn’t spend tons of money there because people don’t sit in a lounge chair as long as they relax on a sofa.”

Watson agrees that a sofa is really worth investing in — a neutral sofa, in particular. Bargain accent pillows and throws can be incorporated to stay on trend.

A living space can also be a good choice for spending on lighting, wallpaper and custom upholstery. After all, this room is where we spend many of our waking hours.

“I love to splurge on upholstery,” McGaha shares. “By upholstery I mean getting a piece that’s custom for you, meaning it’s deeper or it’s got a different fill on the cushion, so that every time you sit down you say, ‘I just love this sofa.’”

Where can you save in a living room? Look under your feet. “Rugs are something trendy, so they can be replaced pretty often,” points out Watson.

“I wouldn’t say spend a lot of money, because that trend will change. I know we have faded antique rugs that have been the style for about three to four years now, but now geometrics are coming back in.”

Use lower-cost art prints in secondary spaces, such as a bathroom or guest bedroom. This bathroom is part of a home designed by Watson.(Courtesy The Design Quad)

Limit what you spend in your guest room.

It can be tempting to go big in the guest room to really make an impression on people who stay with you, but resist the urge, says McGaha. Your investment in a space should relate to how much time you, the homeowner, spend there.

“I love to use artist prints instead of originals in hallways or guest bedrooms or bathrooms. I’m always going to tell you not to spend all your dollars in those secondary spaces,” says McGaha. “And while I love my guest rooms to be luxurious and really elegant for guests, let’s not put something in there that only that one person gets to enjoy. They’re only there for a few nights.”

To save in a guest room, you could paint instead of doing high-end wallpaper. Your window coverings can be sale items; so can guest linens and bedding. When you look for deals, you can more easily change out those elements for a style update.

Go for cost-effective pieces in kids’ rooms.

You don’t have to spend a lot on a child’s room. Less-expensive, trendy pieces will create a space they’re happy with — and when their tastes change, you can more easily swap out the furnishings and accessories.(Getty Images)

Keep in mind that kids tend to be harder on furnishings, and their tastes will change as they grow up — so feel free to choose lower-cost, trendier pieces for their spaces. McGaha says the bed is a particular place you can save in a child’s room. Use a metal bed frame and score a fun and comfy upholstered headboard.

Don’t neglect your entryway.

You might not think about splurging on the entry to your home, but hear us out. It’s often the first thing you see when you return home and the last thing you see before you leave. And it’s the first and last impression of your home that guests have, too.

This is where you want to go for original art, amazing lighting and the wallpaper of your dreams. And best of all, it’s a small space compared to other areas in your home, so you can choose just a few things and still have a big impact.

Source: dallasnews.com