Equity

Equity

In simple terms, equity refers to the difference between your total assets and your liabilities. Specifically, in real estate, equity is the difference between the current market value of your property and the remaining balance on your mortgage.

Home equity can be accessed through borrowing, which creates an additional loan alongside your existing mortgage. There are two common types of loans available for accessing home equity: a Home Equity Loan and a Home Equity Line of Credit (HELOC).

  • Home Equity Loan: This loan allows you to receive the entire amount of the loan in a lump sum upfront.
  • HELOC: This option provides you with a credit line that you can draw from as needed, similar to a credit card.

 

Borrowers often utilize these options to finance large expenses, such as home renovations, medical bills, or other significant costs, by leveraging the equity they have built in their property.

It’s important to be aware of the risk of negative equity. This occurs when the remaining balance on your mortgage exceeds the current market value of your home. Factors such as market fluctuations, depreciation, or economic downturns can contribute to negative equity. This situation can limit your borrowing options, as you cannot borrow against negative equity.

Closing Disclosure

One of the most important documents in the mortgage process. This 5-page form lays out your loan terms, like monthly payments, interest rates, and closing costs

Discount Points

Discount points are upfront fees you pay to lower your mortgage’s interest rate. Each point costs 1% of your loan amount and helps reduce monthly payments.

FHA Minimum Standards

HUD requires that homes financed with FHA mortgages meet minimum standards. The property must be safe, secure, and sound for the loan to be approved.

FHA Limits

The FHA sets limits on the amount it can insure for government-backed loans. These limits vary based on location, property type, and conventional loan standards

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