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Frequently Asked Loan Questions

Bills.com Team
UpdatedFeb 28, 2024
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    4 min read

Do I need to own a home to get a loan?

No, there are many loans for which you do not need to own a home. Personal or signature loans are unsecured loans that can be used in the same way that a home equity loan would be used. Also, don't forget about car loans, boat loans, student loans, and so on. The first two are secured by the car or boat in much the same way that a home secures a home equity loan. And student loans are administered differently from other types of loans, but home-ownership is also not a requirement for obtaining them.

What is the difference between an interest rate and the APR?

Interest is a monthly cost that the borrower pays on the unpaid balance, while the APR includes any interest and finance charges.

Can I get a loan if I’m not a U.S. citizen or if I live outside the country?

Yes. As an example, you would be eligible to get a loan for a home so long as the property you are purchasing or refinancing is located in the United States.

How much can I afford to pay for a home?

How much you can afford to pay for a home depends on you financial situation, your debt, and other factors. Financial calculators are a convenient way to establish how much you can afford to spend on a home.

How much can I borrow to purchase a home?

How much you can borrow depends on your existing credit rating, your income, your debt-to-income ratio, existing loans you have, and other factors. Home purchase calculators can help you estimate the amount you can borrow.

Should I insure my home loan?

Yes, if your finances can afford it. Loan insurance takes care of the amount you will owe the home loan company or bank in case of injury, illness, or death.

How much can I borrow?

There are two types of home equity loans: a traditional home equity loan (also called a second mortgage) and a home equity line of credit.

How much will my home equity payments be?

The most important items to have on hand when applying for a home equity loan are 1 month's worth of pay stubs from your employer, your previous two-years worth of W2 forms, a copy of your monthly mortgage statement, your homeowner's insurance policy, the mortgage note on your current mortgage, social security card, and your driver's license.

How much will my adjustable rate payments be?

The interest paid on a home equity loan is deductible as long as the loan amount does not exceed the existing remaining equity in your home.

What is the difference between a traditional second mortgage and a home equity line of credit?

There is a significant difference between a second mortgage (also called a traditional home equity loan) and a home equity line of credit. A second mortgage is exactly that — a second mortgage on a property that already has a mortgage. A home equity line of credit, however, is a financial arrangement where a bank gives you a checkbook or credit card to make purchases, which then accrue against your home’s equity.

What are the typical terms of a home equity line of credit?

The terms of your home equity line of credit will vary. For example, if your credit line has a variable interest rate, your loan payments may change. So, you want to ask your lender specifically what terms are involved. Find out how often and how much your payments can change. You should also ask whether you are paying back both principal and interest, or interest only. In addition, you should inquire about late payment penalties and under what circumstances the lender can consider you in default and demand immediate full payment.

What is the average repayment period on a home equity line of credit?

Many home equity plans/loans establish a fixed period during which you can borrow money. At the end of this “period,” some plans allow you to renew the credit line; however, not all plans allow renewal. In those cases, you won’t be able to borrow additional money, and you might be required to pay any outstanding balance at the end of the period.

Mortgage market: a pulse check

It is expected that mortgage rates are subject to change. Homebuyers and those refinancing their mortgages should pay close attention to the latest mortgage rate

Mortgage rates February 21, 2024
According to Freddie Mac, the 30-year mortgage rate for the week of February 21, 2024 is 6.9%. This represents a 13 basis points increase from the previous week's rate.
Note: A basis point is equal to one-hundredth of one percent (0.01%). In numerical terms, if the mortgage rate changes by 20 basis points, it means the rate has changed by 0.20%.
According to Freddie Mac, the 15-year mortgage rate for February 21, 2024 is 6.29%. This is a 17 basis points increase from last week’s rates.

Understanding the impact of mortgage rates on your finances
When it comes to determining your monthly payment, mortgage rates are a key factor to consider. Here are the avergage interest rates (APR) for February 25, 2024 based on Zillow data for borrowers with a high credit score (680-740) in the United States:

  • 30-year conventional loan is 6.88%
  • 15-year conventional loan is 6.08%
    Based on the provided rates, a $279,082 30-year mortgage would result in a monthly payment of $1,834. Alternatively, a 15-year mortgage would require a monthly payment of around $2,367.

Explore your options and secure pre-approval today!
To make your life easier, we highly recommend shopping around for mortgages and getting pre-approved. This will streamline the home-buying or refinancing process and make it a breeze. Ready to get started? Check Out mortgage rates now for the best options available.

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