Home Loan Solutions

First time home buyer, second mortgage, refinance, or home equity line of credit? What do all these different loan options mean and which one is best for you?

The home loan business was once very simple and straightforward. The local banker was someone who knew you, your family, and your financial dealings. You asked for a loan and the banker made a decision. Today, money is a commodity that is talked about in the same terms as soy beans or pork bellies. Home loan documents are now called "instruments" and they are bought and sold between banks and lending companies.

If you are a "first time home buyer"?someone who has never owned a home or who has not owned a home within the past two or three years?you can get low-cost, low-interest loans from government supported agencies such as the Federal Housing Authority or, if you have served in the military, the Veterans' Administration.

Homeowners can apply for second mortgages, based on the value of their homes in relationship to the amount still owed. Another option is the home equity line of credit. This allows the borrower to have money available on an as-needed basis. Refinancing pays off the current home loan and starts another loan in its place, usually at a better interest rate.

Lending institutions have different interest rates they charge over the life of the loan. They also charge "points" or percentages of the amount borrowed. Five points on a 10 thousand dollar loan would be 500 dollars. There are also significant "origination fees," and "closing costs" for creating the loan documents, starting the application process and ending the process.