A number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.

If you are shopping for a mortgage with a lot of lenders and we tell you while reviewing your credit report with you that your score has suffered due to excessive inquiries, we may ask you to prepare a letter of explanation which may help us to minimize the effect of the penalty in getting you the loan program you deserve.

There are 5 factors that impact your credit score:1) Payment History2) Outstanding Credit Balances3) Credit History4) Type of Credit5) Inquiries

Credit scoring has been utilized by lenders for over 30 years. Credit scoring is a technology used by credit grantors to qualify the risk associated with extending credit to a given borrower. Risk is quantified by means of a score card which calculates a numeric value, or score, for a credit applicant a lender wants to evaluate. Score calculation is done based on information that has been determined to be indicative of future credit performance. There are many types of scoring methods currently utilized today including credit scoring, applicant scoring, behavioral scoring and several others. The type most relevant to the mortgage industry is credit scoring and among the most widely recognized is the FICO SCORE.

A value (score) is assigned base on the following criteria, in the order of their weight in the scoring formula, payment history, outstanding balances in relation to credit limits, length of credit history, number of inquiries, and the type of accounts.

There are three major credit bureaus that lenders use to “pull” your credit. These companies are:• Experian (Formerly TRW)• Trans Union• Equifax Each of these companies maintains a separate credit report on you based off information gathered from your creditors. Depending on who your lenders are and which Credit Bureau’s they report to, if not all three, will determine the differences in your credit report from each company. At a bare minimum you need to order a report from one of these companies directly or through an intermediary. The best thing you could do is order a Tri-Merge report. This report is one that merges the information from all three Bureau’s into one report so you can see the information that all three credit providers are reporting about you. Mortgage Professional will have access to this report for a reduced fee.

In order for these accounts to be added to your credit report you must actually use the newly issued card at least once to activate it. It usually takes about 90 days for these type of accounts to be reported on your credit report.

The scoring model will differ depending on whether you’re applying for a mortgage, credit card, auto loan, or insurance.

Credit scores you get from companies that advertise online many times are in fact not the actual score your Loan Officer will see. These scores are not based on the same scoring models that are used when have your credit pulled by your Loan Officer for the purpose of a mortgage loan.

FICO scores generally range between 300 and 900.

Scores are based on a person’s whole credit picture. No one factor determines a score. A credit score is a composite of both positive and negative information such as missed payments or bankruptcies (if any) as well as accounts paid satisfactorily. That said, several areas of the credit bureau report carry the most weight in a credit score.

You might consider getting added as an authorized user on a credit card account that has excellent payment history is over 3 years old and has a high credit limit with a low balance. This could increase your credit scores by as much as 20 points per account.

Slight variations in your credit score can have a dramatic effect on the rate you can receive on a home mortgage.

Always review your credit to be sure it is correct.

When shopping for a mortgage or any item that may require a credit check, do not allow your report to be pulled too many times. If your report is pulled too many times, in a short period of time, your credit score may adversely affected.

Free Credit reports advertised never give you a detailed information. It gives you just the accounts open and their balances. They don’t give you scores. A free report is not always the best representation of your credit. You should consultant with a mortgage counselor to get a more detailed view.

A credit check inquiry stays on your credit report for 12 months.

Most lenders obtain scores from three sources and use the middle score to base your qualification.

No more than 7 inquires will be used to calculate the score. Multiple inquires within 14 days, will be counted as a single inquiry. This applies to auto inquiries and mortgage inquiries. Being late on your mortgage is no worse than being late on your credit card. A 60 day or more late is significantly more damaging than a 30-day late. In most cases an unpaid collection is just as bad as a paid collection.

Credit scoring is a scientific method that uses statistical models to assess an individual’s credit worthiness based on their credit history and current credit accounts. Credit scoring was first developed in the 1950s, but has come into increasing use in the last two decades.

Your credit score can play a vital role when lenders decide to extend you a loan. Over 75% of mortgage lenders and nearly 100% of subprime lenders review your current credit scores when making lending decisions, and depending on your score they may offer you a different rate or term then they would otherwise.

I can understand how your credit score can be confusing. I want to thank you for reading the information above. If you would like to continue this conversation than please contact me so you and I can discuss your financial situation. Please read more valuable information and when you feel comfortable I would like you to contact me.

Biggest single factor to credit score is your mortgage. Having one mortgage late is a red flag.

By keeping all of your revolving credit balances below 50%, you will get a higher score. Below 30% is even better

Yes, mortgage accounts are looked at big time. FICO scores are most affected by lates on mortgages than lates on credit cards. They figure, if you cannot be financially responsible enough to pay for your house (the roof over your head) then you are not financially responsible at all. I’ve seen 100 points be taken away from a single 30 day late on a mortgage.

Sometimes credit bureaus can report inaccurate information about you. It is important to resolve these issues since they may hurt you in the loan process. You should talk with your broker about any inaccurate information or contact the three major credit bureaus. Equifax Credit Bureau P.O. Box 740241Atlanta GA 30374-0241(800) 685-1111http://www.equifax.comExperian (Formerly TRW Credit Bureau)P.O. Box 949Allen TX 75013-0949(888) 397-3742http://www.experian.comTrans Union Corporation (Credit Bureau)Consumer Disclosure Center P.O. Box 390Springfield PA 19064-0390(800) 916-8800(800) 682-7654(714) 680-7292It is important to check your credit report annually for errors or potential fraud. If you suspect errors, immediately contact the three credit reporting agencies. If you believe there is wrong information, you should be prepared to provide documentation to the agencies so that they can clear it up.

If there is incorrect information on your credit report such as a payment that was reported late that should not have we will be able to correct the information within 3-5 days by going directly through the 3 major credit bureaus and get a rescore to reflect what your credit score should be.

It might be worth taking a look at your credit report to see just what potential lenders are going to find on your report. In fact, you are entitled to a free credit report within 60 days if a lender has denied you credit based on their review of your credit report.

Credit counseling in lieu of filing bankruptcy has help many Americans out financial issues. Today, there are lenders who are comfortable lending money with a borrower currently in consumer credit counseling as long as the consumer has been on time with the monthly payments.

Many lenders look at credit counseling the same as bankruptcy or just barely a step above bankruptcy. Credit counseling is not always the best route to go to take care of credit card debt. Ask your mortgage professional if there are any options or other ways to deal with your debt first. A debt consolidation refinance can many times save you hundreds and sometimes even thousands of dollars.

If you are considering credit counseling, please speak to a mortgage consultant first if you plan on purchasing or refinancing a home. Entering credit counseling may limit the number of lenders willing to lend to you.

Other sites: Mortgage Broker | MIP | Why choose a mortgage Broker| Pay Option Arm Calculator

Debt to Income Ratio is a term used within the mortgage industry.

There are two ratios that most lenders use to determine your ability to repay a loan. One is referred to as your “back-end”. This ratio is basically your total debt to income ratio. The second ratio is referred to as your “front-end”. Usually, this ratio is considered your housing expenses to income ratio.

The ratio of the your total monthly obligations, which includes housing expenses and recurring bills, in relation to your monthly income. Lender use this to decide your ability to repay the mortgage and all other debts. Your DTI ratio is an important factor in deciding the loan amount you can qualify for. It shows your qualifying ratio, or your financial capacity to pay the mortgage, in addition to your other bills.

Factoring your debt to Income Ratio is one of the basics involved in determining a borrower’s risk profile for a mortgage loan. Borrower’s who have a low debt to income ratio will have much greater discretionary income and pose a lower lending risk. Borrowers with a high debt to income ratio will be considered a higher risk.

Not too long ago in the mortgage industry, the Debt-to-Income ratios are expressed in two sets of two digit figures, such as 28/36, in which 28 represents a “front end” ratio of 28% of total income and 36 means a “back end” ratio of 36% of income. Nowadays, banks are more concerned about the “back end” ratio and all but disregard the “front end” ratio. Most have also raise the “back end” ratio to over 40%. In other words, mortgage banks are now allowing borrowers to use 40% or more of their monthly income to qualify for home financing, provided they have no other debts.

Debt to Income Ratio is usually all your total payments divided by your total monthly income. Lenders usually allow exceptions to this by not counting certain accounts such as deferred student loans, accounts with less than 10 monthly payments remaining and accounts the applicant can prove are paid by someone else.

Gross income is used in determining your Debt-to-Income ratios. Gross income is the monies you have earned before you pay taxes, this number is usually substantially higher than the money you deposit in your bank account every week.

Sometimes a lender will determine that your debt-to-income ratio is too high for you to qualify for a mortgage. Often, you can still qualify if some debts are paid off prior to or at closing.

If you have student loan payments that are deferred, ask your preferred Mortgage Professional about having this payment excluded from your debt to income ration.

Do not be afraid to apply if your debt ratio exceeds that standard quotas as electronic underwriting has approved debt ratios in the 60 to 70 percent range and equity in the property, excellent credit history and/or sufficient assets all help in getting this through.

The debt to income ratio is a control the lender uses to offset and measure risk. The higher the DTI the higher the risk. The higher the risk the higher the rate, or the lower the LTV.

Include all of your income sources on your loan application. Be sure to include sources such as child support, social security and similar types. They all can be figured into the final DTI and may greatly affect your final interest rate.

Most lenders now days will mainly be concerned with your back end ratio. 41% or below will fall into the conforming lending guidelines. Subprime lenders may even go up to 55% ratio. You will need a mortgage professional to pull credit and look at your income to calculate the ratio for you.

Failure of a borrower to make timely mortgage payments under a loan agreement.

Borrowers with a delinquent mortgage will generally have a higher interest rate than those who are not delinquent. Credit scores also play an important factor in this.

Different types of delinquency will affect your score in different ways. A late payment on your mortgage is the most damaging.

Your credit report will reflect these late payments, using the standard symbols listed below, to read the late payment history. i.e.: R2 would show a revolving (credit card) debt, that has been past due more then 30 days. O = Open (entire balance due each month) R = Revolving (amount due can change each month)I = Installment (fixed amount due each month)0 = Approved, but account is too new to rate or not yet used 1 = Paid as agreed 2 = 30 or more days past due 3 = 60 or more days past due 4 = 90 or more days past due 5 = 120 or more days past due or is a collection account7 = Making regular payments under a wage earner plan or other repayment arrangement8 = Repossession9 = Charged off account

Having delinquencies on any loan will decrease your credit score, and will make it more difficult for you to obtain financing for your home.

If you know that your credit report contains delinquencies which are incorrect or are not attributed to you personally, please tell one of our loan specialists about the situation so that we may assist you in removing the delinquencies and qualifying for the loan program you truly deserve.

Your delinquency will have a major impact on your credit scores. The more recent the delinquency, the more your scores will drop.

A delinquency on a mortgage loan will be considered a greater derogatory factor than a delinquency on unsecured credit by a mortgage loan underwriter. For this reason, homeowners would be advised to do everything possible to try and make their mortgage payments on time.

Delinquency is when you fail to make mortgage payments, when they are due. For most mortgages, payments are due on the 1st day of the month. Even though they might not charge a “late fee” right away, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.

Delinquencies are also known as “lates.” On your mortgage they are reflected in days 30, 60, 90, or 120. A 120 day late is also considered foreclosure, in the eyes of any lender.

If you ever get seriously behind in your mortgage payments and feel foreclosure looming be especially wary of companies offering assistance. Often these are scam-artists who swindle thousand’s from unknowing homeowners, sometimes leaving them penniless and homeless.

Most lenders consider a loan to be delinquent when payments on the loan are 30 to 60 days past due.

Most lending banks will overlook delinquencies if the homeowner can satisfactorily explain the cause of the delinquencies and the unlikelihood of recurring. Acceptable causes include divorce, separation, tragedy in the family, loss in the mail caused by relocation, etc. Homeowners are often required to supply supporting documents.

If you find yourself in a situation where you might not be able to make all of you monthly obligations you want to make sure that you make your house payment in time as to not be 30 days late. A 30 day late on your house payment can hinder you from qualifying for a mortgage more so than a 30 day late on a credit card.

There are many lenders that will finance you even if you are delinquent.

Other sites: Mortgage Broker | Conforming Loans | FSBO | Mortgage banker | 1003 The Loan Application | New Credit Card Minimum Payments | AZ Mortgage Source | Delinquency | The Lending Process | Reasons Loan Applications Are Rejected | CCRs | Fixed-rate mortgage | VA | Consolidating Credit Card Debt into Your Mortgage| Pay Option Arm Calculator

No. Imagine if perfect credit was required. Few loans would be made and every lender in town would be bankrupt.

If you have poor credit you should strive to improve your credit rating after securing a mortgage. This will allow you to refinance at a conforming rate and save you money every month.

When banks underwrite a mortgage application, there are four major factors they consider. Credit history is only one of four. Lenders also examine the loan applicant’s ability to repay the loan, the homeowner’s asset reserves, and the loan amount in relation to the property value, in other words, how much is the homeowner putting up in the property. With one or more of the other three factors being above average, even a homebuyer with below average credit profile can easily obtain a mortgage.

Even if you have filed for bankruptcy or are currently in foreclosure, contact us about refinancing your property. You do not need perfect credit, even bad credit is OK with us because we have thousands of loan programs for borrowers of all credit types.

There are some lenders that do not even look at FICO scores. This is because sometimes people have not established any credit , but yet will still make rental payments and utility payments on time. These various payment histories will appear on an individuals credit report.

If you are thinking about buying a home but you are not quite sure if you can qualify then it might make sense for you to contact a mortgage broker. A good mortgage professional will not only look at your credit but will also look at your complete financial picture to see what makes sense for your current situation. They will also make recommendations on what programs will be available for your situation. If you are unable to obtain a mortgage now a mortgage professional will help guide you through what needs to be accomplished so you can qualify real soon.

There is no such thing as ‘perfect credit’ . All consumers who have a credit rating fall into either ‘conforming’ or ‘subprime’ financing category. There are even programs for first time borrowers who have no credit history. However, some consumers who have had difficulty meeting their commitments may have credit so damaged that they could be asked to raise their credit score to qualify .

Perfect credit is not needed to get a mortgage because most lenders do not judge borrowers on credit alone. Although, credit is a big factor when applying for a mortgage each lender has different criteria to be approved for a mortgage. Lenders also take into account a borrower’s mortgage/rental history, employment history, and other factors. There are many lenders that target borrowers with less than perfect credit which is called sub-prime lending.

There are many different types of mortgages that you will be able to get without perfect credit. Some programs use the credit score only, only the mortgage history, and some will even disregard collections and judgments allowing them to exist without having to pay them off.

Sub-Prime lenders specialize in people with less than perfect credit. With the loan programs available in today’s market most people can purchase a home.

Fannie Mae and Freddie Mac reduce the costs of borrowers, who meet the underwriting requirements of the agencies, and who need loans no larger than the largest mortgage the agencies are allowed by law to purchase. For 2006 the maximum is $417,000. It is raised every year in line with increases in home prices.

There is no company in America, taking bigger strides or that is more committed to providing lending for the purpose of expanding minority homeownership.

The Conforming Loan limits set by FNMA (Federal National Mortgage Association) for 2006 is $417,000 for single family residence, $533,850 for duplex, $645,300 for triplex, and $801,950 for quads. Hawaii and Alaska have Conforming loan limits 1.5 times higher than the continental U. S. Mortgages with loan amounts higher than the conforming limits set by Fannie Mae are referred to as “Jumbo Loans”.

These loans offer the best rates for borrowers. You do not need perfect credit to qualify and they also will take very high debt to income ratios, sometimes as high as 65%.

A FICO score is a number that rates a borrowers credit record. The score is based on a number of factors, including how well debts have been paid off, current levels of debt, types of credit, and length of credit history. Scores generally range from 350 to 900.

However if you are applying for a very aggressive loan, like a pay option arm, or responding to a promotion for excellent credit borrowers, multiple recent mortgage lateness’s will make it very challenging for us to get you a loan with the terms you are expecting. More than your improving your FICO score on your credit report, working to remove lates through credit repair will help ensure you get the home mortgage refinance or buy new home mortgage you deserve.

If there is incorrect information on your credit report such as a payment that was reported late that should not have we will be able to correct the information within 3-5 days by going directly through the 3 major credit bureaus and get a rescore to reflect what your credit score should be.

Credit scoring has been utilized by lenders for over 30 years. Credit scoring is a technology used by credit grantors to qualify the risk associated with extending credit to a given borrower. Risk is quantified by means of a score card which calculates a numeric value, or score, for a credit applicant a lender wants to evaluate. Score calculation is done based on information that has been determined to be indicative of future credit performance. There are many types of scoring methods currently utilized today including credit scoring, applicant scoring, behavioral scoring and several others. The type most relevant to the mortgage industry is credit scoring and among the most widely recognized is the FICO SCORE.

You should periodically review your FICO score and see if there is anything you can do to improve your score.

The are five main categories of information that the FICO score evaluates:1. Credit Payment History: 35% 2. Credit Balances: 30%3. Credit History: 15%4. Credit Inquiries: 10%5. Credit Types: 10%

Credit Payment History: 35%At 35% Credit Payment History weighs the most. While events such as a bankruptcy, foreclosure or tax liens will have the greatest negative impact on your score, multiple and/or recent late payments have a tremendous impact as well.

A new law allows borrowers to receive a free copy of your credit report from each of the credit reporting agencies every year. Visit www.annualcreditreport.com

The Fair, Isaac Corporation,(FICO) developed the formula for credit scoring. In general, the higher the score, the more creditworthy a borrower is in the eyes of the lender. A score of at least 680 indicates the borrower is very creditworthy.

Credit Balances: 30%What is your credit balance to your credit limit? The Outstanding Credit Balance ratio has the second highest weight on your credit score. High balances on your credit cards can be viewed as a red flag since it’s an indication that you may be overextended. If you have multiple credit cards, you may want to spread the wealth to keep the credit balances to credit limit ratio low.

Credit Inquiries: 10%Opening a new credit account doesn’t harm your credit score dramatically especially after you make the first payment. However, credit inquiries can negatively impact your score. Generating many credit inquiries exudes that you are trying to secure a large amount of credit or you are being turned down by lenders and have to apply elsewhere.

FICO score is one scoring system used by Experian, a credit profiling company. Two other companies have similar scoring systems that are just as widely accepted by lending banks. Together with Experian’s FICO score, credit reports that contain Trans Union’s Empirical score and Equifax’s Beacon score are often referred to as the Tri-Merge Report.

To keep a healthy or high FICO score you will need to at the very least do these 3 things:1 – Keep your balances on your credit cards to 50% of what your limit is2 – Always pay your bills on time – if you have to hold a bill and pay late make sure it’s not more than 30 days to post. 30 day lates really bring your credit scores down 3 – Try not to cancel cards you have had for a long time. Length of time on accounts plays a part into the scoring

For more information on how credit scores are developed, please visit: air, Isaac and Company (FICO)www.fairisaac.com200 Smith Ranch Road San Rafael, CA 94903ph: (415) 472-2211

There are many credit fixing agencies that will help raise fico scores for a potential borrower so they can put themselves in an overall better position for obtaining a loan. If your fico scores are low, there are still plenty of things that can be done to help bring scores up. Sometimes it takes little time and sometimes it takes longer but in the end the results can be fantastic.

Credit History: 15%Credit History is a reflection the length of time that you’ve had accounts open. You’re rewarded for keeping long term debt. Older credit accounts that have been used more frequently will have more weight than those that are newly opened or used with less frequency.

Most lending institutions categorize scores in to ranges. Generally scores above 800 are considered excellent, scores from 700-799 are considered good, scores from 600-699 are average, scores from 500-599 are considered poor, for scores below 500 there are very few lending options available. There are many lenders and each has their own guidelines for qualifying borrowers.

Credit Types: 10%This percentage of your FICO score is based on your mix of credit. Do you have a good mix of credit cards, retail accounts, installment loans, finance company accounts or mortgage loans? It looks at the whole picture and totals how much of each type of account that you have.

In the early 1980s the three major credit bureaus, Experian, Equifax and Trans Union all worked with the Fair, Isaac company to develop generic scoring models that allow each bureau to offer a score based solely on the contents of the credit bureau’s data about an individual. Creditors-especially those in the mortgage industry-frequently use the scores when deciding who receives loans. They can order your score, commonly called a FICO score, from one of the bureaus, but it only draws upon information from your credit report. Individual creditors often also consider other information, such as your salary or how long you have been employed at the same company when making loan decisions.

Your mortgage broker will be happy to review your FICO score and your complete credit report with you in detail, which is often a much better alternative to struggling to make sense of the abbreviated reports delivered by free credit report websites. Ask your mortgage professional for more information about this important subject.

Most people do not have perfect credit. Most people have FICO scores ranging from the low 600s to the high 700s. Mortgage applications typically are not rejected because of a few late payments.

The floor rate is the lowest rate that is allowed on an adjustable rate mortgage. Most borrowers understand that an ARM can increase, but depending on the type of loan they can also decrease to match market changes. The floor rate is the lowest rate that an ARM can adjust down to.

The initial interest rate on a subprime adjustable rate mortgage usually is the floor rate. When the fixed rate period on these mortgages end the rate can increase, but they usually do not decrease.

Many Brokers and Loan Officers do not disclose the floor rate in the Truth in Lending Disclosure, because it is not required by law.

A Floor rate can also refer to the lowest rate available on any given loan program, fixed or adjustable. This means that the lender is unable or unwilling to write a loan lower than this “floor rate” even if the borrower is willing to pay to buy it down.

If you obtain an adjustable rate mortgage and the rate does not go up or down after the initial fixed period, do not assume that the loan is simply a fixed rate mortgage as the floor rate and an index that is lower then when you originally financed may be the reason for the rate staying the same.

Other sites: Mortgage Broker | Why choose a mortgage Broker | Delinquency | What not to do after you apply for a Mortgage| Pay Option Arm Calculator

The GFE is a list of all the closing cost that are involved in the loan; such as discount points, processing fees, underwriting fees, title fees, taxes and insurance, and any other fee that might be associated with the loan. 800 section of fees- charges from the broker, 900 section –charges required by the lender(pre paid interest, mortgage insurance, etc) 1000 section- reserves required by the lender(taxes and insurance), 1100 section- fees charged by the title company(closing fee, title search, title insurance, etc) 1200 section- fees required by the local government( recording of the loan, etc)

Borrowers must understand that there is no requirement in the law that the Good Faith Estimate be accurate within any certain percentage to the fees that are actually charged at closing. It is only required to be issued “In Good Faith”, a somewhat arbitrary standard that is difficult to prove one way or another. Working with an experienced, licensed and knowledgeable mortgage professional rather than just whoever purports to have the lowest rate will likely increase a borrowers chances of having very similar fees at closing to those shown on the GFE.

There are several reasons why the GFE may change from when it is originally disclosed to what is represented at closing. If the loan amount changes this will affect any points on the loan as well as some of the title charges. If the date of closing changes this will change the per diem interest. Estimates may be included for the taxes and insurance, when the actual numbers are determined this can change the GFE. If the broker needs to change lenders for one reason or another this may change some of the fees, as each lender has different fees that they charge. If the rate changes for some reason (borrower’s credit drops and they no longer qualify) this can affect the closing costs. There are many acceptable reasons for the GFE to be inaccurate and have some small changes by the time you get to closing. If the changes are major make sure you have your broker walk you through the original and final GFE and explain any discrepancies. Don’t be afraid to ask questions. There are some changes that may not be acceptable to you such as additional points. If this is the case try to negotiate with your broker, don’t be afraid to walk away. In most cases you are entitled to a copy of the final HUD-1 at least 24 hours prior to closing.

The Good Faith Estimate along with the Truth-in-Lending is required by law to be given to borrower within 3 days of applying for a mortgage. They need to be signed and dated by borrower to ensure compliance.

The best way to determine which lender actually offers you the best mortgage deal is to carefully examine each lender’s closing cost estimate. Be aware however, that not all closing cost estimates are alike. In an attempt to make themselves more attractive to customers, some lender’s closing cost estimates leave out significant fees. Generally speaking, a Good Faith Estimate should include the following: the loan origination or broker fee; points; prepaid homeowner’s insurance; an appraisal fee; title search and insurance; tax adjustments; and mortgage insurance if you are putting less than 20% down.

A Good Faith Estimate is just that, an estimate and subject to change. In fact, final closing costs cannot be estimated until closing when the final HUD-1 settlement document is presented.

People often believe that the Good Faith Estimate is the best way to compare loans. In fact, that is not true. The Truth-in-Lending disclosure (TIL), which also takes into account your APR, is a more accurate way to compare loans, in terms of their cost to you.

The fees listed on the GFE are estimates only. Depending on many factors, your GFE may change during the loan process, and for that reason it cannot be considered a commitment to lend.

The charges can vary on the Good Faith Estimate. Escrow accounts will vary depending on how many months need to be set-up, when you close will affect the prepaid interest, different lenders will have different fees, and some general fees are added which may not be needed such as a survey or a pest inspection.

The Good Faith Estimate is only an estimate or range of charges. For example, the lender may not know the costs for a settlement agent that you choose, or the exact amount that will be collected for an escrow account for taxes and insurance.

Home Equity Line of Credit (HELOC) is a line of credit against which a homeowner can borrow as often as his financial situation calls for. He can borrow and pay off the debt any time he chooses. When there is an outstanding balance, the required payment is the interest accrued every month. When there is no balance, he incurs no finance charges.

A heloc can be used when interest rates are low to purchase vehicles and other large items which would normally be financed with fixed rate loans. Check with your tax consultant about writing off the interest that is paid on these items. HELOCS can have a check and credit card attached to them for ease of use when purchasing against the equity of your home.

Ways to use your Home’s Equity to your advantage is to get the rate down as low as possible. One option is Auto debit. You can receive a discount rate if you automatically debit a set amount each month from your credit line. It can be used to pay bills or car payments. Option two, some lenders will give you a discount rate if you agree to use your credit limit as soon as you get it.

Most banks allow homeowners to borrow up to 100% of the house value. A handful of “non-prime” lenders even lend up to 125% of the value. As one can imagine, there are many restrictions on such high Loan-to-Value Home Equity Line of Credit. One of the most common restriction is an appraisal report on the property to ensure the house value is supported and that the local housing market is not in a down trend with declining values.

HELOC’s are usually fully indexed at the Prime Lending Rate plus an additional number of interest points depending on what the borrowers credit score is, and how much money is borrowed against the property -vs.- its’ value.

Home Equity Loans, similar to all mortgages, are secured by the house. Should the homeowner defaults on payments, the bank can foreclose on the house that is used as collateral.