How to secure the home loan that you need

Springtime represents new beginnings and is the prime time to get the house in order.

Whether you?re looking to make a first-time purchase, refresh an existing home or simply leverage built-up equity for other reasons, it?s important to figure out which path is right for you and understand the lending options available.

Fortunately, many financial institutions offer various free online tools and calculators to help consumers get a grip on their budgets and get the best financing for their needs.

First-time home buyers have an excellent opportunity to make their move now, as interest rates remain historically low.

First, buyers must start with determining what is affordable. In addition to the mortgage payment, housing costs will include property taxes, homeowners insurance and fees, such as homeowner association dues.

Altogether, costs should be no more than 28 percent of monthly gross income and should leave room to continue servicing other debt, such as student loans, credit cards or auto loans.

When preparing to buy a home, work through credit pre-approval to be ready with a strong offer when the opportunity arises. In addition to reviewing credit history, a loan originator will consider the amount of the down payment.

A down payment typically ranges from 3 to 20 percent, and one that is less than 20 percent may require you to purchase mortgage insurance.

A mortgage originator, however, can provide a variety of lending options to optimize your investment, from 15- and 30-year mortgages to fixed and variable terms.

If the change in seasons is prompting an urge to make some improvements to a much-loved residence, consider financing the updates through a home equity line of credit (HELOC). Eligi?bility depends on how much equity has been built up in the home and the lender’s loan-to-value ratio.

A HELOC works much like a credit card and offers flexibility. A minimum amount is paid monthly, and interest applies to the amount borrowed.

Before embarking on a remodeling project, do some homework. Start with the lender to determine the value of the home and the loan amount available. Then, establish a budget, leaving room for unexpected expenses.

Work with a reputable professional to define the project and its requirements, and shop around for bids and recommendations to confidently select a contractor.

Some lenders offer checklists to help get the most from the investment.

Another option for financing a project through a home’s equity is a home equity loan (HELOAN). As with a mortgage, the loan is granted as a lump sum and is paid back in installments over time, typically 10 to 15 years and at a fixed rate locked in at the time of securing the loan.

A HELOAN works well for a one-time goal to improve the value of a home. Be mindful that either a HELOAN or a HELOC introduce some uncertainty, as monthly expenses will increase and must be maintained to avoid foreclosure risk.

Remember to consult a professional for advice applicable to your specific situation. Start with a lender who can help you identify financial options available to home buyers and owners today.

With careful planning and budgeting, the financing you need may be well within reach.

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