How Do You Get a Home Loan for a Fixer-Upper?

Purchasing a home of their own is a dream for many people. But the high price of property often means that it can take a long time and a lot of saving to own a home. To save money, many prospective buyers decide to look for a property that needs some TLC. But getting a home loan for a fixer-upper has some nuances to keep in mind.

Securing a mortgage for a fixer-upper is a great way to get into a property that you can afford. Buying a home that needs a little attention is also the perfect way to make the home uniquely yours as you do updates, upgrades, and renovations.

For any home loan needs, the expert team at TwinCity Lending is here to help. Our concierge service ensures you get the best rates, service, and closing process.

Why Choose A Fixer-Upper?

Choosing a house that requires work can seem daunting, but it can also offer a host of benefits:

A Lower Price – If you have your heart set on a particular location, but the prices are out of your range, then a fixer-upper could be the perfect solution. Due to their less-than-perfect state, they often carry prices below market rate. The lower price point makes them a fantastic option. You could find yourself living in your dream location for a fraction of the cost.
An Older Home – In general, fixer-uppers tend to be older properties. This is perfect if you are looking for a space that is bursting with character and original items. Rather than designing a house that looks like all of its neighbors, you can restore the period features such as windows, cornices, and super-high ceilings. It is exciting to bring charm and majesty back to a faded beauty.
A Chance to Make It Your Own – One of the significant appeals of a fixer-upper is the opportunity to put your spin on a property, and make it feel like your home. This chance is particularly exciting if you are planning to stay for the long term. You can design your perfect dream home right from the outset.

What Are Your Options?

When deciding how to get a home loan for a fixer-upper, many buyers opt for a renovation loan. This type of loan package is beneficial when you want to buy a property that needs some work. It allows you to finance the purchase of the home, as well as the essential improvements required into one loan. You only have one monthly payment to cover the mortgage and renovations.

This streamlined home loan package is an ideal way to get started on homeownership without a considerable outlay of cash. Some of the most popular renovation loan options include:

FHA 203(k): This choice comes through the Federal Housing Association and is accessible to those with a lower income and credit score. The FHA 204(k) is suitable for most home improvement projects. You can use the funds to carry out both structural and cosmetic renovations. Even better, work can begin as soon as you close.

It is important to note that these loans are only suitable for primary residences. You will not be able to submit an application for renovations on a rental property or second home. There are also limitations on what you can do with the funds. Luxuries such as a pool or extreme landscaping do not qualify for using the loan money.

There are two types of 203(k) loans: limited and standard. The limited version is available to use for any renovations up to $35,000, as long as they don’t require major structural work.

The standard option covers projects with budgets over $25,000 or where significant structural improvements are necessary. For this route, you must work with a HUD consultant. They will help the homeowner analyze bids and oversee all inspections.

VA Renovation loan: The loans offered by the Department of Veterans Affairs went through a recent update. Now they are eligible for use in the purchase and renovation of a home. Note that for this type of loan, you will need a VA-approved contractor, and there may be a construction fee attached to the loan.
Fannie Mae HomeStyle: A HomeStyle loan requires a higher credit score than the FHA 203(k) loans. But almost any home improvement is eligible, including landscaping or even installing a pool. With Fannie Mae backing, this loan is a popular choice if you are planning a total luxury overhaul of a property.
CHOICERenovation Loan: Guaranteed by Freddie Mac, this option carries a lot of benefits. It is ideal for those seeking a lower-cost home to purchase since it has a low down-payment requirement. Borrowers can even earn a down payment by making repairs themselves before closing.

A renovation loan is a perfect way to ensure that you can meet all your financial obligations while still working on developing and building your dream home.

How Do I Get Started On a Home Loan for a Fixer-Upper?

If you decide to head down this route, the first step is to talk with your lender. It is best to work with a mortgage broker rather than a loan officer who works with only one institution. The broker will be able to offer you more options for your financing needs. They will walk you through your options and help you determine the best loan for your needs.

Once you have a plan with your lender, it’s time to go house hunting. Be sure you have an experienced real estate agent who can help you through this process. And unless you plan to do the work yourself, it’s a good idea to have a contractor available to give you some advice and input as well.

When you are in contract on a property, you will likely need to obtain estimates for the work to be done. Sometimes this information is necessary to close the transaction.

TwinCity for All Your Lending Needs

No matter what stage of home buying you are in, the friendly staff at TwinCity Lending is here for you. We can help you navigate FHA and VA loans, as well as home equity and jumbo loan packages. Reach out today to get started.

November 30, 2019December 1, 2019

What Is a Reverse Mortgage and Is It a Good Idea?

There are a lot of opinions on the wisdom of using a reverse mortgage. Some people believe it is the best thing to happen to an older person’s finances. Others stress the pitfalls and dangers of this type of home loan.

The reality is somewhere in the middle. A reverse mortgage can be an excellent option for many homeowners. But it does carry unique rules and risks that people need to pay attention to before signing on the dotted line.

At TwinCity Lending, we take care of seniors with the respect and dignity they deserve. We will not steer you toward a home loan package that isn’t the right fit for you. But if a reverse mortgage is appropriate, we can help.

What Is a Reverse Mortgage?

A reverse mortgage is a home loan that works the opposite way of a traditional forward mortgage. In this type of loan, the home serves as collateral, just as it does in a forward home loan. But most other components of the mortgage work in reverse.

With a reverse mortgage, the homeowner borrows against the property’s equity. The lender makes payments to the homeowner instead of the other way around in this scenario. In essence, the borrower can convert their home equity into a significant amount of cash.

Seniors who qualify and choose to take out a reverse mortgage often use the cash to supplement their retirement income. Depending on the type of loan package, there may be stipulations on how the borrower uses the funds.

What Happens to a Reverse Mortgage If the Homeowner Dies?

Many concerns about reverse mortgages center on what happens when the homeowner passes away, moves, or sells the home. But protections are in place for this situation.

Lenders cannot offer a loan for more than the value of the home. Additionally, if the home’s value drops, making the loan balance larger than the home value, the borrower is not responsible for the difference. The borrower’s estate also will not need to repay that difference.

The loan is due in full when any of these events take place:

The borrower passes away.
The borrower sells the house.
The borrower moves out of the home for more than a year. This situation can happen in cases where the homeowner needs to go into nursing care.

Typically, the heirs or the estate sell the home to repay the loan. In some instances, the estate or heirs may choose to pay back the loan and retain the property.

Three Types of Reverse Mortgages

For those considering taking out a reverse mortgage, it’s essential to understand the options.

Single-Purpose Reverse Mortgage: This option is generally the least expensive loan choice. But it also is the most restrictive one. Single-purpose reverse mortgages are available through particular government and non-profit agencies. The loan paperwork specifies what the funds are for, and that is the only way the homeowner can use the loan money.

Proprietary Reverse Mortgage: This loan option is a rarely-used reverse mortgage. It is only available to borrowers with much higher home values than what a typical reverse mortgage allows. Although you may be able to borrow more money, you are likely to have a higher interest rate, as well.

Home Equity Conversion Mortgage (HECM): The HECM is by far the most common form of a reverse mortgage. This version does not have income or medical requirements. HECM loans have backing from the U.S. Department of Housing and Urban Development. Because of this fact, borrowers must go through a mandatory counseling session before proceeding with the loan. The homeowner pays for the counseling appointment.

Who Qualifies for a Reverse Mortgage?

This type of home loan is not as widely available as a traditional mortgage. There are specific requirements for qualification, and several of them relate to the home, not the borrower.

You must be at least 62 years old and live in the home.
The home must have sufficient equity, as determined by the lender.
The property must be a single-family home. Two-, three-, and four-unit properties also may qualify if the borrower lives in one of the units.
You must have enough income to cover home maintenance and other costs, such as insurance, taxes, and HOA fees.
For HECM options, you will need to undergo the required HUD counseling session.

Is a Reverse Mortgage a Good Idea?

More than a million seniors have secured reverse mortgages since they became available in 1990. This loan option has allowed many homeowners to remain in their houses in spite of fixed retirement incomes. As with any home loan package, there are benefits and downsides to consider.

One of the greatest benefits to a reverse mortgage is the ability to remain in your home while freeing up money for expenses. Homeowners who have significant equity can supplement their income this way, allowing them to live a fuller life in retirement. Since there are no income or medical restrictions for obtaining an HECM, the reverse mortgage can be simple to get.

Many seniors like the idea of having additional income during their golden years. They appreciate controlling their money without having to rely on children or other family members for assistance. And as many people seek ways to age in place, the reverse mortgage is gaining popularity.

Those who qualify can receive their reverse mortgage funds in several ways:

Lump-Sum Payment: This distribution is the only one with a fixed interest rate and typically has a cap of 60% of your equity.
Equal Monthly Payments: These payments can last the life of the loan or for a set amount of time, depending on loan terms.
Line of Credit: Seniors can draw against their equity and are only responsible for repaying the amount they draw.

Let’s Talk

If you or a loved one are considering a reverse mortgage, reach out to the experts at TwinCity Lending. We will thoroughly explain the ups and downs of this type of home loan to be sure you are set up for success. There are many scams out there, and we want to be sure you have protection.

It is our honor to serve the seniors in our community who have already contributed so much. Give us a call today to see if a reverse mortgage is right for you.

November 11, 2019November 30, 2019

What Is a VA Home Loan Certificate of Eligibility?

When it comes to home loans, the VA program is one of the most popular programs on the market. And rightly so, in our opinion here at TwinCity Lending. But many veterans aren’t sure how to start the process of securing a VA mortgage. It may feel overwhelming to get started, but the first step is to obtain your VA home loan certificate of eligibility.

This vital document also called a COE, is where your VA lending process begins. The VA loan eligibility letter tells the lender that you can receive home loan funding through this unique program.

The team at TwinCity Lending is proud to serve our nation’s active and veteran military members. It is an honor to help you secure a home loan so that you can enjoy the many benefits of the American Dream.

What Is a VA Home Loan?

Before getting too far into your eligibility journey, let’s clarify what a VA home loan is and how it works. This program has been vital in the stability of our nation.

The United States Department of Veterans Affairs oversees the VA home loan program. Passed in 1944 as part of the Servicemen’s Readjustment Act, the VA home loan provides backing for mortgages for those who serve in the military.

The Department of Veterans Affairs does not extend the loan for a home purchase. Instead, it guarantees the loan so that a lender has less risk in making it. Many service people leave the military without a credit history. And obviously, someone who is actively serving or recently discharged doesn’t have a traditional job history either.

With traditional home loans, these two factors would be stumbling blocks. Lenders would see this sort of borrower as too big of a risk. The VA-backed loan, however, provides partial repayment of the mortgage if the borrower cannot pay. This minimizes the risk that a lender must take.

In addition to backing the loan, the VA program also offers:

Low or zero-down payment requirements
Lower credit score requirements
More lenient income requirements

Those who qualify can use the VA home loan option to purchase a condo, mobile home, or single-family dwelling for their primary residence. It also allows borrowers to secure a loan to build or refinance their primary residence. It is not available to use for second homes or investment properties.

A home loan through the VA provides an incredible opportunity for military members and their families. It is a well-earned benefit for their service.

How Do I Get a VA Home Loan Certificate of Eligibility?

To secure your crucial COE, you will have to verify that you are eligible for the loan. There are specific requirements based on when you served, whether it was during war or peace, and how long you served. The reason for your separation from the military is also a factor.

Once you know that you are eligible for the program, you need to obtain the VA loan eligibility letter. To secure your certificate of eligibility, you can apply online through the Department of Veterans Affairs website. You can also apply by mail, although this takes more time.

As soon as your document arrives, you are ready to work with a lender to secure a home loan. The COE will work for any lender who offers VA mortgage options. Take the time to choose a lender you trust and who will answer all your questions. Many veterans opt to work with a mortgage broker such as TwinCity Lending to receive the best service, selection, and interest rates.

What Is the Process for Getting a VA Home Loan?

When you have your COE in hand, obtaining your home loan will look much like it does for anyone else. Once you have chosen a lender or broker, the process is generally quite simple. It typically breaks down into five steps.

1. Get a Pre-approval Letter from Your Lender

Whoever you choose to work with for your VA home loan will generate a letter of pre-approval. This letter tells you and your real estate agent how much you can spend on a home. Once you are ready to make an offer on a property, this letter is crucial. It shows the seller that you are prepared to move forward right away. Buyers without this letter have a harder time entering into a contract.

2. Find Your Perfect Home

Work with an experienced realtor to find the right house for you and your family. Unless you have a critical time frame to work within, you don’t need to rush. Buying a home is one of the most significant investments you will make, so go ahead and take the time you need.

3. Enter into Contract on a Property

Your real estate agent will help you make an offer once you find the home you want. If the seller accepts, then you are under contract to buy the house. Congratulations! This step is when your VA home loan lender will kick into high gear. There will be an appraisal and inspection, and you will likely need to provide more documentation to the lender.

4. Close the Transaction

At TwinCity Lending, once we have all your documents, we typically can close on your home loan within two weeks. Assuming nothing significant shows up in the inspection and appraisal process, this is a relatively speedy part of buying a home. When you and the seller have signed everything, the paperwork will go into the county records. At that point, you will have the keys to your new home.

5. Move into Your New Home

Now it’s time to enjoy this well-deserved reward of homeownership. You served with bravery and honor, and now you can cherish a home of your own. Thank you for your service.

Connect with a Premier Mortgage Broker

TwinCity Lending offers personalized concierge service to all of our clients. And it is an honor to serve those who have served our nation.

Reach out today with any questions about the VA home loan process. Our expert team will help you on your road to buying your very own home.

October 28, 2019November 5, 2019

Can I Get an FHA Home Loan With Bad Credit?

Having bad credit doesn’t always have to stop you from buying a home. If you have a steady income that allows you to make a monthly mortgage payment, you may be able to get an FHA home loan even with bad credit.

There are several pieces of your financial health that a lender will look at, but there are options for those with credit challenges. Working with a mortgage broker is the best choice for finding a home loan package that will work for you.

At TwinCity Lending, you can learn how to get a home loan from our lending specialists. Contact us to learn more about the options we offer.

Will an FHA Home Loan Help You Buy a Home?

The Federal Housing Administration (FHA) provides financial backing to qualified consumers. The FHA is not the lender for your home loan. Instead, they insure the loan so that lenders are willing to extend credit to borrowers who don’t qualify for traditional mortgages.

This program offers potential buyers the chance to secure a home loan even if they do not have a high credit score or a large down payment.

A conventional mortgage typically requires a buyer to have up to a 20 percent down payment to purchase the property. It also generally demands credit scores of at least 700 to secure a home loan with the best interest rates. FHA loans are different.

The benefits of an FHA loan are numerous. They can include:

Lower interest rates on the home loan you secure
Reduced closing costs
Lower down payment requirements
Improved access to credit with lower application requirements
The ability to purchase a more expensive home due to the lower interest rate

Every situation is different. Even if you have bad credit, you may qualify for an FHA loan so that you can enjoy the benefits of homeownership.

What Are the Eligibility Requirements for an FHA Loan?

There are a few things you need to know about how to get an FHA home loan. Not everyone with bad credit will qualify. Those who wish to buy a house using this type of loan still need to provide proof of income to show they can make a consistent monthly payment.

To obtain an FHA loan, you must have a minimum credit score of 500. If your number is higher than this, you may qualify for additional savings opportunities. If you have a credit score of at least 500, you may be eligible to borrow up to 90 percent of the home’s sale price. This opportunity means you would need to provide only 10 percent as a down payment.

Some borrowers who have a score of at least 580 may benefit for additional financing opportunities. Your down payment requirement drops to just 3.5 percent at that point.

In addition to credit score expectations, other requirements exist. You will need to show:

Proof of consistent, adequate income
A debt-to-income ratio that is within the lender’s range
Proof that the property is in good enough shape to qualify

Your TwinCity broker will help you learn if you’re eligible to get a home loan using the FHA program. We can answer all of your questions about the requirements.

What If Your Credit Score Isn’t That High?

As noted, FHA does not provide home loans. Traditional lenders do. That means you still must meet the lender’s standards for borrowing money.

The FHA backing offers protection to the lender since it is riskier to provide a loan to someone with poor credit. Should you default on the loan, the FHA will pay the lender for their losses. Thanks to that financial protection, the lender is willing to extend you a mortgage at a reasonable interest rate.

If your credit score is lower than 500, the FHA may not be willing to approve your loan application. That means lenders would face a significant risk. This risk will likely mean they will not offer you a home loan. If you have a sub-500 credit number, consider following these tips for improving your credit score before you try to secure a mortgage.

Pay Down Your Debts

Instead of using credit, make purchases with a debit card or cash. Focus on paying down or eliminating consumer debt to lower your debt-to-income ratio. This ratio is a significant piece of the lending picture. If you have too much debt compared to your income, a lender will not risk extending you a loan.

Check Your Credit Report

You can get a free copy of your credit report every year from each of the three credit bureaus. Take advantage of this service and check that everything on your credit report is up-to-date and accurate. Errors will lower your credit score, so address them quickly.

Make On-Time Payments

One of the most significant impacts on your credit score is your ability to make payments on time. Use auto-pay features with your utilities and credit card companies to make sure the payments are never late.

Avoid Opening New Lines of Credit

When you are preparing to seek an FHA home loan, or any mortgage option, don’t open new lines of credit, such as new credit cards. Even if a new credit card has a zero balance, it raises a red flag to lenders. It is potential debt, and it gives them pause.

Consider Debt Consolidation

There are no legitimate companies that can repair your credit for you. Instead, ask your lender if there are options for consolidating your debt to pay it down faster. You might want to seek help from consumer credit bureaus as well. And once you do secure an FHA home loan, the TwinCity experts can explain how to use your home equity for debt consolidation when the time is right.

Ready to Apply for an FHA Loan?

As you work with a lender to determine if you qualify for an FHA home loan, continue to make all the right financial moves:

Build up your down payment.
Create a budget and stick to it.
Pay down your debt.
Consider adding new income, if possible, to help boost your ability to qualify.

If you want to learn how to get an FHA loan or to learn about applying for any home loan, contact TwinCity Lending. Our team can help you to find a mortgage package that will work for you, even if you have less-than-perfect credit. Reach out today to schedule a no-obligation consultation with our team.

October 14, 2019November 5, 2019

Your Guide to the Mortgage Interest Deduction: It’s Not Gone!

As 2019 is coming to a close, most of us turn our attention to end-of-the-year festivities. Along with great food and joyous time with friends and family, the end of the year also means taxes. Because nothing says “party” like talking tax law and mortgage interest deductions.

So as you embark on the holiday season, you are probably eagerly anticipating tax time right around the corner. No? Just us?

Regardless, if you are a homeowner or are considering buying a house, it’s essential to have accurate information about the tax benefits. It is especially crucial to understand how your mortgage interest factors into taxes.

Every year it is important to get your ducks in a row to make sure you are prepared for the annual rite of taxation. Part of that preparation includes becoming knowledgeable about what you can deduct and what you cannot.

And to add a little spice to the meatball this year, the Tax Cuts and Jobs Act (TCJA) kicks in. This tax reform bill arrived on the scene in 2018, but it did not kick in to affect tax returns until this year.

The TwinCity Lending team is here and ready to help you become a homeowner so that you can take advantage of the associated tax perks. Reach out today to ask questions or start a loan application. You’ll be in the home of your dreams in no time.

Tax Reform Misconception

In addition to changes in tax brackets, tax rates, family benefits, and standard deductions, there is a change in the mortgage interest deduction. Unfortunately, many homeowners mistakenly think that this tax break disappeared with the new law.

There has been a lot of uproar over this supposed elimination of the deduction. But it didn’t go anywhere. It just changed. If you are a homeowner, it is likely you still qualify for this deduction. But first, let’s review and clarify what your mortgage interest is.

What Is Mortgage Interest?

Mortgage interest is the amount of money you pay for the privilege of borrowing the money needed to buy a home. When you fill out a loan application and seek preapproval for a home loan, the lender will tell you what interest rate you will pay to borrow the money. This rate works just like the interest on any other credit card, student loan, or car loan. But mortgage interest rates are generally much lower than others. This amount will be part of your mortgage payment each month.

Your monthly payment will generally cover the following obligations:

Principal loan amount
Interest charges
Mortgage insurance, if required
Homeowner’s insurance, if not paid separately
Property taxes, if not paid separately

Historically, those who own homes have been able to include the amount they pay in mortgage interest in their itemized deductions on tax returns. This tax benefit lowers the person’s taxable income, potentially saving them money.

Did the Mortgage Interest Deduction Disappear?

No, it did not go away. It’s still there, and most homeowners can take advantage of it.

Under the old law, homeowners could deduct the mortgage interest on a principal loan amount of up to $1 million. They also could deduct interest on home equity loans of up to $100,000. These deductions applied to primary residences or second homes.

So what changed? Taxpayers who are married and filing jointly now may deduct the mortgage interest on loan amounts of up to $750,000. The number is $350,000 for individuals. So although it is different now, the mortgage interest deduction is still around. And many people can benefit from it.

There is even more good news. If you acquired your mortgage before December 16, 2017, the old limits apply to you. So it is not all gloom and doom, as you may have heard. Securing a home loan and buying real estate is still a worthwhile financial goal.

Can I Still Deduct the Interest on Home Equity Debt?

This question doesn’t have as clear-cut of an answer. The tax bill removed the home equity interest deduction in some circumstances.

Specifically, to deduct this interest now, a homeowner must use the loan to buy, build, or make large-scale improvements to their primary or secondary residences.

The new tax law changes keep valuable tax deductions within reach of most homeowners. The majority of home loans qualify the taxpayer to claim the mortgage interest deduction.

And a home equity loan or line of credit remains a great option to pay for big-ticket items. It can make it possible to get a new roof, a kitchen remodel, or an awesome second home.

And even if you need to use home equity for other needs, such as debt consolidation, it can still be a smart idea to do so. The interest rate for HELOC options typically is much lower than the rate on credit cards and other consumer debt. So it can be a worthwhile plan, even if you can’t deduct the interest. TwinCity Lending can help you get this started.

Is Homeownership Still the Right Choice?

Buying real estate is absolutely the right move when it comes to building long-term wealth. Even with the tax reform changes, most homeowners will be able to deduct their mortgage interest.

Any time there are sweeping changes to tax laws, misconceptions and myths can make the rounds. But the new bill does not eliminate the mortgage interest benefit as some do believe. This long-standing deduction has helped homeowners for decades, and that isn’t changing.

TwinCity Lending Is On Your Side

Regardless of how the new tax rules affect you, the experts at TwinCity Lending are here to help you through the home loan process. We are a concierge mortgage broker team, and our experience and training have us ready to answer all of your home loan questions.

Whether you are just getting started as a home buyer or want to add to your existing real estate portfolio, we have you covered. We offer competitive mortgage interest rates and can help you with programs for veterans, first-time buyers, and more.

Reach out today and let our experienced staff make your dreams of homeownership a reality.

September 7, 2019November 5, 2019

Teach Your Teens How to Get a Home Loan

Having a family discussion about how to get a home loan may not rank at the top of the to-do list as a parent. But it’s a component of one of the most important talks you’ll have with your teen.

Financial management is critical for every teenager to learn. Instilling good knowledge and skills now may help them avoid problems later. Start by sticking to the basics, and then expand their knowledge to include other topics that may apply to them.

If you’re looking for help on how to get a home loan, our team at TwinCity Lending is just a call away. Give us a call today.

Teach Your Kids About Credit First

An excellent place to start is with a solid understanding of credit. When your son or daughter reaches college and begins to use credit, you want them to make empowering decisions. Unfortunately, from 2004 through 2009, college students saw median credit card debt rise by 74 percent.

You can’t rely on schools to teach students this information, either. Only 17 states require high schools to include a course on personal finance.

Start the conversation with a definition of what credit is, why we should use it, and why we shouldn’t overuse it. Here are some points to talk about:

Credit is beneficial because using it wisely shows lenders that a person is a reasonable credit risk. That means they may qualify for loans in the future.
Talk about the burden that credit creates when we overuse it. Discuss the cost of using credit, including interest, and how that makes a simple purchase expensive.
Also talk about how to choose credit based on interest rates and fees, rather than the available limit.

Talk About How to Get a Home Loan and the Opportunities It Provides

Most consumers need to use a home loan to purchase a house. A great place to start this conversation is with an explanation of the down payment. Many lenders require a down payment, but a young person may have no idea what that is or how they could come up with so much cash.

This is a great time to discuss savings vehicles that can help your children achieve this goal. You also can explain other aspects of home loans, such as insurance and interest.

What Is a Mortgage Anyway?

Be sure you also explain exactly what a mortgage is. Teach your kids that it is a lending tool for buying a home, also known as a home loan. The value of the house works as the collateral for the loan. That means if the borrower stops making payments, they can lose possession of the property. The lender owns the home until the borrower repays the loan

For older students, it can also be valuable to talk about different types of mortgages. This topic should include FHA loans and VA loans for veterans. Discuss the value of buying a home and why real estate tends to be a solid financial decision for many people. This conversation is also a great way to bring up the importance of buying versus renting a home.

Interest Rates on Home Loans

In your initial discussion about credit, you should be explaining how interest rates work. And it is critical to teach young people what they need to do to qualify for low interest rates later in life. They need to understand how to maintain a good credit score in the years leading up to buying a home. This conversation should include the fact that the actual amount you pay for a home is significantly higher than the sale price, due to interest amounts.

How Does Home Equity Work?

Home equity is an important topic to cover with your teens and young adults. It helps to open their eyes to how they can use credit in their favor. Home equity, which is the amount of the home’s value that is not under a mortgage, is a powerful asset. For example, some people pay off their student loans or other debts using the equity in their home.

What makes equity so important is that it tends to build up over time. This growth builds funds that a homeowner can access for other needs. With lower interest rates and qualifications, equity can be helpful for the lifetime of owning the home.

What Makes a Lender Offer a Home Loan to a Consumer?

Drill into your children the value and importance of good credit. Are you sensing a theme here? You can pick up an ad or browse through a real estate website with your child to see the value of various homes. That’s a big number for most teens. Why should a bank loan that enormous amount of money to a consumer to buy a home?

This conversation should include the idea of risk for the financial institution. Lenders offer loans to consumers who are a good risk. That is, they are willing to loan you the money if they feel confident you can pay it back. What makes a borrower a good risk?

Steady employment
A good credit score
A low debt-to-income ratio
Good references
A larger down payment

How to Pay Off Student Loans – Making the Connection

As college tuition and fees escalate, your teen may be feeling anxious about being able to afford higher education. If your child is set up for success in owning a home, they will have options for paying off student loans with their home equity.

A student loan conversation gives you the chance to talk to your teen about how to pay off any loan. They should learn that it is vital to pay more than the monthly payment and always pay on time. Learning how expensive it can be to pay off debt can help your teen see the value in keeping it in check throughout their lifetime.

You’re Not in This Process on Your Own – Let Us Help You

Whether you’re teaching your child how to get a home loan, pay down debt, or use credit, one thing is for sure. It is all critical information. And for your own lending needs, put your trust in TwinCity Lending. Contact our dedicated team to learn more about how we support you and your growing children on your financial journey.

Call TwinCity Lending now for a free mortgage review at 651-303-4236 or learn more about our services.