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Home Finance – The Adventure To Financing The American Dream
The Three Little Pigs headed out on their adventure to live the American Dream. Each pig's journey led to different savings plans, different loan arrangements, and different complications. Home finance decisions can either destroy someone's plans or positively impact one's investment.Choice 1: Straw - Short Longevity With High Interest
The first pig, Mr. Quick Fix, spent little time saving for his home. Home finance education seemed a waste of time. A poorly constructed home seemed to meet his needs. With no down payment and bad credit, Mr. Quick Fix opted for a home mortgage loan with high adjustable interest rates, several points, and a long term. He built up almost no equity before The Big Bad Wolf came along and blew apart his shelter. With no equity to tap into for home improvement, Mr. Quick Fix was forced into foreclosure and bankruptcy.Choice 2: Twigs – A Non-conforming Structure With A Point or Two
The second pig, Mr. Flexible Branch, took a little more time to decide on his dream home. He had little down payment but good credit. Mortgage brokers were willing to work with him as long as he paid an extra point or two. He listened carefully to home finance advise but felt too intimidated to ask the right questions. His loan was based on an adjustable rate for 15-years. His monthly payments were slightly higher than he wanted, but he built up equity in no time. Mr. Branch felt the adjustable rate worked in his favor during the sturdy financial environment. When The Big Bad Wolf came along and blew in his home, he had enough equity to do many of his home improvement projects.Choice 3: Bricks – A Solid Loan With Low Payments
The third pig, Mr. Firm Deal, did a load of research before locking into a 30-year fixed rate loan. He applied the free advice he found from an online savings plan and rented before purchasing. When the time was right, he built a solid foundation with 20% down payment and a prime interest rate. His credit was so great that brokers and lenders were willing to cut deals. Every once awhile, he took out a home equity line of credit to do a few home improvements and increased the value of his home. When The Big Bad Wolf finally reached his home, the Wolf has little affect: the house stood firm and Mr. Deal repaired the minor damage without affecting his investment.