Home Benefits/Eligibility Credit Line/Equity Loan Common Problems HUD Loans
				Introduction Home improvements will eventually be needed by anyone who owns a house and intends on keeping it in functional order. Whether it be plumbing, a new roof, or a redone kitchen, improvements involve work, materials and, in many cases, financing. This is where home improvement loans come into the picture. Generally, home improvement loans involve borrowing money at a fixed interest. These types of loans have traditionally not required any collateral and are restricted to improvements on an owned house (owned by the borrowing party). Many of these loans are created by banks and lenders for the purposes of financing home repairs, remodeling, additions to existing structures, buying add-ons to the backyard like spas or pools, or some other type of improvement to the property. A typical home improvement loan will usually have a loan life term between 15 and 30 years. The design is intended to make it easy for borrowers to access larger sums for expensive projects and handle the cash flow for payment while providing lenders a valuable revenue stream. Since many home improvement loans are based on equity available in the home to be improved, many lenders usually make a specific equity level a criteria for loan approval. In the past, some lenders have offered financing with loan to value (LTV) criteria as much as 95%. However, in recent months that lending flexibility has been replaced with increasingly conservative lending practices, so LTV criteria are much lower now. For smaller projects, it may be better for a borrower to instead consider a line of credit. Lines of credit can either be attached to your home equity (which banks prefer), or as consumer lines of credit similar to a credit card. The interest rates tend to be higher, but the financing benefit is the same in terms of funding improvements. Lines of credit associated with a home equity are called home equity lines of credit or HELOCs. The major downside of lines of credit, however, are that banks can do cancel them at any time with little or no notice. This conservative lending move has been seen frequently in recent months with the downturn of the economy. Regarding the use of the loans themselves, lenders traditionally do not set parameters of the use of the funds aside from using them on a home improvement. So whether it is a kitchen improvement or a new backyard landscaping, the lender is not going to get involved in the details. Additionally, restrictions on hiring are not applied either. So whether you do the work yourself or hire a contractor, the lender again is not going to be involved in that decision-making.   Next - Benefits & Eligibility