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Helping family is what life is all about but sometimes they need more financial help than you can manage. Buying property is the perfect example. If your kids or another close relative need help buying a home, you may need more capital than you have available.
Depending on how long you’ve owned your home, you may have significant equity in it. Many homeowners are eligible to tap into that equity and use it to help family members become homeowners too. Home equity loans are easy to obtain, providing you with the fast loan decisions you need to help your loved ones become homeowners.
Now is the perfect time for anyone to buy a home. Interest rates are at their lowest and there are numerous loan programs available for buyers with any financial status. If your loved ones need help to build credit, you can be the one to help them by using your home equity.
Other great reasons include:
• Providing money now to buy a house helps your loved ones build equity quickly. Once you’re a homeowner, you earn equity just by paying your mortgage and the natural appreciation homes experience.
• Family members just starting their ‘adult life’ won’t feel stretched financially. With down payment help, they have some leeway. Lenders will offer lower rates and better terms with even a little money down.
• Your loved ones can live within their means. Stretching their budget and trying to make homeownership a reality when they have little money is tough. Many do it but end up house poor. When you provide the down • payment, your loved ones only have to worry about the monthly payment fitting into their budget.
• Parents can contribute up to $15,000 each (for a total of $30,000) without the kids incurring any taxes.
Lenders don’t ask what you’ll use the home equity funds for – it’s your choice! This gives you the freedom to do what you want with the funds, including gifting them to a family member to buy a home. If you apply online, you can get fast loan decisions, and know where you stand to help your loved ones quickly.
It’s easy to get a home equity loan. You decide how much of your equity you want to borrow. Most banks allow you to use up to 90 percent of your home’s value.
Here’s how that looks.
Your home is worth $400,000, you can have up to $360,000 outstanding. If you have a first mortgage of $300,000, there’s still room to take out equity to help your relative buy a home.
Lenders make it easy to gift money for a down payment with the following steps:
• Provide proof of the funds’ origination (the home equity loan)
• Provide proof of transferring the funds to the recipient’s bank account (canceled check or wire transfer)
• Write a quick gift letter stating the reason for the gift and that you don’t expect repayment
If you’re looking for fast loan decisions to help your family members become homeowners, look no further than your home equity.
A home equity loan is easy to obtain, has attractive terms and you can use the money however you want (including gifting it to loved ones). Helping your loved ones get on the property ladder helps them build credit, equity and a solid financial status. You can rest assured knowing you helped your relatives get a good start in life without starting underwater right from the start.
Help your family members today by tapping into your home equity!
Before tapping into your home’s equity and adding to your monthly obligations, consider the following.
• Don’t borrow so much that you can’t afford your mortgage payments. A home equity loan is in addition to your original loan. If you’re gifting the funds, make sure you can afford the extra payment. If you loan the funds, make sure the payment you and your relatives agreed on either covers your home equity payment or you can afford it yourself.
• Don’t max out your home equity. It’s a good idea to leave some money in your home. You can’t predict the future. What happens if you need money in a pinch in a few years? Leaving a cushion helps ensure you are in good shape.
• Make sure you get the best terms. Interest rates and terms are incredibly attractive today. Look at your options, including a home equity line of credit, home equity loan and cash-out refinance to see which one is the best for you financially.
There’s one other alternative. If gifting money doesn’t sound appealing, you can be your relative’s ‘lender.’
Rather than gifting the funds, you can loan it to them. If you do, make sure the terms are clearly outlined. It’s easy to misunderstand if you only agree verbally. Instead, create a clearly written agreement that all parties sign and date.
If you want to help your loved ones build credit, you could even report the payments to a credit bureau for them.
In the agreement make sure you include the loan amount, the expected payment amount, payment frequency and any other specific terms, including what happens if your loved one has financial trouble and can’t pay. A written agreement avoids any misunderstandings, arguments and family issues.