How to Obtain a Home Improvement Loan

How to Obtain a Home Improvement Loan

After several years in your home, the question of home improvements is bound to come up. Sometimes it is due to necessary repairs and maintenance. For others, it is a great way to add value to your property. Unfortunately, these improvements often come with a steep price tag. If you are looking for ways to fund your projects, here is how to obtain a home improvement loan to help you update your house.

The Prep Work to Obtain a Home Improvement Loan

Before you set a meeting with a bank or lender, you should know what to expect. This includes knowing what questions they will ask and having the necessary documentation in hand.

The first thing any lender will do is run a credit check. You can do this beforehand by running a ‘soft’ credit check through Experian. If you know what your current score is, then you will have a better idea what loan options the bank or lender can offer you.

Next, the lender will ask for income verification to ensure you can repay the loan. So, take some time to prepare the documents like pay stubs, W-2s, or recent tax return for the self-employed. If you have an appraisal of your home and the projected cost of the project, it will also present you as a more favorable applicant.

Types of Home Improvement Loans

The scale and financial needs of your project will also affect which loans are available to you. Your financial health will also greatly affect the interest rates and terms offered. Here are the most common types of home improvement loans.

Unsecured Personal Loans

With an unsecured loan, you do not need to provide collateral to secure the loan. The interest rates the lender can offer you will depend on your credit score. However, once approved the funding comes quickly once you agree to the terms. Often times, you can have the money in your account within the same day. Unsecured home improvement loans usually have a shorter repayment period, lower amounts, and fewer fees than secured loans. However, they will also have higher rates, especially if you have a low credit score.

Home Equity Loans

This loan is more commonly referred to as a second mortgage because you are borrowing against the value of your home. The loan is paid as one lump sum that you repay over a longer period of time in fixed monthly installments. The benefit of getting this type of home improvement loan is that you never have to worry about market fluctuations affecting your interest rates. The greatest concern is that if you get too far behind in your payments, your home could be at risk for foreclosure.

Revere Mortgage Option

For aging Americans, often find themselves in a financial quandary as retirement suddenly rolls around. While they’ve worked all their lives and done the right thing by investing in a 401K and saving as many precious greenbacks as possible, they nonetheless realize they simply don’t have enough money to live on.

When that’s the case, it’s a good idea to look no further than your most precious asset to get yourself back into financial shape. That is, your family home. By taking out a reverse mortgage loan, you can tap into your home’s massive equity and get a nice lump some payment or, if you so choose, get monthly checks. You can see how much of a reverse mortgage you qualify for by using this handy reverse loan calculator.

Home Equity Lines of Credit (HELOC)

This secured loan is a popular option for home improvement projects because they usually offer lower interest rates than unsecured loans. A home equity line of credit, or HELOC, is a revolving credit which allows you to take money as needed. Although they provide greater flexibility, they are subject to variable interest rates. Furthermore, you must use your home as collateral meaning you could be in trouble if you are unable to make your monthly payments.

The Best Home Improvement Loan for You

Before undertaking any new renovation or maintenance projects, take stock of your financial situation. Ensure that you are ready to take on the responsibility of an additional monthly payment. If it is stretching your budget beyond your means, ask yourself just how necessary it is. Obtaining a home improvement loan is a huge financial commitment that may require you to borrow against the equity in your home. Take the time to consider all your loan and refinancing options. Choose the one best suited for your project and budget.

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How to Spot Home Improvement Scams

How to Spot Home Improvement Scams

Hiring a contractor to complete home improvements can be a frustrating and confusing process. While most businesses are comprised of professional, hardworking people, there are plenty of scammers out there trying to make easy money. Home improvement scams are nothing new, but they become more common place during economic downturns. The worst part is they usually prey on the most vulnerable. Here are some of the most common home improvement scams and tips to help you avoid them.

5 Common Home Improvement Scams

1. Take the Money and Run

Be wary of any contractor who asks for large cash payments up front. If you receive a request for more than a third of the money upfront, there’s a good chance it is a home improvement scam. Any reputable company will guarantee their work and accept payment in installments. The FTC recommends using credit card or check in case you need to contest charges down the line. Otherwise, scam artists could run off with your money before they even begin or finish the work.

2. The Ol’ Bait and Switch

This is one of the oldest cons in the book because it is one of the most effective. People love to get a great deal so many will respond to local advertisements and mailers. The customer is drawn in by a low starting quote only to have additional services added to the estimate. If you are not cautious, you could lose thousands of dollars to this type of home improvement scam.

3. Passing Off Liability

If someone comes knocking at your door, do your research before you agree to anything. Check for online reviews of their work and official websites to verify they have the proper permits, training and insurance. One common home improvement scam involves traveling contractors who offer cheap labor around the neighborhood. Even if you hire skilled laborers, you – not the contractor – will be liable for any penalties or repairs if they are not licensed. It’s better to stick with certified and transparent companies who guarantee their work.

4. Getting What You Pay For

One cliché that holds true is that you always get what you pay for. If someone is offering ridiculously low prices, then it usually equates to bad or minimal service. Also turn away anyone using substandard or discount products. Trying to save a few bucks now could result in costly repairs. If the offer seems too good to be true, then it probably is.

5. Bullied by Insurance Companies

Even when you have done everything right, insurance companies present another potential source of home improvement scams. Beyond the threat of con artists are the legal ways insurance companies deny valid claims. Be sure to review your policy so you know what to do when contesting it.

How to Spot Home Improvement Scams

The best way to not become a victim is to know how to spot a home improvement scam when you see one. If you have any red flags such as high pressure sales tactics, cash upfront requirements, or no written agreements, run. To help you vet contractors, always ask for references and check reviews online. Lastly, know the laws and terms of any contracts or policies you sign. In today’s digital world, there is a wealth of information online to help you choose the best contractor for your home repairs.

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