Home loan in the United States is now done in a very simple manner and some organizations now even have stated on the Internet that most of the paperwork can be done on the Internet.
The importance of paperwork is gradually giving way to communication via the Internet, and any organization which keeps on doing business in the classical way is bound to come to grief later.
First national Bank of St. Louis was seen in the Internet, but that bank did not seem to have the archaic system that has been described here. The housing loans in United States are of two types. The first type is the mortgage loan that is used for the original part of buying the house. The second loan is for the repayment of loans concerned with housing or for any other purpose. This is subsidized by the Federal Reserve. In turn there are 14 designated banks which operate these loans from the reserve into different states. These banks in turn have banks which give the housing loans to the customers. The banks which give loans to the customers are supported by the banks designated by the banks which are appointed by the reserve for the state.
One of the banks which do the refinancing for housing loans is Third Federal. The bank was established in 1938. It prides itself on being an equal opportunities lender operating in the states of Ohio, Kentucky and Florida. The bank specifically mentions that it has the main objective of helping people to achieve their aim of home ownership and financial security. The loan itself is called by them as a home equity product. The calculation of the possible loan is relatively simple. The first factor to be considered is the value of the house and the balance of the loan. Let us say that the value of the house is $200,000 and the balance of the mortgage balance on it is $60,000 then the equity held by the owner in the house would be $140,000. This is the value used for any refinancing exercise. (Partnering with Third Federal)
This equity can be used by the owner for the purpose of short-term goals like getting a new kitchen done, buying a new car, etc. It may also be used for paying off other debts that have been incurred at high rates of interest as this type of loan has low rates of interest, sometimes allows interest only payments and permits the deduction of the interest from the tax that is payable. Another use of this is payment for the education of the children in college. This has doubled from he costs in 1980s. There are different types of loans that are available in this area and it is important to read the detailed conditions. The failure to repay the interest or loan in time could lead to a situation where the house could be lost by the owner. In the area of this refinance, there are two types of loans that are available - home equity lines of credit and home equity loans. (Partnering with Third Federal) They type of loans that are being referred to in the case of First National Bank here are the home equity loans.
One of the main advantages of this loan is that the interest which is paid for availing the loan can be deducting from the tax payments. The details of the effect can be advised by tax consultants for the person. Normally these loans are not used for day-to-day expenses. It is possible to have two different loans based on the house - one being the original mortgage at the time of purchase of the house and the second on the equity loan taken on the house. These loans do not have to be with the same lender. These loans operate like an auto loan using the total home equity as collateral. The bank gives the money at one time and the interest is charged on the full amount from the date of receipt till the complete repayment of the debt. The term of the loan is variable, but is for a maximum of 15 years or 180 installments. The loan is limited to between 80 and 85% of the home equity which has been described earlier. Other institutions permit even higher loans up to 100% of the home equity, but at a higher rate of interest. A few lenders provide even loans of more than 100% and up to 125% of the appraised value of the house. The costs of this loan will be even higher. The interest on loans above the 100% of the appraised value is not tax deductible. (Partnering with Third Federal)
The calculation of the interest is complex and requires the use of financial calculators. At a rough rate, it can be said that every $10,000 of home equity loan, for 15 years at 8.00% rate of interest will have a monthly charge of $95.58 per month. If the loan is repaid in 10 years the payment will be higher at $121.33. These loans are often used for the purpose of improvement of the home, in which case the value of the house goes up. The average spending per year by an American on his home for improvement is $3,796. The costs associated with starting a home equity account are for the credit bureau report for the individual, the appraisal for the valuation of the house, the determination of the title, the evaluation of the likelihood of flood damage, the mortgage filing and mortgage and other taxes. These are often paid by the financial institution on behalf of the client. Then these will be considered when the loan is sanctioned. If a fee for this is charged, then that also has to be considered. Some institutions also charge a fee for holding and maintaining the home loan account. This is normally from $25 to $100. When the loan is closed in advance of the scheduled period, a fee is charged from $150 to $350. If the credit rating of the client is not good, then extra charges may be made. There are also charges for late payment which is normally around 5% of the payment amount. (Partnering with Third Federal)
The operation of the First National Bank that is in our example is almost similar to the operation of The Third Federal as has been discussed above. In the case of First National at St. Louis, they require only a form to be filled in first, and that can be done on the Internet. Here the potential customer is asked to just fill up a simple form with the following details purpose of the loan, the state in which the loan is required, the city in which the property exists, the county, the amount of loan required, value of the home and the assumptions that have been made for the calculation of al the details. In St. Louis, they have patented this technology and hey say that this is all the information they require. The first step in the case of First National as referred to here require a form to be filled up before the loan agent etc. during a personal visit. Can this not be simplified by sending the form in a printed form if not on the Internet?
This would remove one of the complaints about personal visits to some extent. The information given in this can be stored in a physical or computer file by our First National if they are still averse to computers. The use of computers will simplify the procedure by taking off the application from the Internet, and reduce the necessity of employing people to store all these details in physical files, typing them out etc. It will also save a lot of time. Once this form is received, it may be checked prima facie for the contents. If more details are required, the potential customer may be sent a letter asking him for the same. He can reply to it at his leisure. Then the satisfaction of the first executive of the company can be achieved. If any further authorizations from the client are required, the necessary forms can be sent to him for him to sign and return. By communicating through the computer or letters, the exchange of information can be done at a much less stressful level, and personal visits can be avoided. The use of computers can make the entire process much cheaper also.
Then the entire file, physical or computer can be sent to the processor. Most of the details have already been done for him He has to get the confirmations of the details from the outside agencies. This is an investment from the bank on the customer, and is normally paid for by the bank. Thus there is no problem in proceeding on the same. The problems only come when the client is found…