Home Buying Process

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Traditional Mortgages

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Can I be a homeowner? Finding a home Making an offer on a home Applying for a loan Inspections The closing process Real Estate loan glossary Important Resources

Understanding Traditional Mortgages FHA Loans VA Loans Understanding Home Equity Borrowing Against Your Equity Helpful Steps to Take Before Buying Predatory Lending Additional Resources

Your credit Predatory lending Finding a healthy home

Traditional Mortgages

Understanding Home Equity

People who have paid down their mortgage or seen their home's value rise have equity in their home. Equity is the difference between the home's value and what you owe the mortgage lender. One benefit of homeownership is the ability to build equity. Homeowners draw on equity for emergencies and for retirement income. Equity also allows you to pass wealth (the home or money made by selling that home) from one generation to the next.

Refinance Loans: In recent years, many people have refinanced their home loans to take advantage of low interest rates. Some have also refinanced in order to obtain cash. In a refinance, you pay off your mortgage with a new loan. In a "cash-out refinance," you increase the size of your debt in order to get cash at the closing table that you can use for other purposes.

In any refinance, it's important to ask about the fees you will pay. Sometimes, even substantial fees are easily hidden, as lenders may roll the fees into the loan balance. Of course, increasing the loan balance decreases your home equity.