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For many students and their parents, a college education is a top priority. With education costs continually rising, paying for a degree may seem difficult or impossible. Some parents consider using their homes equity to obtain funds for college but arent sure if that would be a wise move.

Benefits of Using Home Equity for Higher Education
Home equity can be easier to access than a traditional loan. To obtain an educational loan yourself, or for your child to obtain one, a lender would require a lengthy application and credit check. If you already have a mortgage and make payments on time, you may find it much easier to secure a home equity loan. If you already have a home equity line of credit, you can simply write a check to your childs university.

Federal student loan programs limit the amounts that can be borrowed each year. If your child will attend an expensive university, you may not be able to borrow enough to cover the entire cost. Meanwhile, your mortgage lender may allow you to borrow up to 90 percent of your homes equity.

Interest rates on home equity loans are generally lower than rates for loans offered by the federal government or by private lenders. The lower interest rate can make a home equity loan the most attractive option if you need to borrow to finance your childs education.

Danger of Using Home Equity
Using home equity to pay for a childs college education is very risky. If you suffered a financial hardship, such as a job loss or unexpected medical bills, you could have limited options to modify or delay your home equity loan payments. Using your home as collateral means you could lose it if you failed to repay the loan. On the other hand, if your child took out student loans, options such as forbearance, deferment, and loan forgiveness could be available to help in tough financial times.

Other Ways to Pay for College
A variety of grants and scholarships are available from universities, community organizations and businesses to help cover the costs of higher education. Your child could work part-time during the school year and work part-time or full-time during the summer. Another option is for your child to attend a less expensive university, at least for a year or two.

Think Carefully Before Tapping Into Your Homes Equity
Using your home to help cover the cost of college may seem like a good idea. While a home equity loan or line of credit can be easy to obtain and can have favorable interest rates, make sure you fully understand the risks. If you suffered a hardship and couldnt repay the debt, a mortgage lender would be less forgiving than a student loan servicer, and you could lose your home. Think things over carefully and explore other sources of funds, as well as the possibility of your child attending a different institution.

This article is intended for informational purposes only and should not be construed as professional or legal advice.

Published with permission from RISMedia.

More space is one of the must-haves of just about everyone looking for a home, but if you happen to have a home on the market that has tiny rooms, it doesn’t mean there won’t be any interest in the property. It just means you may have to do some things to jazz it up.

A small room doesn’t necessarily translate into an uninteresting room, and there are numerous design tricks you can take advantage of to make it more eye-catching, starting with clearing it out as best you can so clutter doesn’t get in the way.

It’s a good idea to create a singular focal point in the room, such as adding a colorful pattern to the bed in a bedroom, setting a dining room table as if you’re having a lavish dinner party or adding a comfortable chair in the living room. The idea is not to have too much furniture around these items so they appear larger than they are. Having one large painting as opposed to several on the walls is also better for aesthetics.

Light will enhance a room and can make it appear larger than it really is. This doesn’t mean, however, that you want to add a bulky lamp that takes up too much space. The less items clamoring for attention, the better.

Use light and bright colors throughout the house. Icy blues and cream colors are lauded as the best color combinations that can really make a tiny room seem bigger. Conversely, heavy, dark colors absorb light and can make a small space seem even smaller. It’s all about illusion. Light and brightly colored walls are more reflective, making a space feel open and airy.

Consider adding mirrors or glass to a room to also help with size, as they give an impression that a room is larger than it really is.

When it comes to a small kitchen, keep things organized in cabinets and not laying around on the counters. Smaller chairs or stools are also better, as is a round table instead of a square one.

A small space doesn’t have to mean less interest. With the right design, furniture and color usage, a small room can leave a big impression.

Published with permission from RISMedia.

Most people who want to purchase a house cant afford to pay cash and therefore need to take out a mortgage. The type of loan you choose will depend on your financial circumstances and plans and can have a significant impact on your monthly costs, so its essential to understand all your options.

Government or Conventional?
The federal government administers several programs to help homebuyers in specific circumstances. The Federal Housing Administration offers loans with down payments as low as 3.5 percent for first-time buyers. The U.S. Department of Veterans Affairs provides loans for current and former servicemembers that require little or no money down. The U.S. Department of Agriculture offers loans for people to purchase homes in rural areas.

If you dont qualify for a government-backed loan, you may be able to secure a conventional mortgage through a bank, credit union or private lender. Since conventional loans arent insured by the government, they are riskier for lenders. Youll need a better credit score to qualify and likely need to put more money down.

Fixed-Rate, ARM or Balloon?
Youll also need to decide whether a loan with a fixed or adjustable interest rate is better for you. A fixed-rate loan can help you plan for the future since youll know exactly how much your mortgage payments will be. That predictability can be extremely valuable if you have or plan to have kids and need to save for college and retirement.

An adjustable-rate mortgage (ARM) will have a low introductory rate, and then the interest rate will periodically adjust based on market conditions. If you have a relatively low income now and expect it to rise in the future, an ARM may be a good choice for you. An ARM may also make sense if you plan to live in your house for only a few years before moving.

The term of the loan is another important part of the equation. A 15-year mortgage will have higher monthly payments than a 30-year loan, but a 15-year loan will have a lower interest rate, which means youll spend less money on interest payments over the repayment period.

With a balloon mortgage, the homeowner makes monthly payments over a period of five to seven years, and at the end of that period, the remaining balance comes due. A balloon mortgage will only make sense if youre absolutely certain that youll sell your home before the balloon payment is due. If you dont, refinancing may not be possible, depending on your credit score, income and the value of the house at that time.

Select a Mortgage Carefully
Buying a house is likely the biggest financial move youll ever make, so choosing the right mortgage is critical. Think about your current and future financial picture, conduct research, compare terms offered by different lenders, and use online calculators to figure out how much youd pay in a variety of scenarios.

This article is intended for informational purposes only and should not be construed as professional or legal advice.

Published with permission from RISMedia.

What is a comfort letter, and why might you need to submit one?

The mortgage process when purchasing a home can be tricky. There’s a ton of paperwork to read through and sign”so much that your hand might cramp up from the vast amounts of signatures required. But don’t worry if your mortgage lender requests that you write a “comfort” letter”it’s just a statement clarifying your financials so the lender can get you to the closing table with minimized risk.

As to what the mortgage lender might want to clarify, it could be a number of things:

Employment Lapses
Is there a period of time in which you werent working recently? The lender may ask you about this lapse to ensure youre still a stable loan candidate and financially comfortable with paying back the loan once you close on the home. You may have worked freelance during this time, in which case the lender may ask for proof of income.

Large Bank Deposits
Did you recently come into a large sum of money? If you deposited it into your bank account, your mortgage lender may ask you where that money came from and what you plan to use it for. There are strict rules about using gifted funds toward the purchase of a home, and your lender will want to confirm it’s not a loan given to you by friends or family that you’ll need to pay back.

New Job Status
Are you switching jobs in the middle of the loan application? If there’s a change in income, this could add another layer of questioning. Your lender may want you to state how much youll be making at the new job, as anything less than your current income is going to change how much you can afford. The lender may also want to know where the job is located”if it’s further away from where you live, will you be commuting or working remotely? The lender just wants to ensure youre a legitimately viable loan candidate.

A comfort letter is a way for your mortgage lender to cover its bases. If youre completely open about your financial history when applying for the loan, you have nothing to worry about. So, don’t panic. Just provide the requested information in a timely fashion, and you should be good to go.

Published with permission from RISMedia.

If you’ve owned a home for several years and made responsible financial decisions, you may have built a significant amount of equity. Home equity is the difference between the current market value of your house and the amount you still owe on the mortgage. If the value is greater than the debt, you have positive equity that can be used to finance other goals.

How Does Equity Change Over Time?
There are two ways to increase the amount of equity in your home. First, you can pay down the principal on the mortgage and make improvements that will increase the value of the house. As the ratio of the amount of the house you own outright to the amount of debt increases, equity grows.

It takes years to build equity. One reason for this is that mortgages tend to charge more interest at the beginning of the repayment period, which means a relatively small amount of each payment is applied to the principal. Later in the repayment period, a higher percentage of each monthly payment will pay off the principal, so equity will grow at a faster rate.

Paying a mortgage each month can be a way to force yourself to save and build wealth. Since the value of a house will increase over time in most circumstances, you can amass a significant amount of equity if you stay in your house for several years.

Paying your mortgage on time is no guarantee that you will gain equity. If the local housing market or the economy as a whole takes a nosedive, the value of your house could plummet. You could wind up with less equity than you had before, or you might even wind up owing more than your house is worth.

How to Take Advantage of Equity
You can benefit from your homes equity when you sell it. If you receive more than the amount of the outstanding mortgage balance, you will be able to pay off the loan and walk away with a profit.

You can also use your home equity while you are living in your house. You can borrow against your equity with a home equity loan, which would provide a lump sum of money, or a home equity line of credit, which would let you borrow money in a variety of amounts over a period of time, up to your credit limit. Both options would provide you with money that could be used for home repairs and improvements, credit card bills, and other expenses.

If you want to find out how much equity you currently have, you can use a home equity calculator to get an estimate. If you want a more exact figure, you will need to have the house appraised.

Focus on Increasing Equity
Home equity takes time to build, but it can give you the financial flexibility you need to pursue other goals. Diligently paying down your mortgage and making valuable home improvements can help you grow your equity faster.

Published with permission from RISMedia.