Mortgage Videos

The speaker reviews a common mortgage qualification ratio, the debt to income ratio.  He mentions that debt to income ratios measure your debts in terms of your gross income.  Different loan programs require different DTI ratios to qualify.  Many loan programs follow a 29/41 ratio qualifier.  This means that 29% of your gross income can be used to pay your monthly mortgage payment, while 41% of your gross income can be used for your mortgage and all your other debts.  The 29/41 is the FHA loan recommendation, but other loan types can have different standards.

The speaker explains what a home equity loan, how a homeowner can determine how much equity they have, and discusses his belief that these loans fueled economic consumption during the early 2000's and are now leading to the furious increase in foreclosures and bankrupcies.

Suze Orman discusses the differences between a home equity line of credit (HELOC) and a home equity loan (HELOAN).  She mentions that these two types of loans are used to withdraw equity out of your home in the case that your home has appreciate in value or you have paid down the mortgage and have equity sitting in the home.

She mentions that a HELOC is a loan which is tied to an adjustable interest rate, such as the prime lending rate set by the federal reserve, and payments will adjust up or down as the prime rate does.  HELOCs basically provide a fixed credit line for the borrower to draw upon and interest is only paid on the amount which has been taken from the credit line. Borrowers can use checks to draw upon the line of credit.

Conversely, on a home equity loan, you receive a fixed amount which has a fixed interest rate and a fixed payment until the loan is paid in full.

Suze prefers home equity loans when interest rates are low so that you can lock in a very low interest rate on the equity borrowed from your home.