Changes to either of these variables can impact the amount of equity you have in your home.

As the appraised, fair market value of your home increases, so does your equity. If the appraised value of your home decreases, the amount of equity also decreases. If you pay down the principal balance of loans on your home, your equity increases. As you borrow more against your home, your equity may decrease, depending on the market value.

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You don’t have to remember any equations to understand equity. To put it simply, your home can gain equity in the following ways:

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• Cash used for down payment

• Extra payments made toward principal balance

• Appreciation of your home’s fair market value

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What can your home equity be used for?

You can pull the equity that you have earned in your home and use it for any purpose that you need. You may find that your equity is a good tool to pay off high interest debt, loans, or overdue bills. Your equity may be used to repair and remodel your current home, or used as a down payment on a vacation or investment property. Your equity may be the lifeline to protect you during periods of hardship or unemployment, or the ticket to the vacation or retirement that you have been waiting for. The equity in your home belongs to you, and you can do with it whatever you choose.

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How do you get your home equity?

If you want to access the equity in your home, contact one of our American Pacific Mortgage loan advisors to discuss how your equity can be put to work for you. One of the things your advisor will present to you are the various options in which you can get your equity.

• A Cash-out Refinance

• A Home Equity Line of Credit (HELOC)

• A Home Equity Loan

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Understanding Home Appraisals

The impact of a home appraisal on your mortgage loan.

A home appraisal determines what your home is worth in the current market. This fair market value will determine how much equity you have in your home, and the amount that lenders are willing to lend on your home. Appraisals are not just for home purchases, your lender may request one for your refinance mortgage loan as well.

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What is the home appraisal process?

Your lender will ask a state-licensed and lender-approved professional to assess your home and determine its fair market value. The report submitted by the appraiser will tell the lender if the property value supports the requested loan amount, and can affect the amount that they are willing to lend.

The appraisal report will contain information such as the home’s legal description, size, shape, age, and condition. The appraiser will perform a complete visual inspection of the home’s interior and exterior areas, inspect the neighborhood, and inspect comparable sales on the street.

The inspection of comparable sales, or “comps” will help the appraiser to see how your home compares to other homes in your neighborhood that have recently sold. Your home value may be adjusted higher or lower than the other comparable homes depending on how it matches. Swimming pools or additional rooms at your home may bring additional value to your home if the comparable did not have them.

We have the answers to your appraisal questions. If you want to know whether your loan will require an appraisal, what to expect during the appraisal process, or whether certain features of your home will be counted towards your value, ask us. There are no questions too small for our loan advisors at American Pacific Mortgage.

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Mortgage Glossary

The ultimate translation tool for your journey through the mortgage process.

Is your head swimming with home loan jargon, acronyms, loan programs, and mortgage terms? Before you try to figure out if Freddie Mac graduated from your high school, take a quick look at this mortgage and home loan glossary to get up to speed on the lingo.

Mortgage Glossary

We want to be sure you are making educated, informed, and confident decisions during the home loan process. If the mortgage glossary hasn’t cleared something up, ask us! We are happy to help you get the knowledge you need to navigate the home loan process with transparency and complete understanding.

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Mortgage Checklist

When you are ready to get started, here is a  list to guide you through the mortgage loan application process.

While this list covers most of the documents that a lender might request, it may be customized for your specific situation. Your American Pacific Mortgage loan advisor can give you an individualized picture of the specific documents your loan may need.

List of requested documents:

Financial and income documents

• Most recent pay stubs covering the last 30 days

• W-2s for the last two calendar years

• Two most-recent statements for all checking, savings, CD, money market, and/or securities-brokerage accounts (please include all pages)

• Most recent statements for all retirement accounts (IRAs, SEP-IRAs, 401-(k)s or 403-(b)s)

• Most recent statement of stock options, employee stock option purchase plans, and similar if you’re using them as part of the down payment or for closing costs

• Federal tax returns (1040s) for the last two calendar years; please include complete returns with all schedules filed

• YTD Profit & Loss Statement if you’re self-employed or an independent contractor

• All federal K-1s, partnership returns (1065s) and corporate or S-corp. returns (1120s or 1120-Ss) for the last two calendar years

 

Property documents

• Mortgage, real estate tax, and insurance premium statements for all properties currently owned

• Leases on all rental properties you may own, if applicable

Personal documents

• Complete bankruptcy papers, if applicable

• Divorce decree and settlement statements, if applicable and only if requested by Underwriting to verify receipt or obligation to pay alimony or child support or to verify the division of assets. 

Proof of identity

• State-issued driver's license or passport showing your date of birth to satisfy Patriot Act requirements

• If not a U.S. citizen: a resident alien card (front and back); resident alien application or H1B or L1 Visa plus passport as applicable

Some Things to Consider

Before you begin the application process, be mindful of actions that may impact your ability to get the most competitive rate on your loan.

Do not make large purchases on credit, open new credit card accounts, or closes credit accounts or credit lines.

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Do not change jobs if possible during the loan process, or your loan may need to be re-approved.

 

Avoid moving money unnecessarily from one account to another. If you do need to move money, be sure that there is a clear paper trail. Make copies of deposited checks, deposit receipts, and wire transfer orders. Any large deposits should be well documented.