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Although mortgage rates are creeping up, they’re still very low.

So now may be the right time to discuss with your financial and mortgage advisors how you can use the equity in your home to further your financial goals.

They can help you find the approach that’s right for you.

Tapping your equity

There are a couple of ways you can take cash out of your home, and many places you can then invest it.

The first is a cash-out refinance of your existing mortgage, whereby you replace your existing mortgage with a new one, and pull out cash in the process. Typically, this approach comes with a lower rate than the second option.

This option involves some type of home equity loan or line of credit. If you go that route, you’ll then have two mortgages. Check with your tax professional to see if any of the interest on these mortgages is tax deductible.

Investing it

With cash in hand, here are two of many paths you can take to invest it and make it grow. The first is in some type of investment vehicle that your financial pro can recommend. Getting a rate of return on your financial investments that is greater than what you pay each month on your mortgage is one good way to build wealth over time.

Or you can invest the equity in the purchase of a rental property that will produce a monthly stream of income. Real estate has historically been a great investment, and this is a good way to prepare for retirement. If this is the right approach for you, your mortgage pro, real estate agent, and other members of their teams can help you by

• researching current and future trends in the rental market you’re interested in,
• running a return-on-investment analysis, and
• finding and working out the details of your purchase.

If you are a home buyer, your home inspector can be your best friend. However, many are concerned about the cost of an inspection and prefer to waive it. This is unwise. Here’s why.

A home inspection is a very detailed examination of all the major systems of a property. These include the plumbing, electrical, heating, and cooling systems as well as the structural integrity of the property, and radon gas, mold, and termite detection, as needed.

Unlike an appraisal – the report ordered by your lender, which is used to determine how much a property is worth, and which may uncover some of the more obvious issues – a home inspection is something you order. It looks at the property in greater detail and effectively educates you on the condition of your home-to-be.

There are a couple of reasons why you need a home inspection on any property you buy but especially on foreclosures that are often sold as-is.

First, there is a window of time (often five days) after you sign the purchase contract to get the home inspection and potentially back out of the sale. If you find a significant issue after this window expires, you still are obliged to purchase the property.

Second, the seller may be unaware of or unwilling to share details regarding the condition of the home. If an inspection uncovers a significant issue within that time window, you can renegotiate the price or walk away.

In all cases, you are your own advocate, and your home inspector facilitates this.

If you’ve been pre-approved to buy your dream home, and are waiting for the paperwork to go through, you may be thinking about some needs and wants to make your new home just right.

You could buy a big-screen TV to go into the family room. And maybe the kitchen remodeling should be done sooner rather than later. But with all the money you’ve put into purchasing your home, you may be strapped for cash.

Your credit is good enough to enable you to buy your new home, so would it really be a problem to purchase some of your needs and, OK, a few wants, before you go to closing? Unfortunately, the answer is yes.

Here’s why: Your lender will pull your credit on the day of closing. And if new credit lines show up on your credit report, your loan file will have to go back to underwriting to be re-approved.

If you barely qualified for the loan when you signed the papers, you could have pushed your ratios out of range, and you may not qualify now.

But can you make your purchases by applying for new credit after closing? Resist the urge. Credit pulls could potentially lower your credit scores, and because you may have access to more credit than you did before you started to look for a new home, that may also have an impact.

So before you buy, talk to your mortgage professional. That big-screen TV just may not be worth the risk.

With traditional mortgages, payments are made to the lender once per month, so a 30-year mortgage would have 360 payments, while a 15-year loan would have 180.

If you are considering making biweekly mortgage payments, you would make a payment every two weeks. At the end of each year, you will have made the equivalent of 13 monthly payments.

The effect of this on a 30-year loan, for example, would be to reduce the term of the loan by approximately four years.

This sounds great, but what the bank is doing for you in allowing you to make biweekly payments is something you can also do for yourself.

For example, if you have a 30-year, $100,000 mortgage at a rate of 5%, and are making 12 payments per year, your monthly loan payment will be $536.82.

If you decide to take the biweekly option, your payments would be $268.41. However, one drawback is that you are locked into that payment for the life of the loan.

Another is that you may be charged a premium by the lender for setting up the payments in this manner. But there is another way.

To make up that extra payment a year, all you need to do is send in an additional 1/12 of your monthly payment each month, and apply it to the principal.

So, in the example, you would take the original payment of $536.82 and divide it by 12 to equal $44.74. You’ll send in this extra amount each month to apply to the principal. This also means that if there’s a month where you are experiencing financial challenges, you could skip the extra payment for that month.

The interest savings you realize over time is almost the same for the biweekly mortgage and the do-it-yourself approach (making the additional payment each month). Both methods will save you about $17,000.

Speak with your mortgage advisor to decide which is the best option for you.

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If you are eligible for it, a VA mortgage can be a great way to finance a home.

The program comes under the Department of Veterans Affairs. Its purpose is to allow eligible veterans to finance a home at favorable terms. Effectively, with a VA loan an eligible veteran can buy a property for less money than through another financing option.

You obtain a VA loan from a private lender, and the Department of Veterans Affairs guarantees a portion of the loan, allowing the lender to offer favorable terms.

You’ll still go through the process of qualifying for a VA mortgage, as you would with any other type of mortgage. In order to qualify, you must have a Certificate of Eligibility, plus good credit and sufficient assets; occupancy rules are complicated, but basically you must personally live in the home as your primary residence.

There is no down payment unless the lender requires it or the price is higher than the home’s value. Other advantages include:

• The benefit can be reused.
• A VA loan can also be used to make improvements to your home at the time of purchase.
• You can refinance in order to get a lower interest rate.
• There are no mortgage insurance premiums, but there is a funding fee, which is a percentage of the purchase price. You may be able to roll it into the mortgage.
• The loan is assumable. This means that a qualified potential buyer can take over your loan payments.

Financing a condominium or townhome differs from financing a single-family property. If you’re considering which of these options is right for you, you may want to factor in this information.

According to a blog post on nationwide.com, “A condominium, or condo, is a building or community of buildings in which units are owned by individuals, rather than a landlord.” Townhomes are defined as “conjoined units that are owned by individual tenants.”

One important difference: When you purchase a townhome, you own the structure you live in, as well as the land underneath it. In a condo, you own the interior, but the building exterior and the land on which the building sits is owned by a homeowners association (HOA).

The HOA is governed by a board of directors elected by the owners of individual units. There are monthly HOA fees for both townhomes and condominiums, designed to assist with maintaining the property. Typically, these fees are higher for condos, because they include lawn care, snow removal, pest control, and other regular maintenance tasks. Townhome owners usually have more responsibility for upkeep.

In financing a condo or a townhome, your lender may require that the development be on the Federal Housing Administration (FHA) approved condo list, which is maintained by the Department of Housing and Urban Development (HUD). This is a nationwide list of developments that have been approved, and are regularly reapproved, for loans. Depending on the way the development is classified, some townhome projects may not be included on the FHA list.

Your real estate attorney will be able to examine the HOA financials, as well as bylaws, insurance certificates, and other documents that indicate how well – or how badly – the HOA operates.

This is an important step; your purchase will likely hinge on what your attorney finds in those documents.

Individuals looking to purchase their primary residence in a lower-income neighborhood, or who qualify as lower income but have good credit, may find the following Fannie Mae program a good fit:

The HomeReady program doesn’t have an income limit for purchasing in lower-income neighborhoods designated by Fannie Mae. This means buyers can qualify for the program with a high income (perhaps making the purchase of a character home in an urban area financially worthwhile).

HomeReady buyers can purchase a variety of home types, including single-family homes, townhomes, condos, and some manufactured homes.

Under the program, you can also purchase a one- to four-unit property with another person, providing at least one of the borrowers lives in the home as his or her full-time residence.

HomeReady’s down payment amount is based on the buyer’s credit score. With very high scores, you may be able to put down as little as 3% of the purchase price for a one-unit property. The down payment may come from your own funds, or in the form of a gift from a close relative. With asset reserves, there are several factors that will determine the amount needed.

Income used to qualify for the property may include boarder income, if you can prove with canceled checks, for example, that the boarder was renting from you in nine of the most recent 12 months.

Many lower down payment borrowers may also consider FHA mortgages, but HomeReady mortgages are much less expensive to own, mostly as a result of the lower cost of mortgage insurance (MI).

MI is insurance for the lender in case a borrower should default, and almost all lower down payment mortgages have this. The difference with a HomeReady loan is that MI can be removed at some point, whereas with FHA, it remains in place for as long as you hold that mortgage.

Need more information? Your mortgage professional can help.

As defined in Investopedia, a mortgage rate lock is “an agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage over a specified time period at the prevailing market interest rate.” However, there’s a bit more to the story.

Offering you a rate lock costs your lender money; by committing funds to lend to you, the lender is unable to use them for anything else until your loan closes.

In other words, that money isn’t making money at that moment. Many lenders are hesitant to do this until they are reasonably sure that the mortgage you are applying for is going to go through.

Things that could happen to stop the home purchase process include many that are not of your making and are outside of your control. These may be unforeseen and may include significant issues with the property you want to buy.

So when should you be locking in a mortgage rate? The truth is that nobody, including your lender, knows what the rates are going to do day to day. As is the case with stockbrokers who watch the market to advise their clients on buying and selling, there is no crystal ball.

The answer is that at some point, probably close to the day of closing, you and your lender will need to make an educated guess. Then do it.

If you have questions, your mortgage professional can explain the lock-in process in greater detail.

A common question from home buyers, particularly first-timers, is: “How much do I have to put down to buy a house?” The answer: It depends on other factors.

The most important of those factors will be your credit, followed by income.

Conventional Loans 

These mortgages are loans obtained through Fannie Mae or Freddie Mac. If you have really good credit, you may be looking at a minimum down payment of 3%.

This is definitely something that first-time home buyers should be looking into when they start the financing process. With a down payment this low, you will require mortgage insurance, which, when certain conditions are met sometime in the future, can be removed.

Also, ask your mortgage professional about the “HomeReady” mortgage program, obtained through Fannie Mae. This program caters to low-to-moderate-income borrowers, and those purchasing in lower income areas.

FHA Loans

The minimum down payment with FHA programs is 3.5%. This program is ideal for borrowers whose credit scores may be on the low side.

While FHA is good for people who may be unable to qualify for conventional financing through Fannie Mae or Freddie Mac, the challenge here is that these loans are generally more expensive to own.

This is due to the fact that you will be required to have two kinds of mortgage insurance, and, unlike in conventional mortgages, the mortgage insurance will be in place for the life of the loan.

Other cash outlays in addition to down payments

Keep in mind that for both of the loan types listed above, you can expect to have other outlays of cash associated with the purchase, including closing costs and some type of escrow account.

You will still be able to get seller credits to help you with these other outlays. But note: Seller credits cannot be used to help you with your down payment.

Driven by a possible need to change schools as a result of a move, many parents prefer to shop for a new family home during the summer months.

But fall can be a great time to buy if you’re looking for a deal – particularly in your current neighborhood, where changing schools may not be an issue.

Motivated sellers – such as those located in areas that are expected to see inclement weather during the winter months – are probably considering ways of encouraging buyers to extend their home search into the fall.

The thought of sitting on an unsold home until the spring market comes along can be a compelling reason for these sellers to explore their options.

This presents an opportunity to those who are prepared to buy a home at this time. One of the benefits of looking off-season is the possibility of being able to negotiate a better deal with a seller who is prepared to consider it.

Therefore you, as a potential buyer, may want to consider your options as well.

Start by talking to your mortgage professional. He or she will run your credit to see if you need to improve your credit score before starting your home search. And a discussion about income and assets will help you discover what you can afford in a home.