FIRST TIME HOME BUYER LOANS First Time Buyer Loans and Equity LoansA first time buyer loan is simply a loan for people buying their first home. Borrowers that already own a home can apply for an equity loan. With an equity loan the equity in the home is used as collateral to protect the lender. To make this simple we will assume you own a home that you could sell for $100,000 but you made a down payment of $20,000 and over the years you have paid another $20,000 on the mortgage. This would give you $40,000 in equity, and that is the collateral on the loan. A lender may give you a loan for $40,000 in this case, Since the house is worth $100,000 the lender knows he can get his $40,000 by selling the house. Thats right the lender can sell the house to get his money back, so you don't just stand to lose $40,000 if you don't pay back your loan, you could lose a home worth $100,000. A first time buyer loan is a little different, but can still result in the loss of your home. Let's say you are a first time buyer and you find a home which is valued at $100,00, but the owner is willing to sell you the home for $80,000. This would give you $20,000 in equity in the home. In this case the lender should be willing to give you a loan for $80,000, since he knows he can sell the house for at least $80,000. If after a few months you find you can't make your payments you can lose the house, but you really don't have a lot of money invested in the house, so it wouldn't be such a big loss. Ofcourse you are losing less money with a first time buyer loan, but with both of these types of loans there is something else you need to consider. If you default on either of the loan types your credit status will be worthless at least for the next 7 years, so if you want to buy a home or car after defaulting on either of these loans you can forget about it. Before agreeing to any type of loan contract involving large sums of money, make sure you have the means to re-pay the loan and read all details involved in the transition. A loan default can have a severe impact on your life, so use you head not your heart when considering any kind of loan.  |