What to Expect When You Close on a Home Loan

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coupleAs the name suggests, a closing is the last step in purchasing and financing a home. In the case of a home loan, a closing day concludes a home purchase and the closing of a loan on the same day. Closing day is deemed one of the most important days of the purchasing process. Everyone wishes it to be pleasant and hassle-free.

A buyer’s active participation is necessary to ensure everything goes according to plan. A few preliminary steps given below can provide help in this regard.

Preliminary Document Analysis

Documents such as contracts, evidence of mortgage and homeowners insurance, closing disclosures and inspection reports are usually available for buyers in advance. They should go through these documents in detail to ensure that there are no ambiguities.

An Ultimate Walk-through

Buyers are usually permitted to undertake a final walk-through examination of a home. This walk-through is provided at least 24 hours before the closing day and buyers are expected to point out anything that deviates from the contract that a buyer intends to sign. It also includes potential damages or repairs.

Closing Costs

Buyers are expected to pay an additional cost for closing a home loan. The particular closing cost may vary depending on lender’s policies and location. The closing costs include expenses such as notary, attorney and origination fees. Moreover, the explicit closing costs are mentioned in the closing disclosure.

The buyer should have money available for closing costs before the closing day of a home loan, which is typically when this payment is made.

Who Is Going to Be There?

The closing day procedure may differ depending on region and creditor, but the following people are generally present on a closing day:

  • A notary public
  • A closing agent
  • Buyer’s attorney
  • Seller’s attorney
  • Lender’s representative
  • The seller or seller’s representative
  • Real estate professionals (from buyer’s and seller’s side)

It is the responsibility of a closing agent to administer all of the procedures of a closing day and make sure that the process runs smoothly and transparently.

Which Documents Are Necessary?

The entitled organization’s official and the loaner’s representative provide the list of all the documents required on a closing day. These documents generally include the following:

Closing Disclosure: A document containing all details regarding the monthly payments, closing costs, mortgage loan, and loan terms. Buyers are expected to receive it a few days before the closing day.

Deed of Trust: A document that provides the lender with a claim against the title in case a buyer fails to fulfill commitments.

Certificate of Occupancy: A legal and official paper for buyers moving to a newly-built home.

Mortgage Note: Contains the terms and conditions of a loan in addition to the steps that lenders can take in case of failure of payment. It is the commitment of a mortgagor to repay the loan.

The buyer should be informed in advance whether the documents are to be signed personally or electronically.

Avoid Potential Difficulties
Buyers are expected to be attentive and particular about every aspect of the closing-day arrangements. A lack of attention to detail might result in last minute annoyances, disagreements, and delays which, of course, no one prefers. The prospective stumbling blocks faced by the buyers might include:

  • Inability of the buyer to make a full payment
  • Non-clearance of property lines by seller
  • Failure of buyer to complete walk-through
  • Last-moment withdrawal of lender financing

Such drawbacks can be avoided when all involved parties participate in a detailed conversation regarding the loan and its accompanying documentation.

Basics of Qualifying for a Mortgage

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money_houseThere is a lot of misconception out there when it comes to qualifying for a mortgage loan. For instance, the notion that from the lender’s perspective, loan eligibility is based only on a formula. Although mortgage underwriters look at a variety of different information when determining loan qualifications, it ultimately comes down to four things: credit, equity, income and assets.

Credit

The most important consideration, when qualifying for a home loan, is your credit. Unfortunately, it is also one of those areas in which people are unaware of how their credit history impacts the qualification process. Your credit history compels the lender to determine the likelihood that you can pay back the loan. The lender will take the time to carefully analyze your credit history, and establish your reliability profile. They consider how your current credit cards and loans are paid back, whether the payments were made on time and if the loan was re-paid in full. All of these factors play a part in determining your credit rating or credit score. Your credit score establishes your qualification for a mortgage, and helps in determining the interest rate that you receive.

Credit scores typically used for mortgages range between 350 and 850. A good credit score is considered above 740, whereas anything below 600 is considered to be a poor credit score. Typically, most lenders tend to regard 630 and above an appropriate credit score for qualifying for a mortgage. Also, the higher your credit score the better interest rate you can receive.

Lenders will also carefully examine the items on your credit report. They use these reports to look at whether your account has been open for at least a year, and that there are no outstanding collections or judgments against you. In addition, the lender may want to verify any rental history to help determine consistency with arranged payments.

Equity

When the housing market is down, many homeowners find themselves with less equity when selling their home. If the appraisal of your home comes in lower than expected, you may need to plan for having additional funds available to make up the difference.

Another thing to keep in mind when buying a home are the various settlement fees typically incurred at the loan closing. The settlement fees can vary, depending on the type of loan and the location of the property you are buying. However, it is a good idea to look into the various home loan programs that allow you to have the seller pay for these settlements, as well as for any of the additional costs incurred.

Income vs. Debt

An additional component in obtaining a mortgage loan is your Debt-to-Income ratio (DTI). Simply put, these are the fixed expenses, in addition to the new mortgage, which are assessed against your gross monthly income (before the taxes are deducted). This will help the lender to ascertain whether you are spending less than 50% of the gross monthly income on those fixed expenses. Variable expenses such as utilities, cable or phone are not included in the DTI ratio.

Assets

The lender may also specifically inquire about your liquid assets. They’ll want to verify that the disclosed amount you will be using for the down payment is accessible in a liquid cash account, such as a checking or savings account.

Also, depending on the type of financing you are seeking there could be a requirement to have a steady cash reserve. These reserve requirements are more common when you are trying to purchase a second home or investing in a property.

A Closer Look: 15 Year vs. 30 Year Mortgages

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paperworkMortgage packages that are available these days are diverse and formulated to facilitate all kinds of circumstances. A person can easily feel overwhelmed because of the number of options available.

Choosing between a 15-year versus a 30-year mortgage plan is one such situation. Although the structure of both mortgage strategies are the same, there are some considerations to keep in mind before selecting a mortgage plan.

The Effect of Time

With mortgages, time has a great impact on the final cost. A mortgage is merely a term loan secured by real estate. The debtor pays the interest which is calculated on an annual basis on the outstanding amount still to be paid. The interest rate along with the monthly payback amount remains fixed whereas the interest and principal deductions vary in each monthly installment. That is, the interest deducted in the beginning constitutes the major portion of monthly installments, but it declines gradually over the years with an increase in the deduction of the principal amount.

For a 30-year period, the payable balance reduces in a slow manner as compared to that of a 15-year period. This means that the principal balance declines at a faster pace in the 15-year period.

Fluctuating Interest Rates

The financial institutions offering mortgages have to spend comparatively more in the formulation of long-term loans. Moreover, there are additional payments associated with the long-term loans which render it even more expensive. This is the reason the short-term 15-year mortgage typically offers a lower interest rate to the borrowers as compared to the interest rate in the case of a 30-year period.

The interest rate might not seem to create much difference, but variations of just a few points can result in the savings of thousands of dollars. Mortgage calculators can provide an accurate assistance in this regard.

Saving Goals

The selection of a mortgage plan is also dependent upon the savings an individual might want to retain. With a 15-year mortgage, it might not be possible for a person to save a significant amount of money considering a higher monthly installment. However, it can be comparatively easier to have some savings with a 30-year mortgage because of lower monthly installments. Keeping a reserved savings can be an important determinant as far as the selection of a mortgage plan is concerned.

Financial Position

A concern with a 15-year loan may be that the payment could be too high if an unexpected financial situation was to occur.  There is another option to consider. A possible solution may be to select a 30-year term, but pay extra every month instead of spending that spare amount somewhere else. This can be good practice. Although the interest rate will be paid in accordance with the 30-year term, it would still be better to pay the term off earlier than to keep paying over a period of 30 years. With this strategy and a disciplined approach, the debt can be paid in full without getting concerned about unforeseen circumstances.

Tax Breaks Issue

Tax breaks should not be a significant factor when selecting a mortgage. Although people with a 30-year mortgage pay less tax, the interest rate is still higher than that of a 15-year mortgage. Despite a lower tax payment, it is not beneficial in the long run. Keep in mind that the 15-year debtors are initially facing the difficulty of a higher tax payment, but they are the ones that will enjoy the perks of a short term mortgage.

 

6 Tips for Buying Your First Home

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DMI_1045Buying a home may signify different things for many different people. However, the most common of those things is the dream of owning a home, a place where memories are made. Of course the financial implications are perhaps the most obvious concern, however, the emotional side of buying a home is often overlooked. These six tips can help you manage the financial and emotional sides of buying your first home.

  1. Don’t Rush Things

There are many different factors to consider when buying a home. Making a list of all your requirements before you go house hunting is a good place to start. Also take the time to broaden your research on the real estate property beforehand, as it can save you time and undue stress down the road. The more time you invest in the research phase, the better home you will end up owning.

  1. Check Your Credit

Most consumers tend to underestimate the financial stress of big purchases such as buying a home. After all, a mortgage can be a financial strain for many years.

Handling this type of expense is easier said than done. The current economic conditions and inflation rates play a big part in the decision to make such a big purchase. Begin this next phase by checking your credit report. You can check with your financial institution, or visit one of several websites that will provide you with a free credit report.

  1. Reserve Some Savings for “Extra” Expenses

Be prepared for the extra expenses that come with buying a home. Some expenses can increase sharply, including utility bills and home maintenance costs. Plan for the unplanned expenditures such as HOA fees, lawn maintenance and property taxes. While allocating monetary reserves towards your new home, allocate a sufficient amount to savings to cover those extra expenses.

  1. Do Adequate Research Before Choosing a Mortgage Firm

When shopping around for the best mortgage rates, make time to research various firms until you find the one that works for you. Find the firm that best fits your needs and gives you the rates and payments you can better manage in the future.

Every point in a mortgage percentage matters. Even a quarter percent lower rate can save you thousands of dollars over time. Also, be careful to read between the lines of the mortgage agreement. Some mortgage firms can twist the terms of agreement to hide the actual charges. Paying attention to the details before signing the agreement, could prevent unexpected expenses down the road.

  1. Be Attentive at The Time of Inspection

It is a smart decision to hire a professional home inspector, but also take the time to do a walk-through of the home yourself. Examine every nook and cranny of the house with keenness. If possible, inspect under the carpets and behind picture frames to look for anything out of the ordinary. This general inspection will provide you peace of mind at the time of closing the deal.

  1. Buy for Long Term

Buying for the long term is an investment strategy that will eventually build up equity on your initial investment. Carefully consider the options of renting vs. buying and what works best for your situation.

It would take hundreds of pages to cover all the areas of purchasing a home for the first time; however, these tips will help you get started on the right track.

Metro Credit Union is Heart Walking This Saturday

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IMG_8921Metro Credit Union is excited for this Saturday’s American Heart Association Nebraska (AHA) Omaha Heart Walk to benefit the AHA and their quest to reduce heart disease and stroke in America.  We are serving as a presenting sponsor with Metro management and staff participating in the Heart Walk. Metro President, Mike McDermott is serving as a Co-Chair of the event along with UNMC Chancellor, Dr. Jeffrey Gold and Honorary Co-Chair, Nebraska’s own, Dr. Tom Osborne.

This event, located at Miller’s Landing (151 Freedom Park Rd.), promotes healthy living as well as to raise funds for cardiovascular disease. The Heart Walk is family and pet-friendly, featuring a one and three-mile course with a half-mile Kids Heart Challenge obstacle course.

Heart disease affects all ages, both male and female. Congenital heart conditions in babies are the most common in the United States, occurring in 1 out of every 110 births.  Heart disease is still the #1 killer of Americans, and it is the #1 killer of women, causing 1 in 3 deaths a year. May is American Stroke Month, and stroke is Nebraska’s leading cause of death.

Thanks to the AHA, deaths due to heart disease and stroke have declined 35% in the past decade. So far, Metro Credit Union has raised over $14,000 with our company goal being $16,000. You can help by donating or registering to walk, and you will save lives by providing funds for education and life-saving research.

Gates will open at 7:00 a.m. with the kids walk to follow at 8:00 a.m. Opening ceremonies follow at 9:00 a.m. and the adults hit the pavement at 9:30 a.m.  At the walk, make sure to visit the Metro Credit Union tent to pick up snacks and enter for our drawings. You also may spot adorable Odie, Metro Credit Union’s honorary dog, who will be walking to fight heart disease.

Remember to take many pictures and share them on Metro Credit Union’s social media. If you’re on Snapchat, Metro Credit Union will have a special Heart Walk geofilter for you to use and share with your friends and family.

Thank you for doing your part to help fight cardiovascular disease and spreading awareness for this cause.

 

LStreet

Metro Credit Union 50th & L Street Staff Promoting the Omaha Heart Walk

 

Finance Tips for Newlyweds

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couple_laptopAll couples promise “for better or for worse… for richer or for poorer,” when they marry. However, it can be a challenge to actually survive being richer or poorer without financial management skills.

Money has become a top issue over which newlyweds end up fighting. Consider openly discussing your finances together, because it can be an essential ingredient to a long and happy marriage.

Sometimes in a marriage one person is determined to manage money only their way, and it may not mesh with their spouse’s methods. Others might take all the responsibility on themselves or just put it entirely on their spouse. Some spouses lie about their overspending habits, which causes trust issues among the couple. However, as a newlywed couple, you can avoid these problems and keep your marriage on the right track. However, the two of you will have to work a few things out, and you should do so by taking plenty of time to talk.

The following tips can help you and your spouse get accustomed to healthy financial habits:

Talk About Finances

Communicating your thoughts about spending is best to do before you get married. However, it’s never too late to talk about your finances with your spouse. In the event that you failed to discuss the topic before your marriage, you should discuss the matter as soon as possible with your significant other. You will have to go through the accounts you have open and the debts you owe. You should also be clear on how you would like future money to be handled, and then listen to your spouse for their suggestions.  Together, you will be better equipped to make any changes that you both agree on.

Determine the Goals

Once you come up with your baseline financial status, discuss the long-term financial goals that you might have, such as retiring at a certain age or paying off your debts completely. Make sure that you write down your goals and review them regularly. By doing so, you will have a better chance of success.

Bank Accounts

There are ups and downs of having a joint bank account as well as maintaining individual accounts after marriage. Some may even opt for both types of accounts. By combining your accounts, you can simplify your finances and develop trust in your marriage. It can also benefit you and your spouse if either one of you chooses to take on the extra household or child rearing duties. Having some independence may be preferred by the both of you.

Emergency Fund

Make saving for an emergency fund one of your top priorities. Aim for saving at least six months of your household expenses for emergencies. It should be a priority because an emergency fund can bring security and help protect your relationship if some disaster or mishap arises.

Budget

Make sure that you stay within a budget each month. Limit how much you can spend on a certain budget category in a month. You should do so by reviewing your joint expenses for a few months to understand how much you and your spouse have been spending, and whether you need to reduce the amount. Once you have done that, you can establish a limit on every category that you decide on. Don’t forget to allocate some funds for surprise events.

Keep Track of Your Budget

Making a budget is a great step, but it isn’t enough. You will also need to make sure that you are staying within your spending limits and adjust your spending accordingly. An effective way of sticking to your budget is by using an envelope budgeting system. This method is best suited for young couples who have lower incomes. Another way is to make a spreadsheet that will track all of your expenses, spending, and totals up at the end of the month. Also, make sure that you pay off your credit card charges every month on time. Constantly communicating with your spouse about the budget will help you both keep track of your budget and avoid overspending. Never assume the other person took care of it, or that the other person is staying within the budget. It is better to ask and confer with them so you both stay on the same page.

Get Out of Debt

Being in debt can be damaging even for a single person, but it becomes a double threat when two people have to pay it off. Work out a plan with your spouse for getting rid of your debt and making sure you do not get back into it.

Estimating Your Retirement Needs

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Retirement2017It is important to have a plan for your retirement, but where should you begin? The first step that you should take is to estimate the income that will be required to fund your retirement. However, it is not as easy as it sounds since retirement planning is not an actual science. Your needs will depend on what your goals and requirements are.

You Current Income: The Starting Point
Your desired annual retirement income is something you should decide on first. It depends on who you discuss it with, but it can be anywhere from 40 to 80 percent of your current income or even more. This approach is quite simple and straightforward since your current income is what sustains your lifestyle. Taking the income that you earn now, and reducing it by a certain percentage will give you an idea if you can afford to retire on that amount given the monthly expenses that you have.

However, there is a problem with this approach as it does not account for your specific situation in the future. It’s good to use your current income as a yardstick, but it is also worth it to go through your current expenses extensively and think through the changes that these expenses might go through in the future.

Plan Your Retirement Expenses
The income you get in your retirement period should be enough for your retirement expenses. Therefore, it is important that you estimate those expenses as it is a huge piece of your retirement planning. However, if your retirement period is still quite far away, then determining these expenses can be difficult. To help in getting started, a few of the common retirement expenses are mentioned below:

  • Clothing and food
  • Housing (property taxes, repairs and upkeep, rent, or mortgage)
  • Utilities (electric, gas, water, etc.)
  • Transportation (auto payments, maintenance and repairs, public transportation, etc.)
  • Insurances
  • Healthcare cost (those not covered by the insurance)
  • Taxes
  • Debts
  • Education (children’s or grandchildren’s)
  • Savings and investments
  • Recreation
  • Care for yourself or family
  • Miscellaneous (personal)

You should keep in mind that the living costs can increase with time. You should also keep in mind that the retirement expenses can change from year to year. To protect yourself from unknown variables, you should create a comfortable cushion for yourself with your estimate. Moreover, you should ask for expert financial help to set up for your retirement.

Decide Your Retirement Period
Defining your retirement needs is not the only goal, because you can’t merely estimate the annual income that you will require. You will also have to decide how long you will be retired. The longer your retirement period is, the more years of income that will be needed for funding your retirement. Therefore, it depends on you when you plan on retiring. This decision is usually based on your personal goals and your financial situation.

Your Life Expectancy
The age at which you choose to retire isn’t the only factor to be looked into. You will also need to estimate your lifespan. We all hope to live a long life; but the longer your life, the more years of retirement that you will need to fund. To avoid outliving your retirement savings, you can use government statistics and life expectancy calculators to estimate your lifespan.

Identifying the Sources of Retirement Income
Once you have determined all your retirement needs, you will have to look into the sources of your retirement income that might be available to you. The amount of income that you will receive from these sources depends on how much you invest in them, the rate of investment return and other such factors.

Income Shortfalls
There are steps that you can take to cover the gap if you do not anticipate being able to save enough. A financial professional will be able to guide you, however here are some of useful tips:

  • Cut back on current expenses
  • Turn your assets into investments that may have a potential outpace inflation
  • Lower the retirement expectations
  • Part-time work during retirement

Delay your retirement for a few years

7 Ways to Increase the Value of Your Home

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DMI_711Real estate prices are not the same anymore, so it is natural for a homeowner to think about selling their houses and ways to raise their home’s financial value. With housing prices growing, this is a great time to increase the value of your home. With that being said, it is not always necessary to spend a lot of money on the total remodel of a house.

You can learn about the buyers and what they want. Starting early in the process and completing small projects can provide some of the best results. Here are some tips for making improvements to your home, and smartly utilizing your time and resources.

  1. Create Space

Many buyers today prefer more space. So what is the best solution? Knocking out any non-structural walls, or even the kitchen island can open up space and fashions a sense of flow in the house. Though a kitchen island is an asset, if the kitchen has enough cabinets it may produce a better financial outcome to remove the island. With spending a minimal amount of money, you can transform your house entirely.

  1. Landscaping

Landscaping is one of the top three investments that has the possibility of bringing the largest return and can change the outlook of the house. If your house has a garden or an area with lots of overgrown trees and shrubs, then those tangled trees can sometimes create obscure views.

Overgrown landscaping creates problems at all price points. People often say, “Where’s the house?” If a buyer is unable to view the house properly, they are unable to determine what they are getting and will most likely move on to a house that they can view properly.

If the landscaping has been neglected for a long period of time, it can definitely get out of control and be expensive to fix the situation.

  1. Let in the light

Improving the lighting can be one of the best ways to increase the value of your home. Anything, ranging from a dimmer switch to sun tubes, can enhance a home’s appeal. Sun tubes, also known as sun scoops or light pipes, can be used. These sun tubes use a reflective material that is used for funneling the natural light from the rooftop through a ceiling fixture and into the room.

Other ways by which you can light things up in the house would be to fix any broken panes, and make sure all the windows are open. Consider using lights that use motion detectors so they can turn off automatically. You should also keep in mind that wattage bulbs make a small space feel bigger, and softer lighting brings warmth to empty spaces.

  1. Do Not Put Off Maintenance and Care

Before starting any large upgrades, you should consider some basic improvements and maintenance care. A few suggestions may be insulating the attic, repairing any plumbing leaks, replacing any rusty rain gutters, inspecting the furnace as well as the septic system, replacing or repairing leaky windows, installing storm doors, and weeding out the flower beds. These kinds of fixes add value in the long run to the house. Investing in the maintenance and repairs is moneywise and can be crucial for the sale of your home.

  1. What’s Under Your Feet?

What you are standing on has a value, so you should not neglect the flooring. Many real estate pros recommend spending money on the flooring, but it doesn’t have to be a lot of money.

  1. Easy Bath Upgrades

Spiffing up the kitchen and the bath is a sure way to add value to your home. Some upgrades may not be economical, but other upgrades are affordable, easy and fast, especially in the bathroom.

You can:

  • Replace the glass
  • Clean the mortar
  • Remove the stains left by corrosion
  • Apply fresh seals
  • Change doorknobs and cabinet pulls
  • Change old faucets
  1. Neutral Wall Colors

If you plan on selling your house, then you should fix any walls with chipped paint. If there is a need to do more than a touch-up, we suggest you opt for neutral colors. Removing your personal taste and design can be beneficial. Buyers want to visualize their ideas for a space, and a seller can assist by providing a toned-down wall that can serve as a canvas for the many possibilities they envision their house to hold.

You can add value to your home in several ways. Understanding what a buyer really wants can be the best way to do that. Try to put yourself in the buyer’s shoes.

6 Questions to ask when choosing a Home Equity Loan

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house1A house is usually one of the biggest assets that a person owns. Whether it is big or small, it plays an important role in a person’s life. That’s why homeowners should decide very carefully when taking out a home equity loan.

Getting a home equity loan seems to be an easy option in situations when you need liquid cash quickly, but it’s not a good strategy to get this type of loan right away without asking yourself a few key questions.

Before taking out a home equity loan, here are some things to think about:

1. Are Interest Rates Relatively Low?
It is important to assess current economic trends to determine if a home equity loan is the right choice. If interest rates are relatively low, then it could be a good choice to opt for a home equity loan. With lower interest rates, you can count on paying less interest over the life of the loan. On the other hand, if interest rates are relatively high, obtaining a home equity line of credit might be a better option.

2. Are There Any Stipulations Associated with Home Equity Loan?
Home equity loans are not exclusively used for home renovation or other similar purposes. They can also be used for other financial needs a person might face like an unanticipated expense or college tuition for a child. Ask the lending institution if there are any limitations on the utilization of the home equity loan. This question can save inconveniences in the future and help you decide whether to apply for the loan or not.

3. Will There Be Any Additional Costs?
A homeowner thinking about a home equity loan should inquire about all the costs associated with the loan. There are often extra costs. For example, taxes might be required, there could be annual or closing costs, cancellation fees, etc. It is important to ask about additional costs to make sure you have enough money to stay within your monthly budget.

4. Which Term of the Loan is the Best?
Next, it’s important to decide the term of your loan, since it can play an important role in managing the repayment. If you are in better financial condition, then a short term loan is better. If you can’t manage higher payments, then a longer term loan might be best.

5. How Much Time Does It Take to Get the Loan?
Thanks to technology, loan procedures aren’t as time consuming as they used to. The application submission, approval and loan withdrawal can take as little as a few days to complete. It is a good idea to ask questions about an approximate time that this process might take. This can be important if the cash is needed immediately.

6. Are There Tax Advantages Associated with Home Equity Loan?
One of the advantages associated with home equity loans is the tax advantages available to homeowners. This tax advantage is not available with many other kinds of loans. Tax benefits differ from person to person depending on the lending institution, loaner’s financial conditions and state laws.