Mortgages

Your Mortgage Downpayment

Down Payments arent completely unavoidable but they are beneficial in home buying. Its a good idea to home shop way before you are ready to buy to determine what the price range is for the home you may want to buy someday.

Then design a plan to save twenty percent of that targeted area. Even if you dont exactly save that amount, any amount is beneficial when its time to buy.

The larger the down payment means the larger the benefit. Lets face it. Lenders are taking a risk in lending money to borrowers. They risk the chance of not being paid back and having to foreclose on the home. Its proven that borrowers who invest money into the home upfront are less likely to default on their mortgage than those who invest nothing.

Interest rates directly reflect risk. The less risky you are the lower the interest rate. So the higher the down payment, the lower the interest rate. This can save you thousands in interest that you would have otherwise paid with a higher interest rate.

Another benefit is that you reduce the amount of principle you finance which means less money that interest is accrued on. Again, the larger the down payment means the larger the benefits. This alone can save you thousands of dollars but can even save you more money with the benefit of a lower interest rate as stated above. Are you getting the big picture yet?

The last benefit that we are going to mention is avoiding PMI. A 20% down payment will exclude you on having to pay Private Mortgage Insurance.

Although the insurance is mandatory on any mortgages that do not provide the 20% down payment, the amount you pay in PMI can be lowered as the amount of down payment increases that is below 20%. This benefit along with the two talked about above can save you a very significant amount of money. It is definitely worth the investment.

A good mortgage broker is something every potential homeowner or experienced real estate investor needs to have on their side.

There is no shortage of brokers out there and they come in all shapes and sizes with various personalities.

What people don’t realize is that if you have a very helpful and friendly broker, it can really make a difference in your entire attitude about getting a loan.

When you have a good mortgage broker, you will usually have a pretty stress-free loan process and they will be able to explain it all to you simply and easily.

So how do you know if you have a good broker There are some very simple things that will tell you right away if your broker is good or not.

One of the best ways to judge a mortgage broker is just with common sense. Does your broker like to talk and have an excited attitude

That can definitely improve the experience for you but there are other factors to consider. Punctuality is very important and someone missing dates can be infuriating.

If your broker says they will call at 6 pm and they miss it every time, it might be a problem. You really want someone very punctual.

The broker should be able to list off mortgages and programs by heart as well. It’s not a good sign if they are flipping through a book every few minutes to look up terms and arrangements.

A good way to tell if your mortgage broker is good is to make sure they are willing to answer any question imaginable without getting frustrated.

Ask them something a couple times in one sitting just to see what they do. If it’s obvious they are annoyed and don’t ask why you repeated it, they might not be paying attention and just reciting some spiel they use on everyone.

The Mortgage Escrow Account

A mortgage escrow account is developed whenever you finance a mortgage through a lender. The mortgage escrow account cushions you from paying lump sums for fire and hazard insurance premiums, mortgage insurance premiums, and property taxes by taking the estimated lump sum of these and dividing it over a period of twelve months.

The lender manages this account and covers these and taxes as they come due. There are a couple of advantages to the Mortgage Escrow Account. The first benefit is that the premiums and taxes are always paid on time. The lender always pays these charges as they come due whether or not there are sufficient funds in the mortgage escrow account.

If there are not sufficient funds, the lender does not penalize the borrower but may need to reevaluate and adjust the fees collected to make sure there are sufficient funds in the future. The buyer does not have to manage these accounts because it is automatically managed with the escrow account by the lender. Essentially it is hassle free.

Escrows have lowered interest rates and down payments of mortgages because they help insure the investors interest as well as the homeowners. The small sums that are tied into mortgage payments covers the lump sums that would otherwise come due.

If it were not for escrow accounts some people may have to foreclose on their homes if they didnt budget for their property taxes that come due at the end of the year that are several thousand dollars. Escrow accounts have proven that it creates a much more efficient housing market.

In summary, Mortgage Escrow Accounts are beneficial to all involved. They insure that yearly financial obligations regarding insurance and taxes associated with the home will paid in a timely fashion. It is also hassle free for the borrower because they do not have to deal with these once a year obligations. If you have any questions or concerns regarding your escrow account, you should contact your lender.

The most important factor that determines whether a person is can procure a loan for himself or not is the fact, whether is past credit history is stable enough or not. All factors depend on his past record of handling credits. A bad credit history implies that his appeal for a loan would be rejected and won’t be met in most of the places. And the worst part is that, if the concerned individual in his past has ever been declared as bankrupt or had a foreclosure, then for sure the borrower would face difficulties when he tries to get a financing for a home mortgage purchase, home equity or second mortgage loan. But the gab that home loans are not available for people with bad credit history is just a baseless myth. Since these loans are available to people with bad credit history too. The way however to find such a kind of loan, however is to be to be persistent in looking out for such kind of loans, because there are home mortgage loans for people with bad credit.

The basic problems involving, the process of procuring loan arises from the activities of sub-prime lenders. These are those lenders who actually work really hard for fetching loans for the people with bad credit background and low credit score and then the charge absolutely unreasonable price for the job. Borrowers should be careful of borrowing money from sub-prime lenders, as they can charge high interest rates which, comparatively are too high than the market rate. Not only this, but these lenders also charge unreasonable pre-payment penalties. Online articles are posted in websites to inform the borrowers about their existence and caution them.
However, it’s not absolutely impossible to find lenders who give out loans at reasonable rates and agreeable charges, to people who have a bad credit history. All a borrower needs to do is look around and talk to different mortgage brokers, which would prove to be helpful to find a lender, that can get them an approved loan with a reasonable interest rate and fair terms of repayment.

Things that the borrower, should make sure about, are that he makes use of the lowest interest rate and terms possible. Specially a borrower with a bad credit history and bad credit score should make sure that he sends application for loans to a number of different lenders, since it would be sensible for him to make comparison between different mortgage loan quotes, so that he makes sure that he chooses the best one.

Do You Need a Realtor?

Realtors are professions that are held to a high ethics code to work in your best interest. They can be beneficial in many ways to both a buyer and seller and make the whole home buying/selling process run much smoother.

Realtors bring a lot of knowledge and connections to the table. Realtors are in the business to sell homes and often have connections to estimators, mortgage lenders, and attorneys, all which are usually needed at some point in the process of buying a home.

Realtors are mutual to the homebuyer and seller. They can usually negotiate back and forth without any biases or emotional attachment to the sell. Another benefit is that they can usually communicate the buyers request for improvements to the home before agreeing to buy it to the seller where as the buyer may to intimidate to request it directly from the seller.In another word, the buyer can be a little more forthcoming about what they want and expect from the seller through a realtor.

Realtors also bring a lot of knowledge to the table about local and update to date laws that affect homeowners and mortgages as well as possible future rezoning proposals that may affect school districts. They also have access to what the property taxes, utility costs, and other services and facilities that are associated with the homes.

A realtors knowledge is unbeatable when it comes to buying a home.Realtors benefit sellers by helping the seller come up with a fair price for their home.They can also know what qualities to list about the home to make more appealing to potential buyers.

Realtors also have access to a list of potential buyers and may know the perfect buyer for the home. And many realtors often prescreen the potential buyers before taking them on a tour through the sellers home.

Realtors also work with you from beginning to end. They can explain with you the loan process in detail and match you to a lender. Realtors are great resources for picking out the perfect home and insuring that the process goes smoothly.

There’s a number of reasons for you to refinance a mortgage. Many mortgage refinances can be advantageous to the borrower so long as they be sure that the loans costs and extended interest payments (if applicable) won’t out weigh the benefits that a home loan refinance brings to their financial goals.

One reason to refinance your mortgage is if the current market interest rate is lower than the one you currently have. You can do nothing but profit from this situation especially if you refinance for your loan for the same duration as what’s remaining on the current mortgage. This will save you thousands in interest payments and will decrease your monthly payments. Another reason is if you need to consolidate other debts into your mortgage loan.

Debt Consolidation Mortgages are appealing to those people who wish to rid themselves of lingering revolving debt and have plenty of equity that’s built up in their home.

Although your monthly loan payments may increase, borrowers normally will save a lot of money by saving on interest charges that accumulates through high double digit interest rates from revolving debt creditors.

Another reason might be is if the value of your home has increased significantly. Current market interest rates may not have declined much from what you’re paying now, but it doesn’t mean that you can’t get a lower interest rate. Interest rates are many times determined by how much equity that you put into your home.

The more equity you have the less risky the home loan lender considers you. Now that you have some equity built up in your home think about a refinance just to see how much more you can lower your interest rate which can save you thousands of dollars in interest payments.

The final reason is if you want to change mortgage types or the terms of your current mortgage loan such as from an adjustable rate mortgage to a fixed rate mortgage, or refinance a balloon mortgage payment that is coming due.

Most people are unable to come up with the lump sum of a balloon payment and are forced into refinancing the debt or risk losing their home. In either case, adjustable rate mortgages and balloon payments prove advantageous if you later refinance them. In all scenarios, refinancing is a money saving opportunity. To find out more about refinancing your home, contact your mortgage lender.

Basic Mortgage Terms

There are so many terms associated with mortgages and home buying that it can make your head spin if youre unfamiliar with them. The sure way of getting the best deal is to know a little bit about what terms that are thrown at you through the application process. Below is a list of common terms used during the mortgage process and a little bit about them.

Adjustable Rate Mortgage (ARM) is a mortgage that has an interest rate that fluctuates with the current market rate. These mortgages usually offer a lower mortgage rate than that of a fixed rate mortgage in the beginning but the interest rate can surpass a fixed interest rate later on.

Annual Percentage Rate (APR) is the annual cost of borrowing money that is expressed in a percentage rate, which includes interest, fees, and charges.

Appraisal is a written estimate of the current market value of the home being purchased. Lenders require this to determine the amount they are willing to lend for the purchase of the home.

Closing or Settlement Costs are the total costs of any fees that are acquired during the purchase of the home such as loan origination fees, title company fees, appraisal fees, service charges, etc.

Conversion Option is an option that allows you to convert from an adjustable rate mortgage to a fixed rate mortgage at specified time for the remainder of the life of the loan.

Down Payment is the difference between the selling price and the loan amount that must be paid up front by the buyer. The down payment does not include closing costs or other fees.

Escrow is an account held by the lender that collects money monthly through the mortgage payment to pay for insurance premiums and property taxes on the property. Finance Charge is the total dollar amount that borrowing money will cost you; the total interest to be paid on the loan.

Fixed Rate Mortgage is a mortgage with a set rate that will be paid for the life of the loan. These mortgage payments never change through out the life of the loan. This type of mortgage is the most common. Private Mortgage Insurance (PMI) is a pricey insurance that is required on homes that finance more than 80% of the current value of the home.

Considering a Mortgage Refinance?

There are several reasons for considering refinancing your mortgage. The current interest rates may be lower, to switch from an adjustable rate to a fixed rate, to avoid paying a balloon payment, to eliminate private mortgage insurance, or to retain cash from the homes equity. In any circumstance there are a few steps you want to follow in the process of refinancing your mortgage.

Also things you will need for the refinancing process are W-2s, tax returns, bank, credit card, and brokerage account statements, proof of home owners insurance, and title and purchase agreement, along with other requested documents.

First you should consider how long you would reside in the home in question. If you do not plan in staying in the home for more than three years, you should reconsider financing the mortgage. It usually takes this amount of time to have any monetary gain from the refinance.

Also you want to make sure that you will save at least one percent on your new APR to benefit from refinancing. Don’t forget to calculate in the fees and costs associated with refinancing the home to make sure that you are benefiting from the refinance.

Second you should try to refinance through your current lender to possibly save closing costs. Plus the lender already has a file on the property and can expedite the refinancing much quicker than going through a new lender.mAlso, be sure to lock in your interest rate from the beginning of your application process so you are not affected if rates increase during that time.

The last thing you should consider when refinancing your mortgage is the term in which you want to refinance for. It is recommended to refinance for the remaining months you currently have left on the mortgage. Although extending the loan term while refinancing can lower monthly payments, it could cost you more in the end by extending the period in which you are paying on the loan.

Reverse mortgages was created with the intention of providing retired senior citizens, age 62 or older a steady income, this income comes from the equity in the home. The senior citizen must also reside in the home.

The mortgage lender isn’t reimbursed until the time the home is sold. One caution about reverse mortgages is that the APR is usually higher than that of a traditional home loan. There are three types of reverse mortgages.

The first type of reverse mortgage is Single Purpose Reverse Mortgage. The single purpose reverse mortgage is usually given to those individuals with low to moderate incomes usually by the government. The purpose of this type of mortgage is to assist the homeowner to pay for things regarding the home and property, such as taxes, improvements, and/or repairs.

The second type of reverse mortgage is the Home Equity Conversion Mortgages (HECM) also recognized as federally insured reverse mortgages. This mortgage loan is backed by HUD (Housing and Urban Development). This kind of home loan is more costly than the Single Purpose loan, but it doesn’t require single purpose use. HECM loans requires that you meet with a counselor to go over the costs, risks, and possible options including deciding on one of the other two types of loans.

The third type of reverse mortgage is proprietary. The companies that have created them insure these loans. They are very similar to the HECM reverse mortgages in that they cost more than the Single Purpose loans and follow the same guidelines in determining who will qualify for one and how much it will cost. Proprietary reverse mortgages differ from HECM loans because they don’t require you to meet with a counselor prior to applying for one.

However both reverse mortgages will determine the amount you can borrow from assessing factors such as age, home value, location, and interest rates. To help you to determine which reverse mortgage fits your situation, you should contact a loan officer that’s knowledgeable of reverse mortgages or a HECM counselor.

Stated Income Mortgage Loans

Stated Income Mortgage Loans are typically for those who are self- employed or who have irregular incomes such as buyers who have a commission- based income as well as buyers whos incomes are paid in cash. Stated Income Mortgages do not require the same proof of income as that of conventional home loans which usually involve pay stubs, W-2s for 2yrs, and a list of all creditors.

Although Stated Income Mortgages are dubbed as low-doc or no-doc loans; they are far from. Stated Income Mortgage Loans usually require other means of proving the buyers financial position to find out the debt to income ratio. This usually involves proof of income tax returns, bookkeeping, bank records, and a list of assets and debts, etc. The source of the income must also be verified even if less documentation is required to prove income.

Lenders often consider the source of the income as equally, if not more, important than the amount of the income. Lenders want to know that the income you are currently receiving is reliable and a stable employment source.

The bank records and credit history prove that you have the means to afford the mortgage. These loans are considered to be higher risk than those who are able to provide verification of income. Stated Income Mortgage loans usually have more red tape and restrictions on loan to value of property ratios.

These loans also usually reflect a higher interest rate from a half percent to three percent higher because of the higher risk that the lender takes in lending to a borrower unable to verify income with W-2s and pay stubs.

The main thing here is to be able to prove that you have the income by using bank statements, bookkeeping, and other financial records and also to have good credit. To find out if you qualify contact a lender that offers State Income Mortgage Loans.