Home Mortgage Information

Different Types Of Mortgages And How They Work

admin — Fri, 06 Nov 2009 19:30:45 +0000

When purchasing a home, you will also be purchasing a mortgage. Many first time home buyers are unaware of the options they face when shopping for a mortgage. Choosing the wrong one can cost thousands of dollars, so buyers need to beware of the choices they face. Having the right mortgage information ahead of time is critical.

The most common type of home loan is a fixed rate mortgage. This is a loan that carries a fixed rate for a set period of time, otherwise known as the term of the loan. Fixed-rate loans can be held for many different terms, ranging from 15 to 50 years. Over that time, the interest rate, which will be slightly higher than the national interest rate at the time of the home’s purchase, will not change. The only way to change the interest rate is to refinance, which is basically purchasing a new loan.

Another common loan type is an adjustable rate mortgage. In this loan, the buyer receives an interest rate at the outset of the loan. The rate may stay fixed for a period of time, such as three to five years, but after that time it “adjusts” to mirror the national interest rate. In many situations, this means it will go up. Of course, it can go down as well, but these loans almost always end up costing the homeowner more over the life of the loan than a fixed rate mortgage, especially if they are purchased when rates are really low, since the rate is almost guaranteed to go up at some point in the future.

Interest-only mortgages are somewhat deceiving, because they do not work like a traditional mortgage. In this loan structure, the borrower is only required to pay the interest portion of the loan. The only money put towards the principle of the loan is the money the borrower chooses to add to the loan payment, which means there may be months when no money is added to what is actually owed. This can help buyers get into a home when they cannot afford the monthly payment on a traditional loan, but when the loan term is over, the entire principal amount will be due. These loans are usually only available for a short period of time, making them less than ideal for those who plan to stay in their home for a while. Sometimes people who are flipping a property and anticipate making a profit on the resell price can benefit from this loan structure.

The other loans that are out there, such as VA or FHA loans, are variations on these three structures. They have special guidelines and government programs associated with them, but they function as one of these types. Knowing the differences between these three will help you choose the best possible loan for your next home purchase.

People Who Read This Post Also Read:

How To Choose The Right Mortgage Broker

admin — Thu, 17 Sep 2009 14:22:55 +0000

Choosing a home mortgage broker is not difficult. You have many resources to turn to for referrals to excellent mortgage brokers. Also, because most states require brokers to be licensed, you will have a good idea about the broker’s qualifications before you even begin a relationship.

The first place to turn when shopping for a mortgage broker is your realtor, if you are using one. Realtors often know which brokers are good, and which ones are best left alone. See if your realtor recommends a broker for you to use when you find a home. You can also ask friends and family members who have recently purchased property for their recommendations.

When you have a mortgage broker that you are considering, schedule an interview. You will need to provide financial information to the broker so that he or she can begin looking for a lender for you. However, this is the time for you to learn if you are comfortable with the broker. Remember, you will be living with your mortgage for a long time, so you need to feel confident that your broker is looking to find you the best possible deal.

If you are looking for a specialized mortgage product, choose a mortgage broker with specific knowledge about that type of mortgage. Bad credit mortgages, new build mortgages, and high loan-to-value mortgages are just a few of the situations that may require a mortgage broker with some specific expertise.

Finally, do not be afraid to contact more than one broker. Set up an interview with each one, explain your needs, and see what they have to offer. You will want to do this before you find a property, because you need to have a working relationship with a mortgage broker before you put in an offer on a home. Shopping around will give you the chance to find the broker that makes you feel the most comfortable and confident.

People Who Read This Post Also Read:

How A Mortgage Calculator Can Help With Budgeting

admin — Sun, 13 Sep 2009 19:45:12 +0000

A home mortgage calculator is an excellent tool to use when you are trying to figure out what mortgage is the best for you and how much you can realistically afford to borrow. When you use a mortgage calculator, look for one that gives you the ability to put in a lot of information. The more information you can put into the calculator, the more accurate your results will be.

One type of mortgage calculator is a mortgage payment calculator. This will show you how much your monthly payments are going to be. You will need to know what your interest rate is likely to be and how much you are planning to borrow to use this type of calculator. Once you input the information, the calculator will show you how much your payments will be. Remember that these results may not include the escrow you might want to use for your taxes and homeowner’s insurance.

A mortgage calculator can also help you know which type of mortgage is best for your needs. You can compare fixed rate repayment mortgages, adjustable rate mortgages, and interest only mortgages with a mortgage calculator. Remember to look at both the monthly payments and the overall cost of the loan when comparing the different types of loans.

Have you ever wondered how much interest you will really be paying over the life of your loan? A mortgage calculator can show you! This is a great way to determine whether or not you want to choose a home mortgage that has a shorter term. You will be surprised when you see how much interest you will save by choosing a 15-year mortgage over a 30-year loan.

Many lenders offer homeowners free mortgage calculators that they can use to determine the various aspects of their new loans. You may also find a mortgage calculator on your realtor’s website. With all of the free calculators available online, you need to find one to help you research your different loan options.

People Who Read This Post Also Read:

Options When Facing Foreclosure

admin — Wed, 09 Sep 2009 13:35:41 +0000

When the foreclosure notice arrives in the mail, many homeowners simply give up. After all, when you are behind on your mortgage payments, there is no other option, right? The truth is that there are options other than simply giving up and letting the foreclosure happen.

If you have not yet received the foreclosure notice, but know that you are going to be falling behind, call your lender. Make an effort first to work things out. Remember, your lender really doesn’t want your home. If extenuating circumstances, such as an unexpected job loss, have happened, your lender will often work with you. Temporarily reduced payments, rolling what you owe back into the loan, or a short-term restructured payment plan can help you to get current with your loan. However, if you wait until you are very far behind, your lender is not going to be as willing to work with you. Keep in mind that once you have been offered a repayment option, you need to be able to make the payments.

You can also work with non-profit foreclosure help organizations. They will help you budget and deal with any other credit problems that are making paying your loan difficult. Use caution when choosing one of these companies, as many claim consumer help companies are actually out to make a profit on your circumstances through fees and charges. Check with the National Foundation for Credit Counseling or the Housing and Urban Development Department to find good credit counseling services.

If you simply cannot afford your home, you have options outside of foreclosure as well. Consider selling the house quickly. Discount the price enough that it will sell quickly, but you can still pay back what you owe after deducting your real estate agent’s commissions. If this is not possible because you owe too much, ask your lender if you can simply hand over the deed in lieu of foreclosure. This saves them money, because foreclosure is expensive, so they may accept. If they don’t, try to negotiate a short sale, which is a scenario where you sell the home for less than you owe in order to give the bank something and avoid foreclosure. Make sure the lender agrees to the short sale before you start the process, but keep in mind that short sales do affect your credit score.

If all else fails and you have to go through the foreclosure process, do not panic. Yes, foreclosure is painful and damages your credit score, but it is not a permanent blight. You can get back on your feet and back into a home much quicker than you might think if you learn to budget and stay out of credit card debt after the foreclosure is over.

People Who Read This Post Also Read:

How Does A Reverse Mortgage Help You

admin — Sat, 05 Sep 2009 18:38:50 +0000

The reverse mortgage helps you say in your home even after you retire and have limited funds. If you are married, the reverse mortgage is not due for payment until the last person on the loan has vacated the premises. The nice thing about a mortgage of this type is that you can spend your money on yourself to live instead of giving it away when you pass away. Many people are finding that the reverse mortgage is just another way to get back your money before anyone else can have it.

If you plan to retire and are worried about not having enough money to live from month to month, you will want to consider a reverse mortgage. With social security woes and lack of 401K savings, many people are looking at the reverse mortgage as a way to survive and keep their homes. It is important for people nearing retirement age to have little worries about their finances. This type of mortgage is like a long awaited saving account payment.

You can take the money all at once or receive monthly payments. Since the property taxes and the insurance is included in your payouts and held back, you do not have worry about paying those two items as well. Retiring could not get any better. If you need a reverse mortgage, talk with a lender that offers this service and see how muck you can have for your future retirement.

You will see that you have more money that what you thought. The reverse mortgage will benefit you now when you need it more than it will after you are gone. If you are worried about your children having to pay anything after you are gone, you can stop. A reverse mortgage only gives you enough money so that when the house is sold, the interest and charges are paid directly to the lender. Any leftover monies are paid to your estate.

People Who Read This Post Also Read:

How to Get the Best Mortgage Rate

admin — Tue, 01 Sep 2009 14:33:54 +0000

Mortgage rates are at all time lows, but even with this fact, getting the best possible rate should be your goal if you are refinancing or buying a new home. These tips will help you get the best possible rate.

First, before you even begin shopping for a loan, get a copy of your credit history with the score. You will have to pay a little bit for the score, but you need it. Check your credit history for errors, and get them removed if there are any there. Remember that this process takes time, so start making changes to your credit score early in the home buying process.

If your scores are below 720, you will need to make some efforts to improve them. Start by paying all of your bills on time every single month. Then, look at your credit history to see if the credit limits listed for your debts are accurate. If you need to, have your credit card company call the credit bureaus to have the listed credit limit increased to match your actual credit limit. Remember, your credit score is based in part on the ratio of your credit to the credit limit on each account.

While you are waiting to get a loan locked in, do not apply for any new forms of credit. New credit inquiries can lower your credit score. They also make you look like a risky borrower to the mortgage lender because you are actively seeking credit.

Once you have your credit score as high as it can go, file the application for your loan. If you have a property in mind or are refinancing your existing property, you can lock in a rate when it hits what you want. The locked in rate can be held for a period of time while you get the closing scheduled and finalize all details with the property’s seller. Locking in a rate guarantees that your rate will not go up, but if the rate goes down you are stuck with the one you locked in, so this can be a bit of a gamble.

Be sure to shop lenders as well. While there is not much competition right now for rates since the government has put some rules in place to keep rates low, you may find a slight variance from lender to lender. Be sure to ask about the APR, not just the interest rate, as this will incorporate all of the fees you are paying for the loan in order to give you a more accurate picture of the loan’s cost.

If you follow these steps, you will be able to get the best possible rate. Remember, rates change daily, if not hourly, so you always run the risk of the rate going down after you get yours. Do the best you can, but remember that there are no guarantees when it comes to mortgage rates.

People Who Read This Post Also Read:

The Best Uses for Home Equity

admin — Tue, 25 Aug 2009 16:55:40 +0000

If you have been in your home for a while and have been consistently making your mortgage payments or have seen home values in your area increase, then you are probably sitting on quite a bit of equity. Is there a good way to use this? Should you consider taking out a home equity loan to help pay for other needs for your family?

First, you do need to understand that a home equity loan is a secured loan against your home, and your home could be held as collateral for it. Before you take out a home equity loan, make sure you can afford the payment and really do need the item you are considering buying.

First, consider using a home loan to consolidate expensive debts. You will find the interest rate on the home equity loan is much, much lower than the rate you are paying for your credit cards. However, only do this if you can stop adding to your credit cards. You do not want to end up in worse financial shape than you are already in.

If your home needs some major improvement, a home equity loan is a good option, especially since the money will be going back into the property. You will likely get the money back out when you sell the property at some point down the road.

Finally, the equity in your home is a viable option for paying for a portion of your children’s education. If loan and grant options have been exhausted and you still need more, a home equity line of credit or loan could fill in the gaps, and you will find the interest rate far more acceptable on this secured credit than on any loan option out there for school.

Do not use the equity in your home for short-term pleasures, like a vacation. Once that is done, you will be paying back a loan, with interest, on the most valuable and important asset you own. If you cannot make the payment, you could lose your home. This is not a risk worth taking for a few weeks of enjoyment.

If you do decide to use the equity in your house for one of these purposes, make sure you are careful. Some banks will allow you to borrow more than your house is worth. Do not do this. If you do, you are putting yourself in a dangerous situation in which you cannot get out of your house what you need to if you should need to sell at some point. Always protect yourself by keeping some equity in your property, even if you need to access some for a legitimate need.

People Who Read This Post Also Read:

Tips for Saving Money on Homeowners Insurance

admin — Tue, 18 Aug 2009 15:00:20 +0000

Homeowners insurance is one of those products that you need to have, but hope you never have to use. While most homeowners never tap into the resources offered by their insurance provider, all it takes is one electrical fire or a serious wind storm to cause thousands of dollars of damage to your home, and without coverage, you will be sunk. On top of this, if you have a mortgage on your property, you will be required to have proper insurance in order to keep the loan

While homeowners insurance is a necessity, it does not have to be an expensive one. In fact, in comparison to other insurance products, this is one of the most affordable. With that being said, there are ways to save even more as you shop for a homeowner’s insurance policy.

The first step should go without saying, but many homeowners forget to do it. You need to shop around to make sure you are getting the best rate. You will be amazed at the difference in the rates of different insurance providers. However, before you go with the cheapest option, make sure the company is stable by checking with a rating company such as Standard & Poor’s.

Once you have the best policy, consider raising your deductible. You will lower your payment amount tremendously by doing this. Set enough money aside in an emergency fund to cover your deductible, and you will have a much more affordable policy, without the fear that you will have to come up with a significant amount of money if you had a claim.

Don’t pay for insurance for the land your house sits on. Your land will not be damaged after a fire or theft. When figuring the amount of insurance you need, consider the structure, your outbuildings, and the contents of your home, but do not count the value of the land.

You can make some changes to your home itself to lower the cost of your insurance. Some weather and fire resistant additions can lower your rate, if you tell your insurance representative about them. For instance, some companies offer discounts for storm shutters or modernized electrical systems and plumbing, because these lower the risk of damage from accidents or natural disasters. The same can be said for a home security system, which deters potential thieves.

Finally, keep your credit score high. Insurers regularly use credit ratings to determine the price on an insurance policy. If your credit score is high, your insurance cost will likely be lower.

People Who Read This Post Also Read:

Why Foreclosures Aren’t Always a Good Deal

admin — Sat, 15 Aug 2009 15:40:30 +0000

Most homebuyers assume that buying a foreclosed property means they are getting a good deal on their new home. While many foreclosures come with a low price tag, buying a foreclosure does not always mean you are buying a property at a discount. Before you start searching for foreclosed homes, learn how to spot a true deal.

One of the reasons a foreclosure is not always a good deal is the fact that distressed home buyers often have more debt than just their home mortgage. There are often many other liens and loans against the property, and sometimes these get worked into the selling price of the home. The bank, after all, wants to make sure it is not losing too much money when it finally sells the property.

Another problem with foreclosures is the fact that they usually need a lot of work. People who are facing foreclosure often stop taking care of their homes. They will usually sell their appliances or take their appliances with them, which means there needs to be enough saving on the price of the property to leave room for major appliance purchases. Also, some homeowners who are evicted get mad and do damage on the property, even though they are in foreclosure due to their own circumstances, not the bank’s policies.

Additionally, in many states the foreclosure process takes a long time, and a home may sit vacant for many months before it can be sold. In climates that face cold winters, this can be problematic, as pipes can freeze and cause other serious damage to the home. If you are considering buying a foreclosure, find out if you can have the home inspected before you purchase it so that you will know what problems await you as the new owner.

Keep in mind that not all of the problems with the home may be visible on inspection. You may think that you have enough money set aside for the repairs, only to move in and find more wrong than you first realized. Foreclosures are always sold “as is,” so there will not be a home warranty to help with repairs on major home components that come up as you move in and begin living there.

That being said, there are some great deals on foreclosures available. You need to know how to look at a home beyond its price tag so that you avoid “money traps.” If the price is right and the condition of the home is decent, you can benefit from buying a foreclosure.

People Who Read This Post Also Read:

Making Homes Affordable Refinancing Plan

admin — Tue, 11 Aug 2009 15:10:47 +0000

One of the first things President Obama did in office was try to help the millions of distressed homeowners who are struggling to pay back their mortgages. The Making Home Affordable program works to help these homeowners refinance their properties so that they can afford to keep them. The jury is still out as to whether or not this plan will work, but if you are struggling to pay your mortgage, you should know what it offers. Under this plan, those with mortgages they are struggling to repay may be able to refinance through the Home Affordable Refinance program or have their loans modified through the Home Affordable Modification program.

The Home Affordable Refinance program is available to borrowers who have mortgages guaranteed by either Freddie Mac or Fannie Mae. The program allows buyers with qualifying mortgages to refinance at today’s lower rates, giving homeowners the chance to have a monthly payment they can afford. The homes can be refinanced, even if their value has dropped below what is owed on them, which is a common problem many distressed homebuyers face in today’s market. The goal is to help the homeowner avoid foreclosure.

In order for homeowners to be able to refinance under the current program, they have to be current on their mortgage payments. Also, the amount on the first mortgage on the property, not counting any home equity loans or lines of credit, is equal to or slightly less than the current market value of the home. These homeowners must be able to afford the new payments, and they must be able to stand to gain by refinancing. Loans cannot exceed 105 percent of the current market value in order to qualify for the program. Credit ratings also affect a borrower’s ability to refinance.

Those who are behind on their payments will need to consider the Home Affordable Modification program. In order to qualify for this program, the monthly payment on the mortgage must be equal to or more than 31 percent of the household’s gross monthly income, and the homeowner must not be able to afford the current mortgage payment due to a change in income or expenses.

Under this program, borrowers can have their interest rates temporarily modified so that they can stay in their homes. The modification is based on the borrower’s income, but rates could be dropped as low as 2 percent. Lenders may also extend the term of the loan to make the monthly payment more affordable under this program. The goal is to keep the homes out of foreclosure, a situation that is costly to both the homeowner and the lender.