When President Obama set out to establish an assistance resource for homeowners that could not afford their payment any longer, many people grabbed on to the glimmer of hope. But the Home Affordable Modification Program, in effect since 2009, did not produce exact results. In fact, many people were left worse off then where they started.
What Is a Mortgage Modification?
Under the Home Affordable Modification Program, homeowners who could no longer afford their current loan payments could seek relief from lenders. Mortgage providers were basically required to open the door for modification considerations on existing loans in order to make payments more reasonable. The terms of the original loan were reworked so homeowners could secure a smaller, more manageable monthly payment. [More]
When you’ve never applied for a mortgage loan before, the process can be quite confusing. A mortgage is the biggest loan most people will ever get, so it goes without saying that the mortgage process is pretty intense. That being said, as you take the steps to getting a new mortgage loan, make sure you avoid the most critical mistakes.
Not checking your credit first.
Well before you start applying for mortgages, when you’re in the “I want to by a house” stage, you should check your credit. It’s best to get rid of any credit problems before you apply for a mortgage since it can take months to clear up some errors. If you have errors on your credit report, you can dispute them with the credit bureaus. You’ll also need to take care of unpaid delinquencies and collection accounts if you want to get a mortgage. [More]
Traditionally mortgages are offered with either a 15 year or a 30 year term. A good majority of home buyers opt for the 30 year mortgage because payments are lower and there is a lot more time to pay off your mortgage debt. Even financial experts recommend home buyers opt for a 30 year mortgage to keep cash from getting tied up in mortgages for such a long period of time.
Record Low Considerations
While 30 year mortgages may be the norm, the current trend of record low interest rates may be a reason to reconsider your options. If you are a good candidate for the lowest available interest, meaning you have excellent credit and your debt-to-income ratio is sufficient for lender requirements, a 15 year mortgage may be the right choice for you. [More]
Homeowners tend to seek out a refinance of their mortgage loan when they have built up some equity in their home and wish to get better loan terms than their original mortgage. People also seek to refinance when they initially took out an adjustable rate loan and would prefer a fixed rate loan for better payment manageability.
Because of recent changes in the mortgage industry, it is now harder to get any kind of financing let alone a refinance deal on your current home. Lenders are looking for plenty of equity, creditworthiness, and the ability to repay the loan from any borrower. Since many people have fallen into debt traps or have come close to losing their home through foreclosure, lenders are very particular about who they will lend to and the criteria to approve applications for refinance. [More]
A lot of homeowners go into a mortgage loan expecting to refinance it a few years down the road. This is especially true of homeowners who took on an adjustable rate mortgage. Others consider refinancing to take advantage of lower interest rates or to extend their mortgage repayment term. Refinancing isn’t always a good idea. Sometimes it’s better to just leave your mortgage alone.
When you’re close to paying off your mortgage loan. If you’re more than halfway done paying off your mortgage, now probably isn’t a good time to refinance. You’ll end up paying a lot more interest on your home and lose the equity you’ve gained. The same thing goes if you’ve been making prepayments toward your mortgage to pay it off sooner.
Your interest rate only goes down a little. Lowering your interest by only a percent or half-percent isn’t worth it in the long run. Refinancing has additional costs and you won’t break even let alone get any savings if you refinance for a slightly lower interest rate. Use an online refinance calculator to figure out whether refinancing would actually save you any money. [More]
As if facing foreclosure wasn’t bad enough, now you have to be on the lookout for foreclosure rescue scams. In these scams, companies claim they can help save your home by working out a deal with your mortgage loan. The scams often require upfront payments. In the end, you’re out of hundreds of dollars and still facing foreclosure of your mortgage loan.
Sometimes foreclosure rescue scams come to you after a foreclosure notice is posted at your county or city courthouse. Other scams are advertised on television, radio, and the internet.
You can tell whether a foreclosure rescue service is a scam by looking for certain warning signs:
- The company asks you to pay a fee before they do anything or asks you to send a fee via cashier’s check or wire transfer.
- The company tells you to pay them instead of your lender. Foreclosure scam artists often tell homeowners not to contact their lender at all.
- The company promises it will stop the foreclosure process. Your lender is the only one who can stop your property from being foreclosed. Foreclosure rescue companies can’t guarantee your home won’t be foreclosed.
- The company asks you to transfer your title or deed. [More]
If you ever try to refinance your home, your process might come to a halt when you find out your current mortgage loan has a prepayment penalty. Lenders often put the prepayment penalty clause in a mortgage contract to keep buyers from selling their home or paying off their mortgages within a certain period of time. Some borrowers who have credit problems can’t get mortgage approval without the prepayment penalty clause. Other borrowers with better credit scores agree to the penalty because the lender promises a lower interest rate.
Prepayment penalties usually apply for the first three to five years of the mortgage. The penalty may be a percentage of the total mortgage amount, e.g. 2%. Or, the penalty could be several months of interest payments. Either way, prepayment penalties can amount to thousands of dollars. If you’re refinancing to get a lower interest rate, the prepayment penalty could negate the interest savings you’d receive. [More]
Mortgage loans at one time were relatively easy to get and lenders were pretty lax in their requirements for approving a mortgage loan. However, while the past policies did grant many buyers the America Dream of owning a home, it eventually backfired and caused a financial crisis in the mortgage industry. Now lenders are taking loan application approvals much more seriously and have stringent requirements for mortgage loan eligibility.
Is Bad Credit a Deal Breaker?
When you apply for a loan, you should already know where you stand credit-wise. If you have excellent credit scores ranging above 700, you are more likely to have the most options when it comes to finding a loan and a great interest rate. Lenders want to find applicants who show responsibility when it comes to managing their money and their financial obligations. [More]
If you took on an adjustable-rate mortgage (ARM) a few years ago, you might have done so with the expectation that you would refinance once the interest rate started increasing. Now, you’re probably wondering whether refinancing is the best option.
Refinance Qualifications
Refinancing your mortgage loan generally only makes sense when you can get a better interest rate than your current one or when you can switch from an adjustable interest rate to a fixed rate.
These days, it’s harder to get a great mortgage interest rate. To get the best rates, you need a FICO above 720, at least 20% equity in your home (that hasn’t been used to secure a second mortgage or home equity loan), and two years of steady income. Without all three of those things, you may not get the best rate or you may be denied a refinance all together. [More]
In recent times much has changed about the financial industry, among lenders, and with mortgages. These changes have been made to combat the high rate of mortgage defaults that wrecked the housing and mortgage industries not so long ago. So many homebuyers were given mortgage loans on homes they could not reasonably afford, leading to a nationwide crisis.
Since the storm has finally began calming down, lenders are now much more demanding of borrowers than in the past. Steps are being taken to ensure the borrower is creditworthy and capable of paying off their debts and it is harder to get a mortgage loan than ever before. With credit scores much lower across the board than before, it is not easy to finance a home if you do not have all your finances in order. [More]
