Articles

Pros and Cons of Mortgage Pre-Approval

Imagine making an offer on the home of your dreams: three bedrooms, two car garage, great yard, quiet community. Then, imagine having to take back the offer because you don’t qualify for a mortgage large enough to buy the home. You can save yourself the heartache of missing out on your dream home by knowing ahead of time just what size mortgage loan you qualify for. Get pre-approved.

Mortgage pre-approval is like going through the application process before you ever start looking for a home. The mortgage lender looks at your income and checks your credit history, then tells you how much mortgage you qualify for. Many lenders will lock-in this mortgage amount and guarantee that you can borrow that amount, assuming nothing about your financial situation changes. Continue reading →

When Is a 15 Year Mortgage the Right Choice for You?

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. Continue reading →

How Mortgage Loan Payments Work

For most every homeowner, a mortgage loan was necessary to avoid buyers having to pay the total home price in one lump sum, something most of us can not afford to do. When you take on a mortgage, you have the financial obligation to make on-time payments based on the price of the loan plus interest, taxes, and insurance.

Structure of a Mortgage Payment

Essential components of a monthly mortgage payment will depend upon the amount of your mortgage loan and the terms within the loan. The term of the loan is the length of time you have to pay back the loan in full. Longer terms, like the traditional 30 year term, will result in smaller monthly payments for the borrower but for a longer period of time. 30 year mortgages will also cost the buyer more overall when interest is factored into the equation. A shorter term loan, like a 15 year mortgage, will make the buyer pay much higher payments each month but will also more money to be applied to the principle of the loan. A 15 year mortgage will allow you to be a homeowner in a faster period of time and save you a lot of money in interest charges. Continue reading →

Is Your Home’s Value Affecting Your Refinance?

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. Continue reading →

Can Your Lender Refuse Your Dream Home?

Imagine this scenario: You find the house you adore. You do the legwork on mortgage loans and get pre-qualified for the right amount. The price is more than reasonable and the buyer is happy to accept the offer you put in. You are on Cloud Nine and diligently work to submit your required paperwork to the lender. A few days or weeks go by and you finally here from the lender – they have rejected the home you want. It is a nightmare that does happen to home-buyers. The question is how is it you can get so close to closing and lose the entire deal based on the lenders decision.

Home Rejection Rationale

Provided your loan application was completed and included all requirement documentation per the lender, the denial could be for several reasons that are not actually house related. Here are some of the other reasons for a rejection: Continue reading →

Which Mortgage Loan Option is Best for You?

When it comes to mortgages, you can choose how long you want to pay because mortgages come in different lengths. Of course, certain types of mortgages require you to have better credit than others. But, assuming your credit is good enough to have your choice of mortgages, let’s look at the different mortgage loan options and discuss how you can choose the best one for you.

Fixed rate mortgage options

A fixed rate mortgage has the same interest rate and monthly payment for the length of the loan. A fixed rate mortgage is the best option for a homebuyer who plans to live in their home for at least 10 years. With a fixed rate mortgage, you’ll enjoy the stability of having the same mortgage payment every month.

Fixed rate mortgages come in 10, 15, 20, and 30 years. Interest rates typically go down as the mortgage length goes down. For example, a 30-year and 20-year mortgage interest rate may be 3.75%, while the 15-year and 10-year is 3.25%. Even though interest rates are lower on shorter-term mortgages, monthly payments are higher. But, the benefit is that you’ll pay much less interest over the life of the loan. Continue reading →

Six Times Refinancing Your Mortgage Loan is a Bad Idea

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. Continue reading →

How to Spot a Foreclosure Rescue Scam

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. Continue reading →

Private Mortgage Insurance: What is it and When Do You Pay It?

These days, it’s common to get a mortgage with a low down payment or even no down payment at all. It lets you purchase a home faster than if you had to save up a $10,000 to $25,000 down payment to make up 20%. But, there’s a downside to such small down payments – private mortgage insurance.

How Much is PMI?

Lenders require private mortgage insurance when you have less than 20% equity in your home. The insurance would pay off your mortgage if you default. Private mortgage insurance, or PMI, is typically a certain percentage of your mortgage loan amount, between 0.5% and 1%. On a $150,000 mortgage, your PMI payments would be between $750 and $1,500 each year or between $62.50 and $125 per month. PMI is paid with your mortgage. Continue reading →

More Government Help for Homeowners With Underwater Mortgages

With a large number of homeowners still dealing with underwater mortgages (owing more than their home is worth), the Obama Administration is looking for more opportunities to help.  While some struggling homeowners benefit from the Making Home Affordable Program, (HAMP)with loan modifications designed to keep them in the home without foreclosing, new initiatives are designed to keep people from voluntarily walking away from their homes because they’re paying more than their home is worth.  Under the new government program, FHA’s “Short Refinance” program announced in March,  an estimated 500,000 and 1.5 million homeowners will be helped with a mortgage refinance.

Beginning in September, homeowners who are eligible can begin modifying their home loan.  Other programs, including the Making Home Affordable initiative, were only available to homeowners who were behind with their mortgage payments.  This new initiative requires that homeowners are up to date on their mortgage payments, meet minimum credit score requirements of a 500 FICO score or better, and have proof of their ability to repay the loan. Continue reading →

Mortgage Loan Prepayment Penalty

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. Continue reading →

Interest-Only Mortgage Loans

One option for a mortgage loan with affordable monthly payments is an interest-only mortgage loan. While your monthly payments may be low with an interest-only mortgage loan, there are some drawbacks to this type of loan. These drawbacks often don’t show up until after you’ve had the mortgage for a few years.

What Is an Interest-Only Mortgage?

Usually, monthly mortgage payments are made up of part interest and part principle. Interest-only mortgages allow you to make interest-only payments on your mortgage for a certain number of years. Once the interest-only period has expired, your payments will include both the principle and interest on the loan. Continue reading →

Can I Get a Mortgage Loan With Bad Credit?

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. Continue reading →

Homeowners report increased frustrations over loan modifications programs

When the Make Home Affordable initiative was announced by President Obama, many of the tens of thousands of homeowners struggling to maintain their house payments breathed a sigh of relief.  It seemed help was finally on the way for consumers who have been hit hard by the recession and tough economy.  Unfortunately for many of the individuals who have applied for help to avoid foreclosure, assistance is somewhat elusive.  Here we look at some of the problems reported by both the major lenders as well as applicants going through the process.

Not enough help

One of the biggest complaints regarding loan modifications through the program is the lack of available help.  With foreclosures at an all time high and millions of people affected by the economy, the number of people in need of help appears to surpass the help available.  Most of the major loan servicers are participating in the Make Home Affordable program, yet compared to the number of applicants, the number of modified loans seems rather small.  According to the Wells Fargo servicers report for July 2010 Make Home Affordable program, out of 177,267 trial loan modifications that had been started, just over 22,000 trial modifications are still in progress with over 46,000 permanent loan modifications being made.  What happens to the remaining applicants that have been denied?  Do those homeowners have additional help, or do they proceed to foreclosure?  These are important things to consider when working with a loan servicer on a loan modification to stay in your home. Continue reading →

5 Things You Want to Ask A Mortgage Lender

When you are k a mortgage loan, you must first check out the variety of lenders who say they can help. A mortgage is serious business and it can also be a complex process that too few potential homebuyers truly understand. Without clear knowledge of what to expect and what the mortgage loan process involves, buyers risk defaulting when they can’t keep up with the financial obligations because they didn’t understand the contracts they were signing.

Meeting with a mortgage lender is a good way to clear the air and really get to know the process of applying for and closing on a loan. It is important you find a lender that will work with your specific financial situation and be willing to details the process for you.

Here are 5 things to ask a potential mortgage lender before you sign on the dotted line: Continue reading →