Archive for the ‘Financing’ Category

• Jan 26

  More Americans Are Walking Away From Their Mortgages

  Are you selling a house that isn’t worth as much as the balance remaining on your mortgage? Then it may be time to walk away. With the real estate market not expected to recover until 2023 and foreclosure rates abysmally high, more and more Americans are choosing to let their lender repossess their home even though they’re ahead on the mortgage. It’s a strategy that the lending industry calls “strategic default,” and if you’re struggling to build equity in your home, it might be worth a closer look.

  Strategic default used to be portrayed as something deadbeat homeowners did when they couldn’t keep up with the mortgage. That changed in 2009, when the Wall Street journal ran a piece on a couple who cut their monthly living expenses from $4,000 to $2,000 by defaulting on their home and renting a new one. As the real estate market continued to slide, homeowners around the country – many of whom had never missed a loan payment in their lives – started to seriously weigh their options. According to “Underwater Home” author Brent White, right now “a large number of Americans who are underwater on their mortgages would be better off financially if they walked away from their homes.”

  Strategic default works for a few different reasons. Many people who are thinking about selling are close to retirement and want to downsize anyway. Since they won’t apply for a home loan ever again, they can stand to take the hit of a foreclosure on their credit score. People might also choose to walk away if they live in a state like California, where lenders are allowed to foreclose but are not allowed to sue for the balance of the mortgage. But the biggest reason is this: banks simply don’t want to deal with the paperwork. They’re so backed up thanks to the robo-signing scandal that they’re willing to accept a loss on a short sale to save them the effort of pursuing your debt.

  If you think that a strategic default would benefit you, research your local real estate laws or get in touch with a professional defaulting agency today. After all, if you’re drowning in your mortgage, starting a new life could be as easy as walking away.

  Tags: foreclosure, mortgage, selling a house
  Posted in Financing, Home Buying | No Comments »

• Jan 22

  What a Good Faith Estimate Means to Your Mortgage

  If you’re buying a house, you’re entitled to a “good faith estimate” when applying for a mortgage. However, sometimes these itemized rundowns of the estimated costs of a home loan aren’t made in good faith at all. They can be misleading, and they can bait a homeowner into paying thousands more than they had anticipated. In order to protect yourself from predatory lending, here a few things you need to know about good faith estimates:

  • They don’t tell you exactly what you’ll be spending. The good faith estimate forms that lenders use were revamped about a year ago, but, according to industry experts, they still don’t disclose exactly what borrowers will be paying for their loans. For example, the form doesn’t include down payments in its estimate, nor does it mention seller-paid costs like transfer taxes.
  • They might not be official estimates at all. Providing an official good faith estimate locks lenders into agreeing to the loan terms described on the form. In order to bypass this obligation, some unscrupulous financers provide buyers and homeowners with “work sheets” instead. These documents look a lot like good faith estimates, but they aren’t legally binding. They also allow the lender to change their terms at closing. As a responsible buyer, you should always confirm that every good faith estimate is delivered on the official, legally mandated form.
  • Lenders never know the exact cost of a loan. Some of the expenses associated with buying a house aren’t decided until closing, so there’s no way your lender will be able to tell you exactly how much your loan will cost. This is typically not a problem for many buyers, but there are some lenders who will use that little cushion of uncertainty to jack up their rates behind your back.

  A good faith estimate can be a useful tool when buying a house, but only if you take it with a grain of salt. Instead of relying on these estimates to tell you the total cost of your home, use them as a way to compare the loan terms of different lenders in order to decide which mortgage is right for you.

  Tags: buying a house, mortgage
  Posted in Financing | No Comments »

• Jan 16

  3 Reasons to Consider an Adjustable-Rate Mortgage

  Although financial experts usually advise buyers to avoid adjustable-rate mortgages like the plague, there are a few instances when choosing this type of home loan over a fixed-rate mortgage can actually be beneficial. If you’re buying a house in the near future and you don’t know which type financing you should be looking for, here are a few reasons why you might want to consider an ARM.

  1)    You’re expecting a promotion. If you’re anticipating an increase in your annual income over the next few years, it could behoove you to take out an adjustable-rate mortgage on your new home. You’ll be able to save money on your low initial payments, and when your interest rate starts to increase, you’ll have the resources to handle it.

  2)    You don’t plan on living there for long. If you’re buying a house that you don’t plan to inhabit for longer than five years, an adjustable-rate mortgage is actually a better option than fixed-rate financing. As long as you put your home up for sale before the fixed-interest period expires on your ARM, you’ll end up paying much less than you would have at a higher permanent rate.

  3)    You want to attack your mortgage. Adjustable-rate mortgages can also be attractive to homeowners who want to aggressively pay off their homes. If you’re determined to own your house in half the time your loan period dictates, then you can use the low initial interest rates of ARMs to your advantage. Keep in mind, though, that paying off a house in seven years or less isn’t a viable option for many homeowners.

  Adjustable-rate mortgages aren’t right for everyone buying a house, but there are definitely times when they have an edge over fixed-rate financing. If you find yourself in any of these scenarios and want to know if an ARM is right for you, contact your loan officer today. If you’re smart about it, you can save yourself thousands of dollars with one of these home loans.

   

  Tags: buying a house, mortgage
  Posted in Financing, Home Buying | No Comments »

• Jan 6

  3 Ways to Get the Best Interest Rate on Your Mortgage

  If you’re buying a house this season, you’re in luck. Due to the sagging market, lenders are giving new homeowners lower mortgage rates than they have for the past 10 years. However, you’re going to need to do more than just show up to a lender’s office if you want to minimize your interest. Before meeting with your loan officer, make sure that you’ve taken these three steps to strengthen your portfolio.

  1)    Pay off all of your debts. Your credit score is the most important factor in determining the interest rate your lender will offer you. Don’t even bother applying for a mortgage until the majority of your credit card debts and other loans are paid off. Believe it or not, a 40-point ding on your credit score can result in a 1% higher interest rate on your mortgage. That can mean a house that costs you $20,000 more than it would have otherwise.

  2)    Explore different lenders. A good rule of thumb when looking for a home loan is to meet with five different lenders before accepting an offer. Exploring different options will give you some leverage when meeting with a loan officer. After all, if one financer offers you a good interest rate, the other ones you visit are likely to match it.

  3)    Get a fixed-rate mortgage. Adjustable rate mortgages might seem like better deals at first, but their variable interest rates will always cost you more in the long run. Unless you’re planning on selling a house within five years of moving into it, you should always, always, always get a fixed-rate loan. Fixed interest rates seem higher at first, but those rates will stay the same throughout the entire period of the mortgage.

  The two keys to securing a good interest rate on your mortgage are presentation and competition. You want to present yourself as a reliable and trustworthy applicant while encouraging different lenders to compete for your mortgage. If you remember these two key things when buying a house, you can be sure to get a great offer for your home loan.

  Tags: buying a house, mortgage
  Posted in Financing | No Comments »

• Jan 2

  Want to Pay Less for Your House? Refinance Your Mortgage.

  If you want to save some real money this holiday season, why not give yourself the gift of a home loan modification? In this buyer’s market, refinancing your mortgage can save you tens of thousands of dollars on your interest, and it can even reduce the period of your loan by five or more years. Here are a few ways you can adjust your mortgage to best work for you:

  • Lower your interest. If you originally took an adjustable rate mortgage on your home and aren’t planning on moving any time soon, it pays to refinance and opt instead for a lower-interest fixed-rate mortgage. By renegotiating your 6% interest ARM to a 5.5% fixed-rate home loan, you can save more than $100,000 in interest over a 15-year period.
  • Shorten your period. With defaults on home loans at an all-time high, the number-one priority for lenders is getting back the money they lent you. They’re often willing to give up a few years of interest in order to shorten the period on your mortgage, and this is always in your best interest if you’ve got the income to handle it. While shortening your loan’s period might increase your monthly payments, it will save you thousands on interest in the long run.

   

  • Turn your equity into a cash out. Your equity is the difference between what your home is worth and how much you’ve got left to pay. If you undergo a home loan modification for an amount greater than what you still owe on the home, you can “cash out” on part of your equity. This means you’ll get a sum of money in exchange for receiving less cash when you sell the home. This is a good idea if you want to build an addition or start a college fund for your child. This is not a good idea if you need the cash to pay off unsecured debts, like credit cards.

   

  The weak housing market has given homeowners a variety of home loan modifications to choose from. By refinancing your mortgage, you can pay less for your house, pay off your house faster or even cash out on part of its value. If you want to know more about these modifications, contact your loan officer today.

  Tags: home loan modification, mortgage
  Posted in Financing, Home Buying | No Comments »

• Dec 23

  3 Tips for Mortgage Shopping

  A home mortgage is an expense you’ll be paying off for some time. Yet plenty of people who are buying a home rush into their purchase without any preparation. You may think all lenders are the same or that you’re lucky to receive a loan. This mentality obscures the real issue: like any other purchase, you can find deals on home loans if you know how to look. Here’s what to keep in mind when mortgage shopping.

  1. Shop around. Rates and options vary significantly between different lenders. Pick several lenders and evaluate the rates and packages they offer. Ask a potential lender to give you hard numbers on a 15- or 30-year mortgage (or whatever time span you’re looking at), or use a web-based mortgage rate comparison tool. Compare each lender’s offer and keep an open mind about the long-term savings each type of mortgage offers.

  2. Look for down payment help. If you’re interested in buying a home but have little in the way of savings for a down payment, help may be available. Explore options offered by the federal government for those without the cash to afford a typical 10% down payment. The Federal Housing Administration offers much lower down payments for those with good credit. Other federal bodies, like the Department of Agriculture, also offer help for certain types of properties.

  3. Don’t be afraid to ask for help. Take advantage of your personal and professional networks when buying a home. Ask anyone in finance for advice on the particulars of your mortgage. Also, talk to people who have paid off a mortgage or recently purchased one. These people are full of valuable advice that can make your mortgage-buying process much easier.

  View a mortgage as a purchase, not a loan. When you treat your mortgage as a commodity, your inner deal hunter is likely to appear, and you’ll be more sharply focused on competitive pricing. With just a little work before you buy, you’ll enjoy significant savings.

  Tags: buying a home, home mortgage
  Posted in Financing | No Comments »

• Dec 14

  3 Reasons Why You Should Consider a Home Loan Modification

  It’s a buyer’s market right now, which means that it’s a perfect time for people who have bought a home in the past 10 years to refinance their mortgage. While many people are put off by the idea of refinancing, undergoing a home loan modification now could save you thousands of dollars in the future. If one of the following scenarios is true for you, a home loan modification could make sense.

  1)    You’re having trouble making your payments. If you’re struggling to keep up with your mortgage payments every month, a home loan modification is definitely a good idea. By renegotiating your mortgage you can extend the term of your loan in exchange for lower monthly payments. It will take you longer to pay off your real estate investment, but eliminating the chance of foreclosure is always worth an extra few years of debt.

  2)    You plan on living in your house for a while. People who don’t plan on living in a house for a long time will often get an adjustable-rate mortgage (ARM) because of the reduced down payment and lower initial interest rates. While this is typically a good idea, if you have an ARM and decide to live your house longer than you initially planned, you should modify your home loan to a fixed-rate mortgage. While the term on a fixed-rate mortgage is typically longer than the term on an ARM, they have much lower interest rates overall. If you keep up with your mortgage payments, then you’ll end up saving money in the long run.

  3)    You want to pay off your house faster. If you recently received a promotion or a substantial amount of money from an inheritance or contest winnings, then a home loan modification is the key to paying off your house faster. By increasing the amount of your monthly payments, you can lower your interest rates and shorten the term of your loan by as much as 10 years.

  In the current economy, your lender should be more than willing to renegotiate your home loan. Even if you’re falling behind on your payments, a lender would rather refinance your mortgage to lower the payments than to go through the hassle of trying to collect your unpaid debt. If any of these three conditions apply to you, contact your mortgage broker today to discuss how a home loan modification can help you achieve your financial goals.

  Tags: home loan modification, mortgage
  Posted in Financing | No Comments »

• Dec 9

  3 Ways to Survive a Foreclosure

  When your lender decides to foreclose on your home, it’s easy to feel like the world is ending – but a foreclosure doesn’t mean that you’ll never be eligible for a mortgage again. There are plenty of steps that you can take to get back on the right financial track, if you’re willing to work hard enough. Here are three things you can do now.

  1)    Understand your rights. Although your lender will hound you to pay your mortgage even after they foreclose on your house, they can only pursue your debt within the bounds of the law. Under the Fair Debt Collection Practices Act, a lender isn’t allowed to call your house outside of business hours, inform your employers of your debt or otherwise harass you into paying. If they try any of these underhanded tactics on you, find a lawyer and take them to court.

  2)    Use your credit cards. If you still have credit cards open after your foreclosure, then you should make sure to use them as often as possible. You might not have much money, but spending a little and paying it off in full every month will help pull your credit rating out of the well. If you use the cards responsibly – in other words, if you don’t carry a balance – your credit rating will improve markedly after the foreclosure on your credit score expires.

  3)    Hound your lender to clear your credit score. In some cases, harassing a lender as much as they harass you can be a good thing. If you call, send emails and write letters to your lender every day demanding that they remove your foreclosure from your credit score, you might bug them enough that they’ll clear your credit rating just to get rid of you. Remember, though, that if you’re going to try this, it’s important to stay within the boundaries of the law – just one overzealous message could land you in court.

  Surviving a foreclosure isn’t easy, but it isn’t impossible either. After seven years your foreclosure will be removed from your credit score, so use the time wisely to build up a solid credit rating through responsible credit card use, and don’t be afraid to sue your lender if their collection practices start getting unethical.

  Tags: foreclosure, mortgage
  Posted in Financing | No Comments »

• Nov 20

  How to Handle Adjustable Rate Mortgages

  While the low initial interest of an adjustable-rate mortgage can attract many first-time homeowners, the rising interest rates often sound easier to cope with than they actually are. If you’re stuck in a mortgage with steadily increasing interest, here are a few financial maneuvers you can use to keep your family sane and secure:

  • Start a cushion account. Although you can’t control how much your mortgage interest rates will rise and fall, you can at least make sure that you’ll be able to make your monthly payments on time by stashing a portion of your paycheck in a savings account every two weeks. This way, you’ll have a cushion in case the prime index rate jumps unexpectedly. And if you’ve still got money left over at the end of the year, you can absorb it into your general savings or checking account.

   

  • Plan ahead. If you look at the trends in the prime index rate that your mortgage uses (take a look at the past few years), you’ll be able to get a good idea of which direction your interest is heading in the future. If you have trouble analyzing the data yourself, you can always search the Internet for economists’ predictions. Planning ahead will make it easier to keep the money on hand to cover your increased monthly payments.

   

  • Refinance your mortgage. With foreclosures at an all-time high, banks are looking for strategies to get homeowners to pay their mortgage consistently. For many homeowners, this means refinancing an adjustable-rate mortgage, turning it into a fixed-rate mortgage instead. If you’ve got equity in your home and the fixed period of your ARM isn’t up yet, you’re an especially good candidate for a fixed-rate mortgage. However, you should be aware that this move likely means that you’ll have to stay with your real estate investment for a few more years before you’re able to sell it.

  In the current buyer’s market, an ARM might actually be more affordable than a fixed-rate mortgage. But if you’re uncomfortable with the shifting interest rates, now is a perfect time to modify or refinance your loan in order to extend your fixed-rate period.

  Tags: mortgage, real estate investment
  Posted in Financing | No Comments »

• Nov 14

  Home Financing Options for People with Poor Credit

  In this tough economy, it’s hard to keep your credit rating as high as you’d like it to be, and only a few financial mistakes on your record can compromise your ability to finance a new home. If you’ve got less than stellar credit, here are a few financing options to investigate:

  • Federal Housing Authority Loans. In an effort to expand home ownership and give a boost to the real estate market, the government has begun offering federally funded mortgages to people with bad credit. While the terms of these loans may not necessarily be ideal, they’re one of the best ways to secure financing for your real estate investment if you’ve got a spotty credit score.

   

  • Secured Loans. Secured loans operate on the principal of collateral: you offer something of value to your lender in case you can’t pay your mortgage. As you can imagine, having to put up a vehicle or other valuables as collateral in order to finance your real estate investment isn’t the most desirable scenario, but lenders who are able to secure their investments will likely care much less about your financial history. Furthermore, since these types of loans are fully legal, you can take your lender to trial if things go awry.

   

  • Sub-Prime Mortgages. Sub-prime loans are mortgages which charge more interest than the prime rate. Specifically targeted towards people with bad credit, these mortgages will end up costing homeowners thousands more than the price of their real estate investment. Since the credit crunch of 2008, these loans have been harder to find, and even if you do manage to find a lender willing to finance your real estate investment at a sub-prime rate, it’s better to shop around for other financing options before signing on the dotted line.

  As you can see, the mortgage options for people with bad credit are extremely limited. While it’s always a good idea to build up your credit score before applying for a home loan, if you need to find financing for your house immediately, there are ways to do it. While an FHA loan is probably your best bet for securing a mortgage, don’t be afraid to apply for a secured loan – as long as you’re sure the lender is legitimate.

  Tags: mortgage, real estate investment
  Posted in Financing | No Comments »