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Archive for the ‘Mortgage’ Category

The subprime mortgage crisis has been on the tip of everyone’s tongue lately, and the housing market has cooled. Rather than being discouraged by this, smart investors realize that this is the time for deals to be had. We’re in a buyer’s market, which is an enormous relief for buyers who have watched the market balloon over the last decade. But what if you are one of the thousands of people who got caught up in the low-interest madness, thinking you’d be making enough money to cover the difference when your rates reset?

If you are facing difficulties with your loan, remember that the ultimate goal is to maintain your credit rating. You may be able to negotiate with your lender, you may be able to refinance or you may be forced to sell your home now in order to buy one in the future, but the sooner you address the issue the more options you will have. By getting your finances in order you will be able to get on with your life sooner. Don’t add to your stress by ignoring your fiscal situation; follow these steps to getting back on track:

Know the details – go over all your loan documents so that you are prepared for any upcoming resets or changes. When will your payments increase? By how much? Can you refinance? What kind of penalty would you face, if any? Cut in other areas – can you take a roommate or a second job to help make your payments? You may need to look at significant changes in your spending and lifestyle. Do not make any major purchases at this time, and look at liquidating other assets, such as cars or boats, to help meet your payments.

Contact your lender – You should take the initiative with your lender. Contact them before the problem becomes overwhelming. If you receive calls or letters from your lender respond to them as soon as possible. Do not wait to get too far behind – lenders are less likely to move quickly into foreclosure if you are proactive. You want to speak to the right people – ask for the loss mitigation or collections department. Be honest with them about your situation and don’t make promises you can’t keep.

Beware of foreclosure “rescue” rackets – There are a number of scam artists targeting people in neighborhoods where foreclosure rates have been high. They approach troubled homeowners with promises to help them keep their houses. These “rescues” often come with payments that are out of reach of the average homeowner and result in homeowners being defrauded of their homes, sometimes still owing the original mortgage amount. Any company that approaches you with such an offer should be checked out through the Better Business Bureau, your state real estate commission and Attorney General. Do not sign anything without reading it all, get all promises in writing and ask your attorney or a financial professional to review any paperwork before you sign it. Read the rest of this entry »

If you are thinking of mortgage refinancing then there is one thing you might want to know and that is – you should stay away from ARMs ( adjustable rate mortgages ) …

And if you are wondering why anybody would want to do that, especially since ARMs promise such low interest rates, well here’s why …

Adjustable rate mortgages are a great idea when the interest rates are all set to go down for the next several years …

And interest rates go down only when the Government wants to increase consumer spending. Interest rates go down when the Government is looking at ways to stimulate the economy, boost consumer spending …

But you might want to ponder whether this is the case now …

Consumer spending is extremely good and real estate prices are increasing at record growth rates that may not have been seen before. In fact, in some areas the rates are so high that some experts are actually wondering if anyone but the really rich can actually own property there.

And if the real estate prices keep increasing at the same or even higher rates for a long time, then possibly only the rich will actually be able to buy any houses in many areas …

And if that happens, the housing markets might actually see steep fall in prices because most of the people cannot afford houses … and due to this, lots and lots of houses might remain unsold.

Would that be a healthy trend then ? If you think it’s not, well … that might be something even the Government might not want that to happen …

And what do they do to prevent very high inflation … like what is discussed above ?

The answer : They increase the interest rates …

And when interest rates increase, adjustable rate mortgages increase too … and if the interest rates increase significantly, the adjustable rates increase significantly too …

That’s possibly why you might want to stay away from adjustable rate mortgages.

And what do you choose instead ? Well, you might want to consider fixed rate mortgages … since the possibility of fixed rate mortgages increasing is relatively low.

And here is one other thing you may want to do before you consider refinancing, and that is …
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Most people focus on the current mortgage interest rates when shopping for a home loan. Interest rates are certainly important, but they do not represent the only significant expense associated with financing a home. When you are making plans to purchase a new home, it is important to consider the big picture of all the fees associated with getting a mortgage, rather than focusing solely on interest rates.

Before you can decide just how much house you can afford to purchase, you need to look at an overall summary of mortgage fees so that you will have a clear understanding of all the expenses involved. Many factors can impact the total amount of money you need to borrow, as well as the final out-of-pocket requirement for your monthly payment.

Down Payment

Most home buyers will be required to make a down payment in order to be considered for mortgage loan approval. The amount of money an individual is required to put down may vary significantly based on a variety of factors, including: the cost of the home, the applicant’s credit history, the borrower’s qualification for down payment assistance programs, and many other variables. Typically, home buyers are required to make down payments ranging from five to 20 percent of the home’s purchase price.

Prepaid Interest

The day you close on your home loan, you will be required to pay the interest that will accrue on the loan between the current time and the day the first monthly payment is due. Prepaying interest allows you to exert some degree of control over the due date for your monthly payments. Many people are able to include the initial prepaid interest in the total amount financed, which keeps them from having to pay this amount out of pocket at the closing table.

Keep in mind that the longer you put off your first payment, the more prepaid interest you will have to pay at the time of closing. It makes sense to utilize prepaid interest to make sure that your payment due date is convenient to your income schedule, but there is no benefit to postponing the first payment simply because you are allowed to do so.

Homeowners Insurance

When you finance a home, the premium for your first year of homeowners’ insurance coverage is due at the closing table. No mortgage company will allow a sales transaction to take place without being certain that insurance coverage is in effect the moment the title transfers into the mortgagee’s name. As with prepaid interest, many home buyers who are able to do so elect to include their initial homeowners insurance premiums in the total amount financed.

Escrow Account

As long as you have a mortgage on your home, your lender is likely to require you to make escrow payments toward your property taxes and homeowners insurance premiums. This money goes into an escrow account, which the lender uses to make sure these important expenses are paid when they are due. Requiring escrow accounts protects the lender, who has a vested interest in making sure the property is sufficiently insured and remains free of tax liens.

Title Insurance

One of the most important components of a home loan transaction is the process of verifying that the seller has the legal right to transfer title of the home to the buyer. In addition to verifying that the title of the home is clear prior to closing, it is advisable to protect the home from future title problems tied the actions of past owners with a title insurance policy.
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Most people know what a mortgage is, due to the fact that many people have one. But, do you know how the mortgage itself came about? Here is some basic history on the mortgage and where it came from:

In the beginning, a mortgage was just a conveyance of land for a fee. The buyer paid the seller a set rate, with no interest, and the seller would sign over the land to the buyer. There were usually conditions that had to be met before the land would be the property of the buyer, just like today, but usually it was based upon the assumption that the land would produce the money to pay back the seller. So, a mortgage was written due to this fact, and the mortgage stayed in effect no matter if the land produced or not.

But this old arrangement was very lopsided in that the seller of the property, or the lender who was holding the deed to the land, had absolute power over it and could do whatever they liked, which included selling it, not allowing payment, refusing payoff, and other issues which caused major problems for the buyer, who held no ground at all. With time, and blatant abuse of the mortgage system, the courts began to uphold more of the buyer’s rights so that they had more to stand on when it came to owning their land. Eventually, they were allowed to demand the deed be free and clear upon the payoff of the property. There were still steps taken to ensure that the seller still had enough rights to keep their interest safe and make sure that their money was paid.
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