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Mortgage Loan Options Going Exotic

3 September 2010, 11:29 am

In the past, a person had limited options when borrowing money for a home purchase. These days, there are exotic mortgage loan options that satisfy just about every borrowing need.

Creative Mortgages

Getting a loan for a home purchase can be very stressful. What if you dont qualify? How humiliated will you be? These days, theres no reason to worry. The mortgage lending market has a solution for just about everyone.

1. Do the Two Step. The Two-Step Mortgage is a mixed interest rate loan. Essentially, the loan provides a lower fixed interest rate for a period of 5 years or so and then adjusts to a new rate at the end of the period. The new rate is dependent upon the interest rates being charged at the time of the change. This loan can be helpful for borrowers who are squeezing into a loan since the initial period tends to have a lower interest rate than a straight fixed interest loan.

2. Graduated Payments Graduated Payment Mortgages are loans that, well, have a graduated payment schedule. Depending on the specific lender, the first five to seven years of mortgage payments will be 10 to 20 percent lower than a fixed rate mortgage. After the prescribed time, the payments will actually be higher than a fixed rate loan. The advantage of this loan is two fold. First, it lets you borrow more money than a fixed loan because you can qualify for the lower initial payments. Second, the loan is optimal if you are expecting to sell the house within the initial five-year period after significant appreciation.

3. Sharing Appreciation Shared Appreciation Mortgages are typically provided by private investors and even family members. In essence, you borrow money to purchase a home by agreeing to share a percentage of future appreciation in the home with the lender. Private lenders can want as much as fifty percent of the appreciation, but they will significantly lower the interest rate on the loans. SAMs should really only be used if you have horrible credit and no other options.

There three loan options are only the tip of the iceberg when it comes to mortgages. If you need to get creative, find a reputable mortgage broker in your area and see what they can come up with for you.

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Mortgage Loan Lead

27 August 2010, 11:29 am

If you are a loan officer or mortgage broker looking to purchase mortgage loan leads, you may be considering what type of mortgage loan lead to purchase, and which company to purchase them from.

There are a few different types of leads to choose from and literally hundreds of lead companies to buy them from.

A few different types of the mortgage loan leads you can purchase would be real time leads, which are only seconds old by the time you receive them. There are also the old or recycled leads which you can receive relatively cheap and usually in bulk.

Be careful with the recycled leads because you can guarantee that they have been through many loan officers before they have reached your desk, so dont be expecting much on the quality end of these leads.

Than there is the live transfer lead where the prospect is transferred to you from a representative of the lead company once they have made contact. Just make sure you are available to take the call.

Once you have decided which type of lead is best for you, it comes time to decide on which lead company to invest in.

My suggestion to you would be to call and speak with someone in customer service. Get a feel for how they obtain their leads and how they deliver them, as well as gathering information on their return policy.

If you are unable to reach anyone in customer service, or they are not clear on their answers to your questions, than it is time to move onto the next lead company.

Remember, you work hard for your money, and if you feel as though the quality of the customer service is not good or meeting your expectations, than most likely the quality of the leads will not be good or live up to your expectations.

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Mortgage Loan Understanding FICO Scores

20 August 2010, 11:29 am

Apply for a mortgage loan and youll soon become familiar with FICO scores. Heres a primer on the infamous FICO scoring process.

FICO scores are merely a mathematical representation of your credit record. Credit records are simply a recording of your debts and assets. Credit card balances, for instance, are a debt that appears on your credit record, as do late payments, bounced checks and so on. Credit, of course, is a huge consideration in the mortgage loan process.

A credit score is a figure that represents an overall valuation of how you handle credit and the risk level associated with giving you more credit, to wit, a mortgage loan. The loan underwriter will review your credit report for items such as payment history on debts, debt balances and types of credit you already have. A summary of this information is represented by a figure known as you FICO score.

FICO

You may be surprised to learn that FICO doesnt stand for any credit-related terms. Instead, it stands for Fair, Isaac and Company. This company developed the mathematical formula that produces the much loved or hated FICO scores. The FICO score assigned to you determines whether you love or hate the formula.

FICO scores come in a range of three digit numbers. The lowest FICO score you can get is 350. The highest FICO score is 850, a score for which bankers will bow at your feet. The higher your score, the better your credit situation and the more likely a bank is to provide you with a mortgage loan.

Most people do not have perfect credit. To this end, we find most people have FICO scores ranging from the low 600s to the high 700s. Mortgage applications typically are not rejected because of a few late payments.

If youre considering purchasing a house, you should always try to pre-qualify for a mortgage loan. Getting a reading of your FICO score should be one of the first steps.

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Mortgage Factors: Loan to Value

13 August 2010, 11:29 am

When applying for a home loan, there are a number of factors you have to take into account. Loan to value is one of the key issues that will determine whether you get that loan.

Mortgage Factors: Loan to Value

When considering an application for a mortgage, lenders look at a number of factors. Regardless of the type of loan, they always look at loan to value ratios. The loan to value ration is simply a calculation that tells the lender and you the value of the property in question versus the amount of the loan. The ratio is determined by dividing the appraised value of the home by the amount sought for the home loan. For instance, assume a home is appraised at 200,000. If you apply for a 160,000 home loan, the loan to value is 80 percent.

In evaluating any loan of any type, lenders try to evaluate the risk factor. By risk, they are trying to ascertain the chance you will default on the loan and leave them holding the property. The loan to value ration is one of the factors used to determine risk. Simply put, the larger the loan to value ratio, the more risk the lender has of getting stuck with the property. The higher the risk level, the more picky the lender is going to be about other factors in the application process such as income, credit and so on.

The magic number with loan to value rations is 80 percent. If you can come up with sufficient cash to put down 20 percent on a property, the lender will consider the loan to be less risky. Put in practical terms, the lender knows you arent about to walk away from your large cash down payment if you can help it. Thus, there is less risk in granting the loan.

If you are applying for a mortgage with a high loan to value ratio, you need to make sure you have excellent credit and a strong history of employment. An application with 90 or 100 percent loan to value is going to make a lender risk sensitive, so you can expect it to be much harder to get the loan.

In the current home financing market, the loan to value ratio is not as critical as it used to be. There are now a bevy of lenders that specialize in particular types of loans, particularly high loan to value ratio mortgages. If you are looking at a high loan to value ratio, a mortgage broker is your best option to finding the best deal.

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Mortgage Borrowing Tip – Length of Loan

6 August 2010, 11:29 am

When borrowing money for a mortgage, homebuyers are primarily concerned with simply qualifying. Still, paying attention to the length of the loan is a borrowing tip that can save you a ton of money.

Home Loans

In the mortgage industry, the length of your loan used to be the only major issue you had to deal with. How times have changed! In the current market, the variety of loans that exist are simply stunning. Of course, the massive increase in loan options has inevitably led to massive confusion.

Borrowing Tip

Regardless of the type of loan you go with, you should always try to keep your loan term as short as possible. The shorter the loan period, the less you will pay in interest. Here an example using 15 and 30 year loans.

Assume our first homebuyer gets a 100,000 loan at 8 percent interest. He length of the loan is 30 years with a monthly payment of 733.76. For this mortgage, our homebuyer is going to pay 164,155.25 in interest over the life of the loan.

Now, take the same scenario, but reduce the term of the loan to 15 years. Our homebuyer is going to see the monthly payment bumped to 955.65 per month. Over the length of the loan, our homebuyer is going to pay 90,000 less in interest payments over the life of the loan. On top of this, the house will be paid off in half the time.

When borrowing money for a home purchase, you have to carefully budget your finances. If you can afford increased monthly payments, however, a shorter loan length is going to save you a lot of money over time.

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Mortgage and Home Loans

30 July 2010, 11:29 am

The expansion in the real estate market has allowed many Americans to become “equity rich.” They may not have much money on hand, but they may have equity in their homes worth several hundred thousand pounds or more. Unfortunately, this increasing wealth gave birth at home as equity in cases of theft, as more and more thieves increasingly finding creative ways to help owners of their equity, their homes, or both. A clever scam involves new companies that promise to completely “eliminate” an owner of the mortgage. For a fee of a few thousand pounds, these companies claim that the owner can have a free and clear title to their home without repaying the remaining debt. How does this scam?

This scam is a bit more complicated than other scams that often use simple forgery of identity theft. In this “mortgage elimination” swindle, the owner places his home in a climate of trust with the mortgage elimination of society as a trustee. The trustee files a long and tedious, frivolous, a letter of complaint with the mortgage company, giving them a mere 10 days to respond. If the mortgage company does not respond within ten days, and often they do not, the confidence that these claims are then free from the obligation of mortgage. Using a power questionable procedure, and then the confidence files with the share register for a local release of the house of the title. It thus appears that the house is now without a privilege.

The legality of this range of disorders and of questionable outright fraud. It becomes even worse when the liquidator, clearly stating the title of the house, took a home equity loan, the coffers of the audit, and is rapidly disappearing. The disorder often leaves the original owner of a pile of trial, numerous visits from the police and from the obligation to pay two mortgages. This scam is currently underway in some parts of the country, and is not yet widespread. The owners can easily avoid being taken by this scam by simply recognizing a simple truth, you can not simply give up without a mortgage obligation to repay the loan far. Remember, if it seems too good to be true, it is too good to be true.

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Loan Comparison: Interest Only Home Equity Loans Versus Balloon

23 July 2010, 11:29 am

Loan Comparison: Interest Only Home Equity Loans Versus Balloon 2nd Mortgage

What is an interest only home equity loan? This is a loan where the principal borrowed is not paid back each month only the interest is repaid. The principal borrowed may be due in 10, 15 or 20 years. A borrower may decrease the amount of principal due in the future by making payments on the principal.

Interest only mortgages may be adjustable rate mortgages (ARM) or fixed rate mortgages. A fixed rate mortgage will have a set payment for the period of the loan. ARM mortgages will have a fixed rate initially for a six-month period, and then the rate will increase or decrease based on an index, prime rate or five-year treasury rate.

A balloon second mortgage is a short-term mortgage with a fixed rate of interest. Balloon mortgages require repayment of principal and interest. The monthly payments of principal are not based on the five-year term of the mortgage but a longer amortization period of 30 years. Balloon mortgages must be refinanced every five years at the expense of the borrower and subject to any dramatic increase in interest rates.

One of the advantages of the balloon second mortgage is the lower monthly payments could yield additional funds for debt consolidation and home improvements. With lower monthly payments the homeowner has more money to budget towards other expenses.

If the balloon mortgage is repayable in five years and the ARM is a 520 loan, both loans must be refinanced in five years. The balloon second mortgage must be refinanced with a new second mortgage, a line of credit or a home equity line at the expense of the borrower. ARM mortgage rates reset using a mechanical rate adjustment procedure set in the original contract and have a cap on the amount the rate of interest may be increased.

Currently the rates on balloon mortgages are generally lower then the rates on ARM mortgages. If one were sure that rates would be lower in five years, the balloon mortgage would be a wise choice. If one is unsure of future interest rates the security of knowing the maximum rate the interest can be five years in the future would be worth the slightly higher cost of the ARM mortgage.

Both of these second mortgage loans can co behind a negative amortization loan in 1st position, as long as the broker or lender allows the deferred interest loan. Check with your home equity lenders to make sure that they will allow you to get a home line of credit or second mortgage behind a payment option ARM.

If we had a crystal ball to look into the future the comparison would be simple. In a scenario with 15% interest rates the ARM would be the wise choice while in a scenario with 5% interest rates the balloon mortgage would be the wise choice. Unfortunately the uncertainty of the future of interest rates makes it clear there is some risk involved in making this decision.

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Home Mortgage Loans For People With Poor Credit – Low

16 July 2010, 11:29 am

Home Mortgage Loans For People With Poor Credit – Low Credit Score Lenders

Home mortgage loans for people with poor credit are available at reasonable rates if you find the right lender. With some time spent online researching for low credit score lenders, you can base your financing decision on loan estimate numbers. Even with bad credit, you can find flexible terms, so you can find the right home loan for your budget.

The Role Of Low Credit Score Lenders

Low credit score lenders, also called subprime lenders, offer financing to those with scores of less than 650 at slightly higher than conventional loan rates. On average rates are 1% to 3% higher than A rated loans, but expect to pay more if you have just discharged a bankruptcy or foreclosure.

Subprime loans arent restricted like conventional loans, so you have many more options with your terms. You can secure 100% financing, interest only loans, or a traditional fixed rate 30 year mortgage.

Unfortunately, there are companies that would take advantage of your financing situation by charging high rates and fees. You can protect yourself from these dishonest companies by comparing loan offers from several different companies.

Getting A Good Loan Estimate

The best way to find a lender is to base your decision on their loan estimates. Online lenders can get you mortgage quotes in just minutes, without having to access your credit report. Not only will you get information on rates, but also on closing costs and miscellaneous fees.

To get the most accurate numbers, request quotes on the loan amount and down payment you ideally want. Just remember that if you decide on different loan terms, you will need to ask for new loan quotes.

Timing Your Mortgage Financing

To give yourself enough time to find the best subprime lender, start searching for financing before you look for a house. By lining up your mortgage ahead of time, youll have a better idea of your borrowing potential. You will also be able to close the deal sooner on your new home.

Most online lenders can process your loan application in a few days, with funds available in two weeks. Your escrow company will handle the final disbursement of funds.

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Home Mortgage Loan Mistakes Most Homebuyers Make

9 July 2010, 11:29 am

MISTAKE #1: Over shopping your loan

Your credit score is based on the perceived risk associated with extending you credit. Over the years, the credit reporting agencies have determined that a borrower who seeks credit from many different lenders is riskier than others. Therefore, they decrease your credit score each time a lender pulls your credit report.

Each time you call a lender seeking the best possible rate and terms for your home mortgage, he has to pull your credit report. This is factored into your credit score, and a lower score decreases your likelihood of getting the best rate and terms.

While some consumers are ONLY focused on rates, you should seek the guidance of a National Association of Responsible Loan Officers member that is willing to speak with you about your loan options. There are literally hundreds of loan products available and every borrower has a different financial situation and financial goal. We highly recommend having a consultation with your loan officer so they can tailor a program to meet your individual needs instead of focusing exclusively on rates and points. You may likely find a better product than the one you were shopping for.

MISTAKE #2: Trying to hide past financial difficulties

One of the important services a responsible loan officer offers is helping you overcome past financial difficulties that may hinder your ability to have your loan approved. Your loan officer is on your side.

Supply the information that will help your loan officer provide you with the best possible rate and terms and minimize the impact of your past credit history. The fact that you have recovered from past financial problems makes you a better risk than others who havent yet faced challenges. Overcoming past financial difficulty proves that you honor your commitments and dont give up.

MISTAKE #3: Allowing a loan officer to put misleading or untruthful information about your income, expense or cash available for down payments on a loan application in order to get a loan

Providing untruthful information on a loan application is fraud. Mortgage fraud is prosecuted by federal authorities, and they will find out about the fraudulent information. Do not allow yourself to become an accomplice of a loan officers fraudulent loan application.

Even if a loan officer fills in the information for you, if you do not believe the loan application is 100% truthful, you should refuse to sign it until the loan officer corrects the application. While many loan officers try to help borrowers by misstating the facts, the truth is that they are simply getting themselves and their borrowers into a lot of trouble.

MISTAKE #4: Borrowing more than you can repay

All of us understand that we may have to stretch our monthly budgets a bit to afford the homes we want. However, you will put your entire financial health in jeopardy by buying a home you simply cannot afford.

If you buy an expensive home and find you cannot make the monthly payments, you could face a huge loss when you have to sell that home quickly to get out from under your mortgage. Or worse, you could be forced into foreclosure or bankruptcy.

It is much better to be patient, buy a home you can comfortably afford, make payments, build equity and then transition into a larger home after a couple of years. Yes, the larger home will cost more then, but the home you purchased will also have appreciated during that time. Most importantly, you will have built a successful financial foundation that allows you to experience all of your dreams, including that dream home.

MISTAKE #5: Relying on interest rate advertising

Some loan officers use interest rates to get your attention; however, they may actually end up costing you more. Such rates are often derived by using a 30-year mortgage coupled with an accelerated payment plan.

You may decide you like that option, but you cannot directly compare the interest rate on that mortgage to other opportunities. This loan could cost more than other mortgages with seemingly higher interest rates.

It is critical to find a loan officer you can trust to review the options available to you and the best possible rates for your financial situation. Only a responsible loan officer can give you all of your options in an understandable way.

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Home Loan Mortgage Loan Refinance – Refinancing For A Shorter

2 July 2010, 11:29 am

Home Loan Mortgage Loan Refinance – Refinancing For A Shorter Term To Save Money

Saving money with lower rates isnt the only reason to refinance. Opting for a shorter loan can also save thousands in interest and free up income in the future. A short term loan can also help you pay down your principal quicker.

Better Rates

A 15 year mortgage has a better rate than a 30 year mortgage offered the same day usually by a quarter of a percent. However, even if rates are the same as your current mortgage, refinancing to a shorter mortgage can save you thousands in interest by paying off the principal sooner. Your monthly payments will be slightly larger, but that is because a larger portion of the balance is being paid.

Offers Self-Discipline

Short term loans make your decision to pay off your mortgage official. For those that have a hard time making extra payments on their mortgage, a short term mortgage may be the answer.

It is helpful to first look at your long term financial goals. Perhaps you are planning to pay for kids college tuition, to retire, or to reduce your debt load in the future. Decide when you want your mortgage paid off and look at the monthly payments. You can choose a number of periods 15, 20 or 25 year home loans.

Factors To Consider

Low rates arent the only factor to consider when deciding to refinance, the payment period is also important. By simply making larger principal payments, you get rid of your loan sooner and save money on interest payments. Additionally, reducing your debt level by paying off your mortgage also improves your credit and financial situation.

However, you should also remember the immediate impact of a short term mortgage. A larger monthly payment can put a strain on your monthly budget. You may also find that if you plan to sell your home within a couple of years, you will not recoup the cost of refinancing fees.

You are also limiting your financial flexibility. You are committing yourself to a larger principal payment. You could choose to simply pay down the principal when you have the available cash.

In the end, short term mortgages do have their benefits and should be considered when you plan to refinance.

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