Can you get special assistance or qualify for a low-cost mortgage New Jersey based on the type of job you have? Does working as a teacher, nurse, police officer, firefighter or other career in public service let you qualify for special mortgage programs not available to other borrowers?
Well yes – and no. In reality, there are almost no mortgage programs specifically targeted at certain professions that aren’t available to the general public. But that’s not to say there aren’t any – or that there aren’t certain advantages that teachers, cops and other have when shopping for a mortgage.
A search on the Internet will easily turn up tons of special mortgage offers targeted at these professions. Searching for “mortgages for teachers” or “mortgages for nurses” will turn up page after page of mortgage promotions directed at these professions.
Stable employment = good loan risk
However, almost none of these are actually special mortgage programs New Jersey designed for those professions. Instead, teachers, nurses, firefighter, police, professors, state employees and others in institutional careers share certain characteristics that make them attractive customers for mortgage companies – so many of them design special appeals aimed at people in those jobs.
What those careers share are stable employment prospects and income. Unlike salespeople, factory workers, managers or others in the private sector, people in institutional jobs tend to be at very low risk of being laid off or fired – and often stay with the same employer for many years. Their incomes tend to be stable as well, unlike, for example, a salesperson or small business owner.
All this makes them very safe candidates for a mortgage loan New Jersey. And that’s what can enable you to get attractive terms on a mortgage, rather than a special program aimed at your profession.
HUD Good Neighbor Program
One major exception to this rule is HUD’s (U.S. Department of Housing and Urban Development) Good Neighbor Next Door Program. This program does offer huge discounts for K-12 teachers, law enforcement personnel, firefighters and emergency medical technicians who purchase HUD properties in specific areas.
The incentives are considerable. The program allows you to purchase a home at 50 percent off the appraised value with only a $100 down payment. The catch is that the property has to be a foreclosed home reclaimed by HUD and located in a “designated revitalization area.” These areas tend to be less desirable than other areas, with elevated rates of vacant properties and crime, but are considered potentially attractive to young people looking for areas that may rebound.
Showing posts with label best mortgage interest rates. Show all posts
Showing posts with label best mortgage interest rates. Show all posts
Wednesday, April 14, 2010
Saturday, April 10, 2010
The Value of Your Mortgage
If you are like most homeowners, you are focused -for good reason - on finding the best possible rate for your mortgage. Your mortgage broker Reevytown can offer you the best range of rate options and terms. If a mortgage broker can get you one per cent off the posted rate, that could translate into more than $13,000 in interest per $100,000 borrowed over a 25-year amortization schedule. If, however, you believe that most mortgage rates are basically the same from one institution to the next, then consider the fact that even an eighth of a point difference in the rate can offer significant savings over the duration of your mortgage.
But it's also important to look beyond the rate. There are other ways to find savings in your mortgage. Your mortgage broker Reevytown is up-to-date on market trends and new opportunities... as well as some of the tried-and-true ways to save money in a mortgage.
Do you get an annual bonus in your job? You may want to use that bonus to pay down the principal of your mortgage. If you pursue this strategy consistently over the life of your mortgage, you could save thousands of dollars in interest by paying your mortgage off sooner.
Are you paid bi-weekly or bi-monthly? Consider a change from the usual monthly mortgage payment. Set up your mortgage payment schedule to coincide with your pay period. Again, you can shave years off your mortgage, and enjoy thousands of dollars in savings.
In the coming weeks, we'll look at some of these savings opportunities in more detail. In the meantime, consider the old penny proverb again. How much is your time worth? Time savings is one of the key, unexpected benefits that clients say they have enjoyed when they choose to work with a mortgage broker Reevytown. Above all, a mortgage broker is an expert in customer service, and that means that your broker looks after every detail of your mortgage research and negotiations on your behalf.
But it's also important to look beyond the rate. There are other ways to find savings in your mortgage. Your mortgage broker Reevytown is up-to-date on market trends and new opportunities... as well as some of the tried-and-true ways to save money in a mortgage.
Do you get an annual bonus in your job? You may want to use that bonus to pay down the principal of your mortgage. If you pursue this strategy consistently over the life of your mortgage, you could save thousands of dollars in interest by paying your mortgage off sooner.
Are you paid bi-weekly or bi-monthly? Consider a change from the usual monthly mortgage payment. Set up your mortgage payment schedule to coincide with your pay period. Again, you can shave years off your mortgage, and enjoy thousands of dollars in savings.
In the coming weeks, we'll look at some of these savings opportunities in more detail. In the meantime, consider the old penny proverb again. How much is your time worth? Time savings is one of the key, unexpected benefits that clients say they have enjoyed when they choose to work with a mortgage broker Reevytown. Above all, a mortgage broker is an expert in customer service, and that means that your broker looks after every detail of your mortgage research and negotiations on your behalf.
Your Mortgage Savings
"A penny saved is a penny earned"... or so the old proverb goes. Of course, the value of a penny has changed somewhat from the time when your mother offered her wisdom on the value of keeping what you earn. Today, you could save thousands of dollars by simply making the right mortgage decision. If you're like most homeowners, your home mortgage Reevytown is a goldmine of potential savings.
In the past few articles, we've talked about the importance of your mortgage as one of your most significant financial decisions. We've explored the value of seeking the advice of a mortgage professional -whether you're buying a home or renewing an existing mortgage.
Today, let's take a look at the bottom line: the savings you can enjoy by making the right home mortgage Reevytown decisions.
It is the primary role of a mortgage broker Reevytown to find you the right product for your personal situation. A mortgage broker is a financial professional and - like your investment advisor - he or she will want to understand your personal situation and payment preferences. Your mortgage broker has access to a broad spectrum of lending institutions, so you can do some valuable comparison shopping for the right combination of features, rates and mortgage options.
All these choices offer you substantial opportunities to save money over the life of your mortgage.
In the past few articles, we've talked about the importance of your mortgage as one of your most significant financial decisions. We've explored the value of seeking the advice of a mortgage professional -whether you're buying a home or renewing an existing mortgage.
Today, let's take a look at the bottom line: the savings you can enjoy by making the right home mortgage Reevytown decisions.
It is the primary role of a mortgage broker Reevytown to find you the right product for your personal situation. A mortgage broker is a financial professional and - like your investment advisor - he or she will want to understand your personal situation and payment preferences. Your mortgage broker has access to a broad spectrum of lending institutions, so you can do some valuable comparison shopping for the right combination of features, rates and mortgage options.
All these choices offer you substantial opportunities to save money over the life of your mortgage.
Friday, March 19, 2010
Home Loans
New home sales are coming off the torrid pace of the last couple of years and mortgage interest rates New Jersey for new home loans remain very favorable for homebuyers. Simply put, now is a very good time to look into buying a first home or moving up to a larger home.
While real estate experts report "location, location, location," remains the venerable first rule of real estate, other buyer priorities are shifting with the times. One priority shift is that where once buyers looked to purchase a home for the long term - a place to work and raise their family - today's homebuyers want a residence with appreciation potential. Many people seeking new home loans New Jersey in today's market want to buy a home in that will quickly increase in value.
The way today's buyers look at home loans, especially loans for new homes, has changed. Years ago, price was a big issue and people were more concerned about what their monthly payments would be on a 15- or 30-year mortgage. Today, there are all kinds of options for new home loans, especially adjustable-rate loans with low payments in the first few years. Many people have successfully purchased homes this way, made the low payments and when the equity in their home rose - in some cases significantly - the moved up to a larger home.
When selecting a mortgage for a new home New Jersey, have a plan in mind. How long do you plan to live in the home is a major factor, then search Center State Mortgage for a plan that suits your plan and meets your budget.
While real estate experts report "location, location, location," remains the venerable first rule of real estate, other buyer priorities are shifting with the times. One priority shift is that where once buyers looked to purchase a home for the long term - a place to work and raise their family - today's homebuyers want a residence with appreciation potential. Many people seeking new home loans New Jersey in today's market want to buy a home in that will quickly increase in value.
The way today's buyers look at home loans, especially loans for new homes, has changed. Years ago, price was a big issue and people were more concerned about what their monthly payments would be on a 15- or 30-year mortgage. Today, there are all kinds of options for new home loans, especially adjustable-rate loans with low payments in the first few years. Many people have successfully purchased homes this way, made the low payments and when the equity in their home rose - in some cases significantly - the moved up to a larger home.
When selecting a mortgage for a new home New Jersey, have a plan in mind. How long do you plan to live in the home is a major factor, then search Center State Mortgage for a plan that suits your plan and meets your budget.
Where to go Now on Home Interest Rates
Mortgage Interest Rates - Where do we go from here?
Mortgage interest rates New Jersey are still on an upward trend and the hot refinance market has been cooling off. People are refinancing, but their motivations are different. Most refinancing that is going on right now is more need-driven than rate-driven, people are getting out of ARM mortgages as opposed to everyone looking for lower rates. That being said, for people who have not refinanced and can qualify for a lower rate, immediately is always the best time to get started. The 30-year fixed rate average, mentioned above, of 6.34 percent very well may rise to match the 6.9 percent ten-year average in the latter half of 2006; however, that is still well below the 20-year average of eight percent.
More Indicators
Mortgage interest rates New Jersey have more indicators than discussed above that can predict the movements of mortgage interest rates with decent accuracy. Of course, the short term interest rate is a vital metric, but let's takes another look at the link between 30-year fixed mortgage rates and long term government bonds. You already know that the fluctuations of 30-year fixed mortgage rate averages are closely tied to the yields of 10 year Treasury notes. Those Treasury notes rose precisely a quarter-point during the eight weeks between Federal Reserve meetings, from 4.53 percent on January 31 to 4.78 percent on March 28. Similar to that mentioned above, fixed mortgage rates don't move in lock step with long term Treasury yields, but it's a pretty good indicator.
One last thing to remember, currently variable interest rates on adjustable mortgages New Jersey seem to be moving in tandem with federal fund rates, which are moving upward - that's one last warning for you folks with adjustable rate mortgages. Whether you already own a mortgage and need to revise your debt strategy or you are looking at a new loan, let Center State Mortgage do for you as it has done for hundreds of thousands of others.
Mortgage interest rates New Jersey are still on an upward trend and the hot refinance market has been cooling off. People are refinancing, but their motivations are different. Most refinancing that is going on right now is more need-driven than rate-driven, people are getting out of ARM mortgages as opposed to everyone looking for lower rates. That being said, for people who have not refinanced and can qualify for a lower rate, immediately is always the best time to get started. The 30-year fixed rate average, mentioned above, of 6.34 percent very well may rise to match the 6.9 percent ten-year average in the latter half of 2006; however, that is still well below the 20-year average of eight percent.
More Indicators
Mortgage interest rates New Jersey have more indicators than discussed above that can predict the movements of mortgage interest rates with decent accuracy. Of course, the short term interest rate is a vital metric, but let's takes another look at the link between 30-year fixed mortgage rates and long term government bonds. You already know that the fluctuations of 30-year fixed mortgage rate averages are closely tied to the yields of 10 year Treasury notes. Those Treasury notes rose precisely a quarter-point during the eight weeks between Federal Reserve meetings, from 4.53 percent on January 31 to 4.78 percent on March 28. Similar to that mentioned above, fixed mortgage rates don't move in lock step with long term Treasury yields, but it's a pretty good indicator.
One last thing to remember, currently variable interest rates on adjustable mortgages New Jersey seem to be moving in tandem with federal fund rates, which are moving upward - that's one last warning for you folks with adjustable rate mortgages. Whether you already own a mortgage and need to revise your debt strategy or you are looking at a new loan, let Center State Mortgage do for you as it has done for hundreds of thousands of others.
Mortgage Interest Rates
Mortgage interest rates New Jersey favorable to home buying are still available. Mortgage interest rates have moved higher than the sub-six percent levels that were available from 2003-2005, however, the current 30-year 6.34 percent fixed mortgage average is still well below the eight percent average over the last 20 years. The most important characteristic of mortgage interest rates is whether they are fixed or adjustable.
Since July of 2002, the average 30-year fixed rate mortgage has remained below 6.5 percent. While Federal Reserve short term interest rate increases affect fixed mortgage rates other indicators are also crucial; yields on long term government bonds and fixed rate mortgages are closely linked. Demand for US government bonds and domestic inflation that weighs heavy on that demand must be examined. Low six percent mortgage interest rates New jersey will become a luxury of the past as rates move into the upper 6s in the second half of 2006 bound to revisit the ten-year average of 6.9 percent. Regardless, borrowers are still favoring fixed-rate mortgages over adjustable-rate mortgages because the difference in initial rates is not enticing; current 30-year fixed rate averages 6.34 percent, while a 5/1 ARM is 6.08 percent and a one-year ARM is 5.73 percent.
Adjustable Rates & the ARM
If you have an adjustable rate mortgage New Jersey (ARM) it might be smart to keep a close eye on interest rate movements in the market. ARMs bound to reset in 2007 with a hefty increase in their monthly mortgage payment may be an unpleasantly surprise some folks. Those people whose ARMs have already reset know that substantial increases in monthly mortgage payments can be burdensome to say the least. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Federal Reserve is done raising interest rates, add on the margin of 2.5 percentage points and many ARM borrowers will be looking at a rate of 7.5 percent. Households that can withstand an increase in their monthly mortgage payment may opt for an ARM in hopes of seeing mortgage interest rates fall if the Federal Reserve does have to lower short term interest rates in the further off future. For people on a more fixed income who have or are thinking about an adjustable rate mortgage beware that short term interest rates, which are on an upward trend, can drastically affect a person's mortgage debt load.
Since July of 2002, the average 30-year fixed rate mortgage has remained below 6.5 percent. While Federal Reserve short term interest rate increases affect fixed mortgage rates other indicators are also crucial; yields on long term government bonds and fixed rate mortgages are closely linked. Demand for US government bonds and domestic inflation that weighs heavy on that demand must be examined. Low six percent mortgage interest rates New jersey will become a luxury of the past as rates move into the upper 6s in the second half of 2006 bound to revisit the ten-year average of 6.9 percent. Regardless, borrowers are still favoring fixed-rate mortgages over adjustable-rate mortgages because the difference in initial rates is not enticing; current 30-year fixed rate averages 6.34 percent, while a 5/1 ARM is 6.08 percent and a one-year ARM is 5.73 percent.
Adjustable Rates & the ARM
If you have an adjustable rate mortgage New Jersey (ARM) it might be smart to keep a close eye on interest rate movements in the market. ARMs bound to reset in 2007 with a hefty increase in their monthly mortgage payment may be an unpleasantly surprise some folks. Those people whose ARMs have already reset know that substantial increases in monthly mortgage payments can be burdensome to say the least. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Federal Reserve is done raising interest rates, add on the margin of 2.5 percentage points and many ARM borrowers will be looking at a rate of 7.5 percent. Households that can withstand an increase in their monthly mortgage payment may opt for an ARM in hopes of seeing mortgage interest rates fall if the Federal Reserve does have to lower short term interest rates in the further off future. For people on a more fixed income who have or are thinking about an adjustable rate mortgage beware that short term interest rates, which are on an upward trend, can drastically affect a person's mortgage debt load.
Friday, March 5, 2010
FHA Tightening Up Mortgage Guidelines!
Getting an FHA mortgage is about to get a bit more expensive and a bit more difficult.
Faced with increasing losses in a weakened housing market, the FHA is raising the insurance premium it charges borrowers and tightening other requirements as well. Beginning this spring, borrowers taking out an FHA mortgage will pay an upfront insurance premium equal to 2.25 percent of the loan amount, up from 1.75 percent currently.
The maximum amount of seller concessions, closing costs paid by the seller on behalf of the buyer, will be reduced to 3 percent of the property’s assessed value, down from 6 percent currently. The change will bring FHA loans in line with industry standards.
Borrowers will still be able to qualify for an FHA mortgage with as little as 3.5 percent down, but will need a FICO score of at least 580, a fairly low hurdle to clear. Borrowers with scores below 580 will be required to put at least 10 percent down.
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said FHA Commissioner David Stevens, in announcing the changes. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history.”
The FHA will also increase its monitoring and enforcement actions to ensure lenders are adhering to FHA standards and limit defaults. The Department of Housing and Urban Development (HUD) is also seeking new legislative authority that would allow it to hold lenders directly responsible for mortgages they originate.
Lender performance rankings will also be added to HUD’s online Neighborhood Watch System, which is designed to detect patterns of early defaults, as of Feb. 1. The rest of the new measures will take effect from this spring through summer.
Faced with increasing losses in a weakened housing market, the FHA is raising the insurance premium it charges borrowers and tightening other requirements as well. Beginning this spring, borrowers taking out an FHA mortgage will pay an upfront insurance premium equal to 2.25 percent of the loan amount, up from 1.75 percent currently.
The maximum amount of seller concessions, closing costs paid by the seller on behalf of the buyer, will be reduced to 3 percent of the property’s assessed value, down from 6 percent currently. The change will bring FHA loans in line with industry standards.
Borrowers will still be able to qualify for an FHA mortgage with as little as 3.5 percent down, but will need a FICO score of at least 580, a fairly low hurdle to clear. Borrowers with scores below 580 will be required to put at least 10 percent down.
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said FHA Commissioner David Stevens, in announcing the changes. “When combined with the risk management measures announced in September of last year, these changes are among the most significant steps to address risk in the agency’s history.”
The FHA will also increase its monitoring and enforcement actions to ensure lenders are adhering to FHA standards and limit defaults. The Department of Housing and Urban Development (HUD) is also seeking new legislative authority that would allow it to hold lenders directly responsible for mortgages they originate.
Lender performance rankings will also be added to HUD’s online Neighborhood Watch System, which is designed to detect patterns of early defaults, as of Feb. 1. The rest of the new measures will take effect from this spring through summer.
Getting a Loan with bad Credit Contd.
Improving your credit
So what can you do if you’ve got bad credit? The first thing you should consider is making sure your credit reports are accurate and that you’re not being penalized for bad information. You’re entitled to receive a free copy of your credit report from each of the three major credit reporting agencies each year. Use the official web site, www.annualcreditreport.com , established by the three agencies to get your scores from Transunion, Experian and Equifax and check them for errors. You can also order your actual credit scores, but will have to pay a fee for that.
Don’t bother with so-called “credit repair” services which promise to boost your credit score in return for a fee. There’s nothing they can do for you legally to improve your score other than check your report for errors, the same as you can do, and some of these services have been known to suggest measures that can get you in trouble with the law – such as obtaining a new social security number.
Waiting for better scores
The best strategy for dealing with a bad credit score may be to try to improve your credit rating and apply for a mortgage at a later date. Generally, the impact of most negative items on your credit report begins to diminish after about two years, so if you can maintain a good payment record on your other debts over that time, your credit should show significant improvement over a year or two.
Of course, a foreclosure stays on your credit for seven years and a bankruptcy for 10, but even here, the major negative impacts begin to diminish after a few years, and you may be able to qualify for a mortgage again within three years of such an event.
Waiting means you won’t be able to take advantage of the ultra-low rates currently available, but you may find that by waiting for your score to improve, the rates you’ll be able to get with good credit in two-three years may be better than what you can qualify for today, even in the current low-rate environment.
If you need a mortgage now
If waiting isn’t an option – you need to refinance or buy a home right now – there are some options to consider. One is to get a co-signer, usually a close relative, to help you qualify. But bear in mind that in the event you default, the co-signer will be liable for the full value of the mortgage, so you only want to use this approach with someone you have a solid and trustworthy relationship with, and only if you are certain you will be able to meet your obligations.
Another possibility for couples, when only one partner has poor credit, is to seek a mortgage or refinance solely in the name of the partner with good credit. However, this means you won’t be able to list both persons’ income and assets on the mortgage application – just those of the partner who’s actually applying for the loan, which can seriously limit how much you can borrow.
Don’t assume that you have to borrow right now just because interest rates and home prices are very low right now. Whatever approach you take – borrowing now or working to improve your credit – should depend on careful assessment of what makes the most sense for you over the long term.
So what can you do if you’ve got bad credit? The first thing you should consider is making sure your credit reports are accurate and that you’re not being penalized for bad information. You’re entitled to receive a free copy of your credit report from each of the three major credit reporting agencies each year. Use the official web site, www.annualcreditreport.com , established by the three agencies to get your scores from Transunion, Experian and Equifax and check them for errors. You can also order your actual credit scores, but will have to pay a fee for that.
Don’t bother with so-called “credit repair” services which promise to boost your credit score in return for a fee. There’s nothing they can do for you legally to improve your score other than check your report for errors, the same as you can do, and some of these services have been known to suggest measures that can get you in trouble with the law – such as obtaining a new social security number.
Waiting for better scores
The best strategy for dealing with a bad credit score may be to try to improve your credit rating and apply for a mortgage at a later date. Generally, the impact of most negative items on your credit report begins to diminish after about two years, so if you can maintain a good payment record on your other debts over that time, your credit should show significant improvement over a year or two.
Of course, a foreclosure stays on your credit for seven years and a bankruptcy for 10, but even here, the major negative impacts begin to diminish after a few years, and you may be able to qualify for a mortgage again within three years of such an event.
Waiting means you won’t be able to take advantage of the ultra-low rates currently available, but you may find that by waiting for your score to improve, the rates you’ll be able to get with good credit in two-three years may be better than what you can qualify for today, even in the current low-rate environment.
If you need a mortgage now
If waiting isn’t an option – you need to refinance or buy a home right now – there are some options to consider. One is to get a co-signer, usually a close relative, to help you qualify. But bear in mind that in the event you default, the co-signer will be liable for the full value of the mortgage, so you only want to use this approach with someone you have a solid and trustworthy relationship with, and only if you are certain you will be able to meet your obligations.
Another possibility for couples, when only one partner has poor credit, is to seek a mortgage or refinance solely in the name of the partner with good credit. However, this means you won’t be able to list both persons’ income and assets on the mortgage application – just those of the partner who’s actually applying for the loan, which can seriously limit how much you can borrow.
Don’t assume that you have to borrow right now just because interest rates and home prices are very low right now. Whatever approach you take – borrowing now or working to improve your credit – should depend on careful assessment of what makes the most sense for you over the long term.
Getting a Mortgage with Bad Credit
Qualifying for a mortgage loan or refinance with bad credit is a lot harder than it used to be. Given that widespread defaults on subprime mortgages triggered the financial meltdown of 2008, lenders have become much more cautious about who they’ll extend credit to.
That doesn’t mean it’s impossible to get a home loan with poor credit, but the minimum standards are higher. Also, you’ll likely find it a lot more costly to get a mortgage or refinance with less-than-perfect credit.
So what’s the bottom line? Your best bet for qualifying for a home loan – either a purchase or mortgage refinance – with bad credit is either the FHA or the VA if you’re a military veteran. Both officially will accept loans with FICO credit scores as low as 580, although individual lenders may require a minimum or at least 620.
The FHA and VA don’t actually write mortgages – they insure mortgages that meet their standards that are issued by qualified lenders. So it’s up to the lenders themselves to decide what credit scores they’ll accept, and at what terms.
Consider brokers, small lenders
Some smaller lenders may be willing to accept a lower credit score than the major banks will, particularly community banks or credit unions. If you have poor credit, it’s more important than ever to shop around and compare different lenders. You’ll likely not only find a difference in their willingness to lend, but also significant variety in the terms they’re willing to offer. A mortgage broker can also be a smart choice when you have bad credit, as they're in the business of sifting through multiple lenders to find one that meets your needs, although you will pay a premium for this service.
One thing you won’t be able to escape is that getting a mortgage with poor credit is going to be costly. According to the Fair Isaac Co., which invented the FICO scoring system, a borrower with a score in the 620-639 range can currently expect to pay an interest rate about 1.6 percentage points higher on a 30-year loan than someone with near-perfect credit of 760 or above – about 6.3 percent instead of 4.7 percent for the “ideal” borrower. That works out to about an additional $100 a month for each $100,000 of your mortgage – not cheap.
That doesn’t mean it’s impossible to get a home loan with poor credit, but the minimum standards are higher. Also, you’ll likely find it a lot more costly to get a mortgage or refinance with less-than-perfect credit.
So what’s the bottom line? Your best bet for qualifying for a home loan – either a purchase or mortgage refinance – with bad credit is either the FHA or the VA if you’re a military veteran. Both officially will accept loans with FICO credit scores as low as 580, although individual lenders may require a minimum or at least 620.
The FHA and VA don’t actually write mortgages – they insure mortgages that meet their standards that are issued by qualified lenders. So it’s up to the lenders themselves to decide what credit scores they’ll accept, and at what terms.
Consider brokers, small lenders
Some smaller lenders may be willing to accept a lower credit score than the major banks will, particularly community banks or credit unions. If you have poor credit, it’s more important than ever to shop around and compare different lenders. You’ll likely not only find a difference in their willingness to lend, but also significant variety in the terms they’re willing to offer. A mortgage broker can also be a smart choice when you have bad credit, as they're in the business of sifting through multiple lenders to find one that meets your needs, although you will pay a premium for this service.
One thing you won’t be able to escape is that getting a mortgage with poor credit is going to be costly. According to the Fair Isaac Co., which invented the FICO scoring system, a borrower with a score in the 620-639 range can currently expect to pay an interest rate about 1.6 percentage points higher on a 30-year loan than someone with near-perfect credit of 760 or above – about 6.3 percent instead of 4.7 percent for the “ideal” borrower. That works out to about an additional $100 a month for each $100,000 of your mortgage – not cheap.
Wednesday, February 10, 2010
What Interest Rates Are You Looking At?
Thinking about taking out a mortgage, but not sure what kind of interest rate you can get? Wouldn’t it be nice if they just had a chart where you could see what you can expect to pay with a certain credit score, down payment and other factors?
Well, they do – almost.
Fannie Mae’s Loan Level Price Adjustment (LLPA) Matrix and Freddie Mac’s Postsettlement Delivery Fee (PDF) matrices come about as close as you can get to a single chart telling you what you can expect to pay on a mortgage. Both detail the additional fees the lenders assess based on the borrower’s credit score, down payment, type of loan, type of property and other factors.
They don’t actually tell you what rate you’ll pay, but you can figure out what additional fees, if any, you’ll have to pay beyond what a "perfect" borrower might. And since the fees are commonly rolled into the interest rate – just the opposite of paying points – it’s a fairly straightforward calculation to see how your interest rate might be affected.
Both the LLPA and PDF break out a lot of possible situations that might cause you to pay more for your mortgage, like a cash-out refinance, high-balance adjustable rate mortgage, mobile home purchase, subordinate financing and the like. But for most borrowers, the primary things they’ll want to focus on, at least initially, are the credit score and loan-to-value matrices, or grids.
These grids list credit scores down the sides, and loan-to-value ratios (which correspond to down payments for purchases or home equity for refinancing) across the top. You find the range your credit score is in, see where that row interests with the column for your loan-to-value ratio, and viola! There’s the fee you need to pay for that combination of credit score and down payment.
For example, if your credit score is in the 700-719 range, you’ll typically pay an additional fee of 0.5 percent of the loan amount, as compared to someone with a higher credit score, according to the LLPA. In the 680-699 range, you’ll pay from 0.5 percent from 1.5 percent more, depending on your loan-to-value ratio. Lower credit scores pay even more; the premium ranges from 1.25 percent to 2.5 percent for credit scores in the 660-679 range.
You can also reduce your costs – borrowers with higher credit scores can actually get a 0.25 percent credit if their loan-to-value ratio is less than 60 percent (40 percent equity or more).
More fees = higher interest rate
Rolling the fees into your interest rate generally means you’ll pay a quarter percent (0.25 percent) more in interest for each full percent of fees. You can also pay the fees separately as a closing cost.
There may be other factors that will cause your rate to differ from that available to other customers using the same lender, but consulting the LLPA or PDF is a good place to start.
You can also seek a nonconforming loan, which are not sold to Fannie or Freddie on the secondary market. However, you may find that rates and fees for these types of loans exceed any savings you’d realize.
Well, they do – almost.
Fannie Mae’s Loan Level Price Adjustment (LLPA) Matrix and Freddie Mac’s Postsettlement Delivery Fee (PDF) matrices come about as close as you can get to a single chart telling you what you can expect to pay on a mortgage. Both detail the additional fees the lenders assess based on the borrower’s credit score, down payment, type of loan, type of property and other factors.
They don’t actually tell you what rate you’ll pay, but you can figure out what additional fees, if any, you’ll have to pay beyond what a "perfect" borrower might. And since the fees are commonly rolled into the interest rate – just the opposite of paying points – it’s a fairly straightforward calculation to see how your interest rate might be affected.
Both the LLPA and PDF break out a lot of possible situations that might cause you to pay more for your mortgage, like a cash-out refinance, high-balance adjustable rate mortgage, mobile home purchase, subordinate financing and the like. But for most borrowers, the primary things they’ll want to focus on, at least initially, are the credit score and loan-to-value matrices, or grids.
These grids list credit scores down the sides, and loan-to-value ratios (which correspond to down payments for purchases or home equity for refinancing) across the top. You find the range your credit score is in, see where that row interests with the column for your loan-to-value ratio, and viola! There’s the fee you need to pay for that combination of credit score and down payment.
For example, if your credit score is in the 700-719 range, you’ll typically pay an additional fee of 0.5 percent of the loan amount, as compared to someone with a higher credit score, according to the LLPA. In the 680-699 range, you’ll pay from 0.5 percent from 1.5 percent more, depending on your loan-to-value ratio. Lower credit scores pay even more; the premium ranges from 1.25 percent to 2.5 percent for credit scores in the 660-679 range.
You can also reduce your costs – borrowers with higher credit scores can actually get a 0.25 percent credit if their loan-to-value ratio is less than 60 percent (40 percent equity or more).
More fees = higher interest rate
Rolling the fees into your interest rate generally means you’ll pay a quarter percent (0.25 percent) more in interest for each full percent of fees. You can also pay the fees separately as a closing cost.
There may be other factors that will cause your rate to differ from that available to other customers using the same lender, but consulting the LLPA or PDF is a good place to start.
You can also seek a nonconforming loan, which are not sold to Fannie or Freddie on the secondary market. However, you may find that rates and fees for these types of loans exceed any savings you’d realize.
Using APR to Compare and Contrast Mortgage Lenders
Shopping for a mortgage can be complicated, with lots of different factors such as interest rates, fees, points and loan terms to take into account. Is there a simple way to compare offers from different lenders that cuts through the confusion and shows which is the best deal?
Actually, there is – almost. The annual percentage rate (APR) on a mortgage loan is designed to help you do just that. Although it’s not foolproof and you sometimes have to consider other factors as well, it is a great tool to help cut through the clutter and figure out what the bottom-line cost of a mortgage will be.
The APR takes all those things that make it hard to figure the cost of a mortgage – the interest rate, lender fees, discount points and loan duration (term) – and rolls them into a single number – the annual percentage rate. This number, which is similar to – and often confused with – the interest rate, shows what your actual cost of borrowing is. By law, the APR must be listed on the Truth-in-Lending statement all mortgage lenders are required to provide.
For example, consider two loans, both for $200,000 at 5 percent interest. Just for the sake of an example, we’ll say the first loan has no fees or points paid, so the borrower is simply borrowing $200,000 at 5 percent interest. On the second loan, however, the borrower is paying $5,000 in fees and points, which are included in the $200,000 balance the borrower owes. So in reality, the borrower is getting a $195,000 loan, with a $5,000 charge added right on top.
The APR takes into account this $5,000 charge in figuring the cost of borrowing $195,000 – the amount actually available for the borrower to use. It does this by spreading the $5,000 over the term of the loan – in this case, we’ll say 30 years – and rolling it into the interest rate. Taking that into account, it means the borrower is effectively paying an annual rate of 5.218 percent to borrow $195,000 over 30 years – even though the actual terms of the loan are $200,000 (including fees) at an annual rate of 5 percent.
Shows true cost of borrowing
That’s essentially how the APR works. It takes any fees you pay for a mortgage loan or refinance, and recalculates their cost as part of an interest rate. It’s a handy way of comparing loan offers with differing fees and interest rates. For example, you may have one loan offer at 5.5 percent, zero points and $2,500 in fees, vs. another at 5.25 percent, two points and $7,000 in fees. Your APR on the first might be 5.6 percent, but 5.75 percent on the second. The first loan is the least expensive, even though it has a higher interest rate.
The APR can be used to compare offers on adjustable rate mortgages, even though the rates may fluctuate over time. The way that works is, the APR is calculated assuming you’ll have the mortgage for the full term of the loan and simply pay the new rate whenever it resets. Because no one can predict what interest rates will do in the future, the calculation simply assumes the base rate, or rate index, that rate resets are based on will remain unchanged, so the calculation simply depends on how much the resets vary from the base rate.
Less accurate for loans held only a few years
The one major problem with relying solely on the APR to compare mortgage offers from different lenders is that it assumes you’ll hold the mortgage for the entire term. Remember, in our example above, the $5,000 in costs was spread over 30 years. However, if you sell the home or refinance before you’ve fully paid off the mortgage, you’ve had less time to amortize the fees – increasing the effective interest rate of the loan.
As a result, the APR tends to favor mortgages with low rates and high fees. If you think you might sell or refinance within 7-10 years, a loan with a higher rate and lower fees might be better. Though the APR can act as a rough guide, to get a definite answer, you’ll need to plug the interest rate, fees and other information in to a mortgage calculator and see how they compare for the length of time you plan to have the home.
Actually, there is – almost. The annual percentage rate (APR) on a mortgage loan is designed to help you do just that. Although it’s not foolproof and you sometimes have to consider other factors as well, it is a great tool to help cut through the clutter and figure out what the bottom-line cost of a mortgage will be.
The APR takes all those things that make it hard to figure the cost of a mortgage – the interest rate, lender fees, discount points and loan duration (term) – and rolls them into a single number – the annual percentage rate. This number, which is similar to – and often confused with – the interest rate, shows what your actual cost of borrowing is. By law, the APR must be listed on the Truth-in-Lending statement all mortgage lenders are required to provide.
For example, consider two loans, both for $200,000 at 5 percent interest. Just for the sake of an example, we’ll say the first loan has no fees or points paid, so the borrower is simply borrowing $200,000 at 5 percent interest. On the second loan, however, the borrower is paying $5,000 in fees and points, which are included in the $200,000 balance the borrower owes. So in reality, the borrower is getting a $195,000 loan, with a $5,000 charge added right on top.
The APR takes into account this $5,000 charge in figuring the cost of borrowing $195,000 – the amount actually available for the borrower to use. It does this by spreading the $5,000 over the term of the loan – in this case, we’ll say 30 years – and rolling it into the interest rate. Taking that into account, it means the borrower is effectively paying an annual rate of 5.218 percent to borrow $195,000 over 30 years – even though the actual terms of the loan are $200,000 (including fees) at an annual rate of 5 percent.
Shows true cost of borrowing
That’s essentially how the APR works. It takes any fees you pay for a mortgage loan or refinance, and recalculates their cost as part of an interest rate. It’s a handy way of comparing loan offers with differing fees and interest rates. For example, you may have one loan offer at 5.5 percent, zero points and $2,500 in fees, vs. another at 5.25 percent, two points and $7,000 in fees. Your APR on the first might be 5.6 percent, but 5.75 percent on the second. The first loan is the least expensive, even though it has a higher interest rate.
The APR can be used to compare offers on adjustable rate mortgages, even though the rates may fluctuate over time. The way that works is, the APR is calculated assuming you’ll have the mortgage for the full term of the loan and simply pay the new rate whenever it resets. Because no one can predict what interest rates will do in the future, the calculation simply assumes the base rate, or rate index, that rate resets are based on will remain unchanged, so the calculation simply depends on how much the resets vary from the base rate.
Less accurate for loans held only a few years
The one major problem with relying solely on the APR to compare mortgage offers from different lenders is that it assumes you’ll hold the mortgage for the entire term. Remember, in our example above, the $5,000 in costs was spread over 30 years. However, if you sell the home or refinance before you’ve fully paid off the mortgage, you’ve had less time to amortize the fees – increasing the effective interest rate of the loan.
As a result, the APR tends to favor mortgages with low rates and high fees. If you think you might sell or refinance within 7-10 years, a loan with a higher rate and lower fees might be better. Though the APR can act as a rough guide, to get a definite answer, you’ll need to plug the interest rate, fees and other information in to a mortgage calculator and see how they compare for the length of time you plan to have the home.
ARMs Still Have Some Merits
Looking to get the best possible interest rate on a home mortgage or mortgage refinance? You might consider an adjustable rate mortgage (ARM). Although ARMs are somewhat out of favor these days, for many borrowers they can still be a sensible, and even the best, choice for their particular circumstances.
ARMs acquired a bad reputation in the collapse of the subprime mortgage market, when they were a major share of the mortgages that defaulted and led to the crisis. As a result, many borrowers now regard them as risky, exotic-type loans full of potential pitfalls to snag the unwary.
The truth is, ARMs are a fairly standard and well-established type of mortgage loan. Unfortunately, many lenders used them as a way to offer credit to marginally qualified borrowers, often coupled with “exotic” variations like interest-only payments, resulting in loans that could not be sustained unless housing prices continued to rise. When prices fell, the loans began to default.
But for well-qualified borrowers with a realistic view of their finances, an adjustable rate mortgage can be a sound decision. Initial rates on ARMs often run about half a percentage point less than comparable 30-year fixed-rate loans – a savings of roughly $75 a month on a $250,000 loan – so the savings can be significant.
You’re not likely to qualify for an ARM or any other mortgage these days if you’re a bad credit risk, and exotic wrinkles such as interest-only or negative amortization payments have all but disappeared. Instead, if you get an adjustable rate mortgage these days it’s likely to be a standard ARM that starts out at a fixed interest rate for a number of years (often 3, 5 or 7 years), then periodically resets to a different rate based on predetermined index, such as Treasury securities or the Cost of Funds Index (COFI).
A sensible choice for some borrowers
For certain groups of borrowers, a standard-type ARM can actually be a better option than a “plain vanilla” fixed-rate mortgage. For example, suppose you only plan to remain in the home for 5-7 years. A 7-year ARM (which is fixed at the initial rate for seven years before resetting) locks you into a lower interest rate for at least seven years, and you can sell the house and pay off the rest before it ever resets.
Another candidate for an ARM is a new home buyer who’s just beginning to establish their credit or suffered a credit setback recently. Such a buyer will have to pay a higher interest rate than a borrower with pristine credit; getting an ARM allows them to minimize their rate for several years while building or rebuilding their credit. Then, when they’re built up their credit, they can refinance at the low rates that are available to prime borrowers.
ARMs are also a good strategy during times when market interest rates are running relatively high and the borrower expects they will fall back down in a few years, when the loan can be refinanced at a lower rate. However, given that rates are relatively low currently, that is not likely to be a strategy one would pursue at this time.
Take the long view
The key thing when taking out an ARM, either for a home purchase or refinance, is to be confident you’ll be able to refinance the loan a few years down the road when it’s time for the rate to reset. Because rates can gradually drift much higher once the initial fixed-rate period is over, you don’t want to stay in the same loan for 30 years or however long the full term is. You want to be confident that both your income and housing prices will remain relatively stable, so that you’ll have equity in the home and be able to qualify for a new loan when the time comes.
ARMs acquired a bad reputation in the collapse of the subprime mortgage market, when they were a major share of the mortgages that defaulted and led to the crisis. As a result, many borrowers now regard them as risky, exotic-type loans full of potential pitfalls to snag the unwary.
The truth is, ARMs are a fairly standard and well-established type of mortgage loan. Unfortunately, many lenders used them as a way to offer credit to marginally qualified borrowers, often coupled with “exotic” variations like interest-only payments, resulting in loans that could not be sustained unless housing prices continued to rise. When prices fell, the loans began to default.
But for well-qualified borrowers with a realistic view of their finances, an adjustable rate mortgage can be a sound decision. Initial rates on ARMs often run about half a percentage point less than comparable 30-year fixed-rate loans – a savings of roughly $75 a month on a $250,000 loan – so the savings can be significant.
You’re not likely to qualify for an ARM or any other mortgage these days if you’re a bad credit risk, and exotic wrinkles such as interest-only or negative amortization payments have all but disappeared. Instead, if you get an adjustable rate mortgage these days it’s likely to be a standard ARM that starts out at a fixed interest rate for a number of years (often 3, 5 or 7 years), then periodically resets to a different rate based on predetermined index, such as Treasury securities or the Cost of Funds Index (COFI).
A sensible choice for some borrowers
For certain groups of borrowers, a standard-type ARM can actually be a better option than a “plain vanilla” fixed-rate mortgage. For example, suppose you only plan to remain in the home for 5-7 years. A 7-year ARM (which is fixed at the initial rate for seven years before resetting) locks you into a lower interest rate for at least seven years, and you can sell the house and pay off the rest before it ever resets.
Another candidate for an ARM is a new home buyer who’s just beginning to establish their credit or suffered a credit setback recently. Such a buyer will have to pay a higher interest rate than a borrower with pristine credit; getting an ARM allows them to minimize their rate for several years while building or rebuilding their credit. Then, when they’re built up their credit, they can refinance at the low rates that are available to prime borrowers.
ARMs are also a good strategy during times when market interest rates are running relatively high and the borrower expects they will fall back down in a few years, when the loan can be refinanced at a lower rate. However, given that rates are relatively low currently, that is not likely to be a strategy one would pursue at this time.
Take the long view
The key thing when taking out an ARM, either for a home purchase or refinance, is to be confident you’ll be able to refinance the loan a few years down the road when it’s time for the rate to reset. Because rates can gradually drift much higher once the initial fixed-rate period is over, you don’t want to stay in the same loan for 30 years or however long the full term is. You want to be confident that both your income and housing prices will remain relatively stable, so that you’ll have equity in the home and be able to qualify for a new loan when the time comes.
Monday, February 1, 2010
Mortgage Interest Rates
Mortgage interest rates favorable to home buying are still available. Mortgage interest rates have moved higher than the sub-six percent levels that were available from 2003-2005, however, the current 30-year 6.34 percent fixed mortgage average is still well below the eight percent average over the last 20 years. The most important characteristic of mortgage interest rates is whether they are fixed or adjustable.
Since July of 2002, the average 30-year fixed rate mortgage has remained below 6.5 percent. While Federal Reserve short term interest rate increases affect fixed mortgage rates other indicators are also crucial; yields on long term government bonds and fixed rate mortgages are closely linked. Demand for US government bonds and domestic inflation that weighs heavy on that demand must be examined. Low six percent mortgage interest rates will become a luxury of the past as rates move into the upper 6s in the second half of 2006 bound to revisit the ten-year average of 6.9 percent. Regardless, borrowers are still favoring fixed-rate mortgages over adjustable-rate mortgages because the difference in initial rates is not enticing; current 30-year fixed rate averages 6.34 percent, while a 5/1 ARM is 6.08 percent and a one-year ARM is 5.73 percent.
Adjustable Rates & the ARM
If you have an adjustable rate mortgage (ARM) it might be smart to keep a close eye on interest rate movements in the market. ARMs bound to reset in 2010 with a hefty increase in their monthly mortgage payment may be an unpleasantly surprise some folks. Those people whose ARMs have already reset know that substantial increases in monthly mortgage payments can be burdensome to say the least. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Federal Reserve is done raising interest rates, add on the margin of 2.5 percentage points and many ARM borrowers will be looking at a rate of 7.5 percent. Households that can withstand an increase in their monthly mortgage payment may opt for an ARM in hopes of seeing mortgage interest rates fall if the Federal Reserve does have to lower short term interest rates in the further off future. For people on a more fixed income who have or are thinking about an adjustable rate mortgage beware that short term interest rates, which are on an upward trend, can drastically affect a person's mortgage debt load.
Mortgage Interest Rates - Where do we go from here?
Mortgage interest rates are still on an upward trend and the hot refinance market has been cooling off. People are refinancing, but their motivations are different. Most refinancing that is going on right now is more need-driven than rate-driven, people are getting out of ARM mortgages as opposed to everyone looking for lower rates. That being said, for people who have not refinanced and can qualify for a lower rate, immediately is always the best time to get started. The 30-year fixed rate average, mentioned above, of 6.34 percent very well may rise to match the 6.9 percent ten-year average in the latter half of 2009; however, that is still well below the 20-year average of eight percent.
More Indicators
Mortgage interest rates have more indicators than discussed above that can predict the movements of mortgage interest rates with decent accuracy. Of course, the short term interest rate is a vital metric, but let's takes another look at the link between 30-year fixed mortgage rates and long term government bonds. You already know that the fluctuations of 30-year fixed mortgage rate averages are closely tied to the yields of 10 year Treasury notes. Those Treasury notes rose precisely a quarter-point during the eight weeks between Federal Reserve meetings, from 4.53 percent on January 31 to 4.78 percent on March 28. Similar to that mentioned above, fixed mortgage rates don't move in lock step with long term Treasury yields, but it's a pretty good indicator. One last thing to remember, currently variable interest rates on adjustable mortgages seem to be moving in tandem with federal fund rates, which are moving upward - that's one last warning for you folks with adjustable rate mortgages.
Since July of 2002, the average 30-year fixed rate mortgage has remained below 6.5 percent. While Federal Reserve short term interest rate increases affect fixed mortgage rates other indicators are also crucial; yields on long term government bonds and fixed rate mortgages are closely linked. Demand for US government bonds and domestic inflation that weighs heavy on that demand must be examined. Low six percent mortgage interest rates will become a luxury of the past as rates move into the upper 6s in the second half of 2006 bound to revisit the ten-year average of 6.9 percent. Regardless, borrowers are still favoring fixed-rate mortgages over adjustable-rate mortgages because the difference in initial rates is not enticing; current 30-year fixed rate averages 6.34 percent, while a 5/1 ARM is 6.08 percent and a one-year ARM is 5.73 percent.
Adjustable Rates & the ARM
If you have an adjustable rate mortgage (ARM) it might be smart to keep a close eye on interest rate movements in the market. ARMs bound to reset in 2010 with a hefty increase in their monthly mortgage payment may be an unpleasantly surprise some folks. Those people whose ARMs have already reset know that substantial increases in monthly mortgage payments can be burdensome to say the least. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Federal Reserve is done raising interest rates, add on the margin of 2.5 percentage points and many ARM borrowers will be looking at a rate of 7.5 percent. Households that can withstand an increase in their monthly mortgage payment may opt for an ARM in hopes of seeing mortgage interest rates fall if the Federal Reserve does have to lower short term interest rates in the further off future. For people on a more fixed income who have or are thinking about an adjustable rate mortgage beware that short term interest rates, which are on an upward trend, can drastically affect a person's mortgage debt load.
Mortgage Interest Rates - Where do we go from here?
Mortgage interest rates are still on an upward trend and the hot refinance market has been cooling off. People are refinancing, but their motivations are different. Most refinancing that is going on right now is more need-driven than rate-driven, people are getting out of ARM mortgages as opposed to everyone looking for lower rates. That being said, for people who have not refinanced and can qualify for a lower rate, immediately is always the best time to get started. The 30-year fixed rate average, mentioned above, of 6.34 percent very well may rise to match the 6.9 percent ten-year average in the latter half of 2009; however, that is still well below the 20-year average of eight percent.
More Indicators
Mortgage interest rates have more indicators than discussed above that can predict the movements of mortgage interest rates with decent accuracy. Of course, the short term interest rate is a vital metric, but let's takes another look at the link between 30-year fixed mortgage rates and long term government bonds. You already know that the fluctuations of 30-year fixed mortgage rate averages are closely tied to the yields of 10 year Treasury notes. Those Treasury notes rose precisely a quarter-point during the eight weeks between Federal Reserve meetings, from 4.53 percent on January 31 to 4.78 percent on March 28. Similar to that mentioned above, fixed mortgage rates don't move in lock step with long term Treasury yields, but it's a pretty good indicator. One last thing to remember, currently variable interest rates on adjustable mortgages seem to be moving in tandem with federal fund rates, which are moving upward - that's one last warning for you folks with adjustable rate mortgages.
Saturday, January 16, 2010
Is the Market Good to Buy a New Home?
Consistently timing the market is impossible; make your home-buying decisions based on what you want and what you can afford.
You read it everyday in the news: "Real estate values are down! It's a buyer's market!" If that's really the case, why are you and other would-be homebuyers feeling so nervous about buying a new home?
Congratulations if you're considering your first home purchase. It's an exciting time for you and a good time to buy, in general. Home values have cooled off, giving you the opportunity to consider and compare many properties that would meet your needs. If you have some reservations about buying in the current market, don't worry-it's perfectly normal.
You might be nervous about buying too soon and paying more than you should. This is a valid concern, but one that should be weighed against the risks of waiting too long to buy. You could end up seeing the home you want pulled off the market or bought by someone else. If you find that perfect home at a price you can afford, it may not be wise to hold out for a better price. As long as you plan to stay in the home for the long-term, any immediate changes in value should even out by the time you're ready to sell.
For existing homeowners, the decision to buy is somewhat more complicated. Selling your current home may not be easy. This can become a problem if you find a new home that you just can't pass up. You can try making your purchase offer contingent upon the sale of the existing home, but given the current market, that may not go over well with the seller. If your contingency offer is rejected, you'll need to decide if you can afford to carry both homes temporarily. If you and the bank agree that the answer is yes, you're probably in good shape to put in your offer.
In the meantime, do everything possible to speed up the sale of your existing home. Experts recommend making key upgrades, so that your home is different from the others on the market. Your real estate agent can provide some ideas for minor and major changes that would make the home more saleable.
You might also consider taking out some form of equity financing on the existing home. A home equity loan can fund major upgrades and improvements. A home equity line of credit (HELOC) can pay for minor updates and help you cover expenses if you end up carrying both homes at once
You read it everyday in the news: "Real estate values are down! It's a buyer's market!" If that's really the case, why are you and other would-be homebuyers feeling so nervous about buying a new home?
Congratulations if you're considering your first home purchase. It's an exciting time for you and a good time to buy, in general. Home values have cooled off, giving you the opportunity to consider and compare many properties that would meet your needs. If you have some reservations about buying in the current market, don't worry-it's perfectly normal.
You might be nervous about buying too soon and paying more than you should. This is a valid concern, but one that should be weighed against the risks of waiting too long to buy. You could end up seeing the home you want pulled off the market or bought by someone else. If you find that perfect home at a price you can afford, it may not be wise to hold out for a better price. As long as you plan to stay in the home for the long-term, any immediate changes in value should even out by the time you're ready to sell.
For existing homeowners, the decision to buy is somewhat more complicated. Selling your current home may not be easy. This can become a problem if you find a new home that you just can't pass up. You can try making your purchase offer contingent upon the sale of the existing home, but given the current market, that may not go over well with the seller. If your contingency offer is rejected, you'll need to decide if you can afford to carry both homes temporarily. If you and the bank agree that the answer is yes, you're probably in good shape to put in your offer.
In the meantime, do everything possible to speed up the sale of your existing home. Experts recommend making key upgrades, so that your home is different from the others on the market. Your real estate agent can provide some ideas for minor and major changes that would make the home more saleable.
You might also consider taking out some form of equity financing on the existing home. A home equity loan can fund major upgrades and improvements. A home equity line of credit (HELOC) can pay for minor updates and help you cover expenses if you end up carrying both homes at once
Monday, December 14, 2009
Are Low Mortgage Rates Going to Stay?
Before the emergency Treasury Department takeover of Fannie Mae and Freddie Mac, mortgage rates were trending higher. As a result of the Treasury action, however, mortgage rates plunged. Rates on 30-year fixed-rate mortgages fell by the largest one-week drop in almost 30 years, and loan applications spiked as mortgage rates hit a four month low.
But low rates are probably not sustainable. Just as the credit score of a consumer shrinks as his debt grows, greater responsibility for saving ailing institutions hurts the reputation of the Treasury. The ongoing demise and bailout of other important financial institutions, in addition to Fannie Mae and Freddie Mac, reduces the quality and marketability of its monetary instruments as investor confidence in the Treasury erodes.
The chances of that happening are growing, because the Treasury may have to help other institutions or buy up tons of bad loans to get them off the market and stabilize our economy.
Here's why:
•American companies own approximately $22 trillion in risky financial instruments such as "securitized" mortgages.
•Because of a lack of government oversight, the whereabouts of this high-risk debt is nearly impossible to track.
•Many of these investments are now worthless, because the market for them has been completely wiped out.
•Which companies own these bad assets, and how long it will take before the worthless investments undermine their profits and leave them bankrupt, remains a mystery.
Until the Treasury gets some concrete answers to that $22 trillion question, and a more precise understanding of how it can remedy the situation even as the economy gets weaker, expect to pay higher mortgage rates. Those hoping to snag lower rates in the aftermath of the Fannie Mae and Freddie Mac takeover better hurry and do it while they're still available.
Center State Mortgage is your #1 source for the lowest interest rates in New Jersey and Staten Island! They have the background and experience to get you that perfect loan to give you your dream home! Choose Center State Mortgage for all your home loan needs!
But low rates are probably not sustainable. Just as the credit score of a consumer shrinks as his debt grows, greater responsibility for saving ailing institutions hurts the reputation of the Treasury. The ongoing demise and bailout of other important financial institutions, in addition to Fannie Mae and Freddie Mac, reduces the quality and marketability of its monetary instruments as investor confidence in the Treasury erodes.
The chances of that happening are growing, because the Treasury may have to help other institutions or buy up tons of bad loans to get them off the market and stabilize our economy.
Here's why:
•American companies own approximately $22 trillion in risky financial instruments such as "securitized" mortgages.
•Because of a lack of government oversight, the whereabouts of this high-risk debt is nearly impossible to track.
•Many of these investments are now worthless, because the market for them has been completely wiped out.
•Which companies own these bad assets, and how long it will take before the worthless investments undermine their profits and leave them bankrupt, remains a mystery.
Until the Treasury gets some concrete answers to that $22 trillion question, and a more precise understanding of how it can remedy the situation even as the economy gets weaker, expect to pay higher mortgage rates. Those hoping to snag lower rates in the aftermath of the Fannie Mae and Freddie Mac takeover better hurry and do it while they're still available.
Center State Mortgage is your #1 source for the lowest interest rates in New Jersey and Staten Island! They have the background and experience to get you that perfect loan to give you your dream home! Choose Center State Mortgage for all your home loan needs!
First Time Home Buyers
Nothing beats the thrill of buying your first home. One of the biggest purchases you'll ever make, a new home offers you the chance to build equity, while creating a place for family memories. But you can wind up overspending on your mortgage and home repairs if you're not careful.
A cardinal sin of the first time homebuyer is to fall in love with a home that's too expensive. It's easy to walk into a home that's outside your price range, set your heart on buying it, and then do whatever you can to make it happen.
Even in this subprime mortgage crisis, some banks may still be willing to lend you more than you can afford, especially if you have good credit. To avoid this pitfall, get yourself pre-qualified before you go house shopping. Create a budget to determine exactly how much you can comfortably afford. Don't overextend yourself, since there's more to home costs than just a mortgage.
When you find a home that you like, carefully consider all the potential expenditures-not just the mortgage. Take a look at the utility bills that the previous owner paid for the property. Ask your insurance agent how much it will cost to insure the dwelling. If there's a huge lawn and many gardens, think about all the potential landscaping costs you'll have. If there's a long driveway, consider the cost of snowplowing in the winter.
Plan future changes that you might want to make to the home, as well. If you want to add on a screen porch or a downstairs addition, it may be more cost effective to purchase a home that already has those amenities.
Many first time homebuyers purchase a fixer-upper, with grandiose plans of performing an enormous makeover. That's fine, but make sure that you have the money and time to embark on such an undertaking. Most home improvement projects wind up costing twice what you initially budget for. Plus, if you're not experienced at this type of work, it will suck up hours of your time.
You may want to consider splitting up the tasks. Perform some of the manual labor yourself, then hire a professional for skilled jobs like plumbing, wiring, or floor refinishing. It'll be well worth the investment.
You want to love your new home, not feel trapped in it. Before you sign any mortgage documents, take a step back, and budget your money and your time. Be realistic about what you can afford as a first time homeowner to put into your house. The smarter you are before you close on a new home, the happier you'll be when the deed is done and the deed is yours.
Center State Mortgage is your #1 source for mortgage and home loans for first-time buyers in New Jersey and Staten Island! They have the background and experience to get you the perfect home loan! Choose Center State Mortgage for all your home loan needs!
A cardinal sin of the first time homebuyer is to fall in love with a home that's too expensive. It's easy to walk into a home that's outside your price range, set your heart on buying it, and then do whatever you can to make it happen.
Even in this subprime mortgage crisis, some banks may still be willing to lend you more than you can afford, especially if you have good credit. To avoid this pitfall, get yourself pre-qualified before you go house shopping. Create a budget to determine exactly how much you can comfortably afford. Don't overextend yourself, since there's more to home costs than just a mortgage.
When you find a home that you like, carefully consider all the potential expenditures-not just the mortgage. Take a look at the utility bills that the previous owner paid for the property. Ask your insurance agent how much it will cost to insure the dwelling. If there's a huge lawn and many gardens, think about all the potential landscaping costs you'll have. If there's a long driveway, consider the cost of snowplowing in the winter.
Plan future changes that you might want to make to the home, as well. If you want to add on a screen porch or a downstairs addition, it may be more cost effective to purchase a home that already has those amenities.
Many first time homebuyers purchase a fixer-upper, with grandiose plans of performing an enormous makeover. That's fine, but make sure that you have the money and time to embark on such an undertaking. Most home improvement projects wind up costing twice what you initially budget for. Plus, if you're not experienced at this type of work, it will suck up hours of your time.
You may want to consider splitting up the tasks. Perform some of the manual labor yourself, then hire a professional for skilled jobs like plumbing, wiring, or floor refinishing. It'll be well worth the investment.
You want to love your new home, not feel trapped in it. Before you sign any mortgage documents, take a step back, and budget your money and your time. Be realistic about what you can afford as a first time homeowner to put into your house. The smarter you are before you close on a new home, the happier you'll be when the deed is done and the deed is yours.
Center State Mortgage is your #1 source for mortgage and home loans for first-time buyers in New Jersey and Staten Island! They have the background and experience to get you the perfect home loan! Choose Center State Mortgage for all your home loan needs!
How to Avoid Mortgage Management Problems
How well are you managing your mortgage? It’s an often overlooked aspect of home finance – many borrowers assume that once they sign the loan papers, their only remaining challenge is coming up with the mortgage payment each month. But there’s a lot more to it than that.
Having a mortgage is not like paying your cable or electric bill every month. For one thing, it’s much, much bigger – so it has a far greater potential impact on your life. Your cell phone bill you can simply pay and forget each month. But doing the same with your mortgage can be very costly.
There are a lot of serious mistakes that people make by treating their mortgage payment the same as any other bill, although a much larger one. Simply making your monthly payments isn’t enough – your mortgage is a bill that’s in a class all its own and demands special attention.
The following are some of the mistakes people commonly make in handling their mortgages.
Throwing away old billing statements. For most monthly bills, you can throw the old statement away as soon as the new one arrives, or in some cases, after one year. You don’t want to do this with a mortgage.
The reason? Those statements are your only record of the activity on your mortgage account. If your mortgage is sold to another servicer – as frequently happens – those records may not be transferred to the new bank, or may be incomplete. There’s no legal requirement to do so. As a result, you might not be fully credited for escrow payments you’ve made or get stuck with other charges – and be unable to obtain those records from your previous lender, particularly if that lender has failed. Saving your statements gives you a record of all the activity on your mortgage.
Failing to refinance when conditions are right. Although low interest rates generate a lot of interest in refinancing, many people still stick with their same old mortgage through sheer inertia. Remember, if you can reduce your current rate by a full percentage point and plan to be in the home another four years or more, it’s probably worth your while to refinance.
Remember too, that if you’ve been making regular mortgage payments for several years with no late payments on other bills, your credit has probably improved since the time you first took out the mortgage and you may have acquired equity in the property as well (although many homeowners have seen declining equity in recent years). Both will enable you to obtain a better interest rate relative to the market average than you were able to when you first took out the loan.
Center State Mortgage is your #1 source for mortgages and home loans in New Jersey and Staten Island! They have the background and experience to make sure that you're home loan is the perfect one for you! Choose Center State Mortgage for all your home loan needs!
Having a mortgage is not like paying your cable or electric bill every month. For one thing, it’s much, much bigger – so it has a far greater potential impact on your life. Your cell phone bill you can simply pay and forget each month. But doing the same with your mortgage can be very costly.
There are a lot of serious mistakes that people make by treating their mortgage payment the same as any other bill, although a much larger one. Simply making your monthly payments isn’t enough – your mortgage is a bill that’s in a class all its own and demands special attention.
The following are some of the mistakes people commonly make in handling their mortgages.
Throwing away old billing statements. For most monthly bills, you can throw the old statement away as soon as the new one arrives, or in some cases, after one year. You don’t want to do this with a mortgage.
The reason? Those statements are your only record of the activity on your mortgage account. If your mortgage is sold to another servicer – as frequently happens – those records may not be transferred to the new bank, or may be incomplete. There’s no legal requirement to do so. As a result, you might not be fully credited for escrow payments you’ve made or get stuck with other charges – and be unable to obtain those records from your previous lender, particularly if that lender has failed. Saving your statements gives you a record of all the activity on your mortgage.
Failing to refinance when conditions are right. Although low interest rates generate a lot of interest in refinancing, many people still stick with their same old mortgage through sheer inertia. Remember, if you can reduce your current rate by a full percentage point and plan to be in the home another four years or more, it’s probably worth your while to refinance.
Remember too, that if you’ve been making regular mortgage payments for several years with no late payments on other bills, your credit has probably improved since the time you first took out the mortgage and you may have acquired equity in the property as well (although many homeowners have seen declining equity in recent years). Both will enable you to obtain a better interest rate relative to the market average than you were able to when you first took out the loan.
Center State Mortgage is your #1 source for mortgages and home loans in New Jersey and Staten Island! They have the background and experience to make sure that you're home loan is the perfect one for you! Choose Center State Mortgage for all your home loan needs!
Thursday, November 12, 2009
Mortgage Checklist
Getting a home loan can be a complicated process, so let Center State Mortgage help you breeze through it and take some of the stress off your shoulders. Most mortages require certain information to get started. The following information is usually required during the loan process:
-Your Social Security number
-Current pay stubs or, if self employed, your tax returns for the past two years
-Bank statements for the past two months
-Investment account statements for the past two months
-Life insurance policy
-Retirement account statements for the past two months
-Make and model of vehicles you own and their resale value
-Credit card account information
-Auto loan account information
-Personal loan account information
If you currently own Real Estate:
-Mortgage account information
-Home insurance policy information
-Home equity account information (if applicable)
Center State Mortgage is your #1 source for the lowest mortgage interest rates in Straten Island. Let them help make getting your home loan fast, easy, and affordable. Choose Center State Mortgage today!
-Your Social Security number
-Current pay stubs or, if self employed, your tax returns for the past two years
-Bank statements for the past two months
-Investment account statements for the past two months
-Life insurance policy
-Retirement account statements for the past two months
-Make and model of vehicles you own and their resale value
-Credit card account information
-Auto loan account information
-Personal loan account information
If you currently own Real Estate:
-Mortgage account information
-Home insurance policy information
-Home equity account information (if applicable)
Center State Mortgage is your #1 source for the lowest mortgage interest rates in Straten Island. Let them help make getting your home loan fast, easy, and affordable. Choose Center State Mortgage today!
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