For many people, mortgage payments are their single largest expense. Yet, when financing a home, most homebuyers don’t comparison shop to ensure they’re getting the best mortgage rate Reevytown and terms available. This mistake can cost homeowners tens of thousands of dollars over the course of their mortgage.
Here are seven ways mortgage brokers Reevytown can help:
Access to competitive rates
Brokers deal with multiple competing lenders and can often access exclusive rates. Based on the number of mortgages brokers complete each year, they also have the power to negotiate rate discounts from lenders, which can be passed on to their clients.
A free service
Mortgage brokers’ services are typically available at no cost to consumers. Brokers are paid by the lender selected by their clients.
Knowledgeable advice
Brokers offer consultative service, advice and solutions that are customized to each client’s needs. And unlike banks, brokers work for you.
Speed and convenience
Brokers will work around a client’s schedule to make the transaction as easy and convenient as possible.
Pre-qualification
Whether you’re shopping for a new home or refinancing your existing mortgage, a broker can help you obtain a pre-approved mortgage, often with up to a 120-day interest rate guarantee.
Preserved credit rating
When you shop for a mortgage, there is an accumulation of lender inquiries on your credit bureau report, possibly affecting your credit rating and, ultimately, the rate and terms of your mortgage. This isn’t the case with a mortgage broker Reevytown, who only does one inquiry yet can still get many competing lenders to quote on your business.
Showing posts with label center state mortgage. Show all posts
Showing posts with label center state mortgage. Show all posts
Saturday, April 10, 2010
ARMs a Good Investment?
One of the most innovative mortgages we've seen in a very long time is a new adjustable-rate mortgage Reevytown with some very compelling features. First, it's based on an institutional rate benchmark known as Bankers Acceptance. Most of us are familiar with the rate benchmark - and we are accustomed to assessing mortgage rates based on it. The BA, on the other hand, is the rate at which banks will lend money to one another - and it's typically a lower rate (sometimes much lower) than the prime rate offered to a bank's best customers. The new BA-based mortgage - compared to the best prime-based mortgage available - could have saved a mortgage client a bundle over the last several years, primarily because the prime rate tends to be "stickier" in an environment where rates are falling. Often, the more fluid, market-based BA rates deliver the rate change more quickly. The BA rate is no trade secret, by the way; pick up a copy of your favourite financial paper and look for the published money rates to find the Bankers Acceptance Rate.
But the attractive rate structure is not the only perk. The same BA-based mortgage - so welldesigned to help clients wring the last quarter point from their mortgage rate - now also comes with a rate cap which guarantees that your rate will never climb higher than 2.15% above the starting base rate - no matter what happens to rates during your mortgage term. There's no worry about locking in too high because the rate is always adjustable down.
Only the ceiling is fixed. It's a homebuyers' dream:
A mortgage with limited upside and unlimited downside. If you're thinking about buying a home this year, or you haven't had your mortgage reviewed in the last several months, take the opportunity to get an expert assessment of your many options from a mortgage professional Reevytown. It could be the best investment you'll make this year!
But the attractive rate structure is not the only perk. The same BA-based mortgage - so welldesigned to help clients wring the last quarter point from their mortgage rate - now also comes with a rate cap which guarantees that your rate will never climb higher than 2.15% above the starting base rate - no matter what happens to rates during your mortgage term. There's no worry about locking in too high because the rate is always adjustable down.
Only the ceiling is fixed. It's a homebuyers' dream:
A mortgage with limited upside and unlimited downside. If you're thinking about buying a home this year, or you haven't had your mortgage reviewed in the last several months, take the opportunity to get an expert assessment of your many options from a mortgage professional Reevytown. It could be the best investment you'll make this year!
Can You Get Perks Out of an ARM?
These are heavy days for homeowners. If you've been in your home even a few years, you've probably already enjoyed a modest climb in the value of your home. Even if you don't intend to sell, it's good to know that your real estate investment is doing well. But we're also enjoying an environment in which mortgage rates Reevytown have reached historic lows.
That combination -- strong valuations and low mortgage rates -- has an unprecedented number of homeowners looking for ways to capitalize on the great opportunities available to them.
Whether it's to buy their first home, trade up, or take equity back out of their homes, homeowners are jumping at the opportunity to borrow at today's rock-bottom rates.
While many homebuyers are reconsidering the value of fixed-rate mortgages to lock in those low rates, you should keep in mind that adjustable-rate mortgages Reevytown - the darling of the dropping rate trend - can still offer real value to homeowners. It's a matter of finding the right combination of mortgage features and options.
As banks have been joined by other lending institutions, we have seen our menu of New Jersey mortgage options grow accordingly - with some innovative new mortgage types now available to help homeowners take advantage of today's unusual opportunities.
That combination -- strong valuations and low mortgage rates -- has an unprecedented number of homeowners looking for ways to capitalize on the great opportunities available to them.
Whether it's to buy their first home, trade up, or take equity back out of their homes, homeowners are jumping at the opportunity to borrow at today's rock-bottom rates.
While many homebuyers are reconsidering the value of fixed-rate mortgages to lock in those low rates, you should keep in mind that adjustable-rate mortgages Reevytown - the darling of the dropping rate trend - can still offer real value to homeowners. It's a matter of finding the right combination of mortgage features and options.
As banks have been joined by other lending institutions, we have seen our menu of New Jersey mortgage options grow accordingly - with some innovative new mortgage types now available to help homeowners take advantage of today's unusual opportunities.
Who Can Get a Reverse Mortgage?
Who qualifies for a Reverse Mortgage Reevytown?
All titleholders must be 62 or older and own a home with some equity. There are no income or credit qualifications. Existing mortgages or liens must be paid off, but are often paid with proceeds from the Reverse. The homeowner must also remain current on insurance and property taxes, but these can also be paid with proceeds from the Reverse.
How can a borrower use the money?
The funds can be used for any purpose from making ends meet to living retirement dreams. The top reasons for funds used given typically by borrowers are:
•Paying off debts, primarily mortgage and credit cards
•Home repairs and remodeling
•Living expenses
•Travel
•Health care or long-term care
•Easing the financial burden on children
•Education
•Hobbies
•Escalating property taxes
The amount available depends on the borrower’s age, the value of the home, interest rates and local FHA lending limits. Older borrowers can receive a higher percentage of their equity than younger borrowers. Funds can be received in a lump sum, a monthly payment or a line of credit.
What are the costs?
As with most any loan product, there are origination fees and closing costs, but they can be paid from the proceeds of the Reverse Mortgage Reevytown. HECM loans also have a charge for the FHA’s Mortgage Insurance Premium (MIP). There are usually no out-of-pocket costs to the borrower.
What consumer protections are in place?
Reverse Mortgages Reevytown are non-recourse consumer loans – the loan payoff can never exceed the value of the home. To get a Reverse Mortgage, the customer must attend a mandatory counseling session and review their financial situation with a trained, professional Reverse Mortgage counselor. Many of the counselors are certified by the AARP. The counselor ensures that they understand the transaction, the costs and their other alternatives.
All titleholders must be 62 or older and own a home with some equity. There are no income or credit qualifications. Existing mortgages or liens must be paid off, but are often paid with proceeds from the Reverse. The homeowner must also remain current on insurance and property taxes, but these can also be paid with proceeds from the Reverse.
How can a borrower use the money?
The funds can be used for any purpose from making ends meet to living retirement dreams. The top reasons for funds used given typically by borrowers are:
•Paying off debts, primarily mortgage and credit cards
•Home repairs and remodeling
•Living expenses
•Travel
•Health care or long-term care
•Easing the financial burden on children
•Education
•Hobbies
•Escalating property taxes
The amount available depends on the borrower’s age, the value of the home, interest rates and local FHA lending limits. Older borrowers can receive a higher percentage of their equity than younger borrowers. Funds can be received in a lump sum, a monthly payment or a line of credit.
What are the costs?
As with most any loan product, there are origination fees and closing costs, but they can be paid from the proceeds of the Reverse Mortgage Reevytown. HECM loans also have a charge for the FHA’s Mortgage Insurance Premium (MIP). There are usually no out-of-pocket costs to the borrower.
What consumer protections are in place?
Reverse Mortgages Reevytown are non-recourse consumer loans – the loan payoff can never exceed the value of the home. To get a Reverse Mortgage, the customer must attend a mandatory counseling session and review their financial situation with a trained, professional Reverse Mortgage counselor. Many of the counselors are certified by the AARP. The counselor ensures that they understand the transaction, the costs and their other alternatives.
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.
Your Jumbo Mortgage Loan
Jumbo mortgages Reevytown are not so different from standard mortgages but there are a few key things that are worth looking in to.
Jumbo Mortgage Loans
A jumbo mortgage loan Reevytown is a loan taken for property that is high-priced.. In Colorado, as in most of the U.S., a jumbo mortgage loan is any mortgage that exceeds $417,000 - the limit set by Fannie Mae and Freddie Mac for conforming loans.
Fannie Mae and Freddie Mac, the two agencies that buy the majority of real estate mortgages, will not finance loans greater than $417,000 in most states; however Alaska, Hawaii, and a couple others are exceptions. Therefore, the large jumbo mortgage loans are sold to other investments, often banks and insurance companies, and so a jumbo mortgage loan falls into a different category. Rates for a jumbo mortgage are also higher than conforming loans because there is more risk involved.
What This Means for Jumbo Mortgage Interest
The size of a jumbo mortgage loan Reevytown means there is more to lose. The size, coupled with other factors, results in somewhat higher jumbo mortgage rates than those carried by conforming loans. Since percentage points on jumbo mortgage rages can mean sizable payment differences, buyers should shop around for a good lender when applying for a jumbo mortgage loan in order to find the best rate. Buyers should shop around for a good lender when applying for a jumbo mortgage loan in order to find the best rate.
In truth, jumbo mortgage interest rates are only one thing to consider when shopping for a jumbo mortgage. There are additional fees and closing costs to be considered that could even out the difference in jumbo mortgage rates. Sometimes, the company with the jumbo mortgage rates is actually the cheapest, all things considered.
Also, buyers shopping for good jumbo mortgage interest rates need to consider their goals, plans, and all of their options. Like conforming mortgages, jumbo mortgages are offered in a variety product lines. Buyers have the option of taking out loans with adjustable jumbo mortgage rates with 3 or 5 year locked rates that adjust after that period, or 15 or 30 year fixed jumbo mortgage rates that never change.
Deciding which type of product (variable or fixed jumbo mortgage interest rate) is better for you depends on whether you plan to stay in the home for more than that locked 3-5 year period, or whether you will refinance the loan within 3-5 years anyway.
Jumbo Mortgage Loans
A jumbo mortgage loan Reevytown is a loan taken for property that is high-priced.. In Colorado, as in most of the U.S., a jumbo mortgage loan is any mortgage that exceeds $417,000 - the limit set by Fannie Mae and Freddie Mac for conforming loans.
Fannie Mae and Freddie Mac, the two agencies that buy the majority of real estate mortgages, will not finance loans greater than $417,000 in most states; however Alaska, Hawaii, and a couple others are exceptions. Therefore, the large jumbo mortgage loans are sold to other investments, often banks and insurance companies, and so a jumbo mortgage loan falls into a different category. Rates for a jumbo mortgage are also higher than conforming loans because there is more risk involved.
What This Means for Jumbo Mortgage Interest
The size of a jumbo mortgage loan Reevytown means there is more to lose. The size, coupled with other factors, results in somewhat higher jumbo mortgage rates than those carried by conforming loans. Since percentage points on jumbo mortgage rages can mean sizable payment differences, buyers should shop around for a good lender when applying for a jumbo mortgage loan in order to find the best rate. Buyers should shop around for a good lender when applying for a jumbo mortgage loan in order to find the best rate.
In truth, jumbo mortgage interest rates are only one thing to consider when shopping for a jumbo mortgage. There are additional fees and closing costs to be considered that could even out the difference in jumbo mortgage rates. Sometimes, the company with the jumbo mortgage rates is actually the cheapest, all things considered.
Also, buyers shopping for good jumbo mortgage interest rates need to consider their goals, plans, and all of their options. Like conforming mortgages, jumbo mortgages are offered in a variety product lines. Buyers have the option of taking out loans with adjustable jumbo mortgage rates with 3 or 5 year locked rates that adjust after that period, or 15 or 30 year fixed jumbo mortgage rates that never change.
Deciding which type of product (variable or fixed jumbo mortgage interest rate) is better for you depends on whether you plan to stay in the home for more than that locked 3-5 year period, or whether you will refinance the loan within 3-5 years anyway.
Friday, March 19, 2010
How do Mortgages Work?
The American dream is the belief that, through hard work, courage, and determination, each individual can achieve financial prosperity. Most people interpret this to mean a successful career, upward mobility, and owning a home, a car, and a family with 2.5 children and a dog.
The core of this dream is based on owning a home. Since your house is likely to be the largest financial obligation you'll ever have, mortgages New Jersey were created to assist you in paying for it. A mortgage loan is simply a long-term loan given by a bank or other lending institution that is secured by a specific piece of real estate. If you fail to make timely payments, the lender can repossess the property.
Because houses tend to be expensive - as are the loans to pay for them - banks allow you to repay them over extended periods of time, known as the "term". Terms can range anywhere from between 10 to 30 years. Shorter terms may have lower interest rates than their comparable long-term brothers. However, longer-term loans may offer the advantage of having lower monthly payments, because you're taking more time to pay off the debt.
In the old days, a nearby savings and loan might lend you money to purchase your home if it had enough cash lying around from its deposits. Nowadays, the money for home loans New Jersey primarily comes from three major institutions: The Federal National Mortgage Association, known as Fannie Mae; the Federal Home Loan Mortgage Corporation (known as Freddie Mac); and the Government National Mortgage Association (known as Ginnie Mae). The bank that holds your loan is responsible primarily for "servicing" it.
When you have a mortgage loan New Jersey, your monthly payment will generally include the following:
•An amount for the principal amount of the balance
•An amount for interest owed on that balance
•Real estate taxes
•Homeowner's insurance
The core of this dream is based on owning a home. Since your house is likely to be the largest financial obligation you'll ever have, mortgages New Jersey were created to assist you in paying for it. A mortgage loan is simply a long-term loan given by a bank or other lending institution that is secured by a specific piece of real estate. If you fail to make timely payments, the lender can repossess the property.
Because houses tend to be expensive - as are the loans to pay for them - banks allow you to repay them over extended periods of time, known as the "term". Terms can range anywhere from between 10 to 30 years. Shorter terms may have lower interest rates than their comparable long-term brothers. However, longer-term loans may offer the advantage of having lower monthly payments, because you're taking more time to pay off the debt.
In the old days, a nearby savings and loan might lend you money to purchase your home if it had enough cash lying around from its deposits. Nowadays, the money for home loans New Jersey primarily comes from three major institutions: The Federal National Mortgage Association, known as Fannie Mae; the Federal Home Loan Mortgage Corporation (known as Freddie Mac); and the Government National Mortgage Association (known as Ginnie Mae). The bank that holds your loan is responsible primarily for "servicing" it.
When you have a mortgage loan New Jersey, your monthly payment will generally include the following:
•An amount for the principal amount of the balance
•An amount for interest owed on that balance
•Real estate taxes
•Homeowner's insurance
More on Mortgages
Purchase Loan New Jersey
So above was all the chatter about how fixed or adjustable rates can greatly affect all types of mortgage loans. Now we will discuss different types of mortgage loans. A purchase loan is a fixed or adjustable rate loan most often coupled with a 30-year term used to buy a new property. There are many different purchase loan programs in the marketplace and also many first time buyer programs favorable to people looking to buy their fist home.
Refinance Loan New Jersey
A refinance loan is simply a new loan used to pay off your existing loan. Some people get a refinance loan just to lower their interest rate and others enter into a refinance to lower their interest rate and get cash out. Between 2003-2005 rates on mortgage loans hit 40-year lows, which is why the mortgage industry was going absolutely gangbusters at that time. Now, less people are motivated by rates to refinance, even though mortgage rates are still historically very low and conducive to refinancing. Be aware, if you can achieve a lower rate now, you are costing yourself by not doing so. Back to people's motivations, many people who have adjustable-rate mortgages are refinancing into fixed-rate mortgages while fixed rates are still low. Refinance mortgage loans are entirely new loans and carry all the costs associated with setting up a new loan, but if you can get a better rate you will recoup that cost in a few years and it will be savings from there on out.
Home Equity Loan New Jersey
A home equity loan is a 2nd mortgage on you house and not a refinance of your original loan. Home equity loans usually have a slightly higher rate of interest than refinance mortgage loans because they are exactly what they are titled - a 2nd mortgage loan and are second inline to be paid out in the event a borrow defaults. Traditional 2nd mortgage loans give you access to a fixed amount of money to be paid back in a certain amount of time at a fixed rate.
•Home Equity Loans
Home Equity Line of Credit (HELOC)
A home equity line of credit is a loan that gives you access to credit against equity in your home. With a line of credit everything is flexible, including the interest rate. You are given a limit by the lender for the amount you can withdraw and you are able to draw out that money during a specific draw period. A HELOC is best if you need money over period of time and you can handle fluctuations in your monthly payments.
So above was all the chatter about how fixed or adjustable rates can greatly affect all types of mortgage loans. Now we will discuss different types of mortgage loans. A purchase loan is a fixed or adjustable rate loan most often coupled with a 30-year term used to buy a new property. There are many different purchase loan programs in the marketplace and also many first time buyer programs favorable to people looking to buy their fist home.
Refinance Loan New Jersey
A refinance loan is simply a new loan used to pay off your existing loan. Some people get a refinance loan just to lower their interest rate and others enter into a refinance to lower their interest rate and get cash out. Between 2003-2005 rates on mortgage loans hit 40-year lows, which is why the mortgage industry was going absolutely gangbusters at that time. Now, less people are motivated by rates to refinance, even though mortgage rates are still historically very low and conducive to refinancing. Be aware, if you can achieve a lower rate now, you are costing yourself by not doing so. Back to people's motivations, many people who have adjustable-rate mortgages are refinancing into fixed-rate mortgages while fixed rates are still low. Refinance mortgage loans are entirely new loans and carry all the costs associated with setting up a new loan, but if you can get a better rate you will recoup that cost in a few years and it will be savings from there on out.
Home Equity Loan New Jersey
A home equity loan is a 2nd mortgage on you house and not a refinance of your original loan. Home equity loans usually have a slightly higher rate of interest than refinance mortgage loans because they are exactly what they are titled - a 2nd mortgage loan and are second inline to be paid out in the event a borrow defaults. Traditional 2nd mortgage loans give you access to a fixed amount of money to be paid back in a certain amount of time at a fixed rate.
•Home Equity Loans
Home Equity Line of Credit (HELOC)
A home equity line of credit is a loan that gives you access to credit against equity in your home. With a line of credit everything is flexible, including the interest rate. You are given a limit by the lender for the amount you can withdraw and you are able to draw out that money during a specific draw period. A HELOC is best if you need money over period of time and you can handle fluctuations in your monthly payments.
Different Kinds of Mortgages
Below we will discuss the different types of mortgage loans and some key points of each one. Before we begin that, we must address rates, a dynamic that transcends all different types of mortgage loans and affects them immensely.
Fixed Mortgages New Jersey
Over approximately the past four years, the average of 30-year fixed rate mortgage loans has remained below 6.5 percent. While Federal Reserve short term interest rate increases do have an affect on fixed mortgage rates, yields on long term government bonds and fixed rate mortgages are closely tied. Sub 6.5 percent rates will become a financial endangered species as rates move into the upper 6s in the second half of 2006 approaching the ten-year average of 6.9 percent.
However, borrowers are still favoring fixed rates mortgages New Jersey over adjustable rate mortgages because the difference in initial rates is not worth the risk; 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. You might be asking yourself, Why doesn't everybody have fixed-rate mortgage loans, why take the chance? Some people who can handle rate fluctuations and are willing to play against the odds might see their rates go down if the Federal Reserve does have to lower short term interest rates to stimulate investment even though that does not at all seem likely in the immediate future.
Adjustable Rates
The fluctuations of Adjustable Rate Mortgage loans New Jersey (ARM) are inexorably linked to short-term interest rates determined by the Federal Reserve. Since Ben Bernanke's takeover as Fed chairman, he continued to move short term interest rates upward to thwart possible inflation; most experts state that he will definitely error on the side of caution - raising rates higher in the foreseeable future. Borrowers already in an ARM mortgage should be bracing for a jump in their payments that in many cases will be quite substantial. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Fed 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. Depending on your loan balance and previous interest rate one simple adjustment can make your monthly payments much more of a burden.
Fixed Mortgages New Jersey
Over approximately the past four years, the average of 30-year fixed rate mortgage loans has remained below 6.5 percent. While Federal Reserve short term interest rate increases do have an affect on fixed mortgage rates, yields on long term government bonds and fixed rate mortgages are closely tied. Sub 6.5 percent rates will become a financial endangered species as rates move into the upper 6s in the second half of 2006 approaching the ten-year average of 6.9 percent.
However, borrowers are still favoring fixed rates mortgages New Jersey over adjustable rate mortgages because the difference in initial rates is not worth the risk; 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. You might be asking yourself, Why doesn't everybody have fixed-rate mortgage loans, why take the chance? Some people who can handle rate fluctuations and are willing to play against the odds might see their rates go down if the Federal Reserve does have to lower short term interest rates to stimulate investment even though that does not at all seem likely in the immediate future.
Adjustable Rates
The fluctuations of Adjustable Rate Mortgage loans New Jersey (ARM) are inexorably linked to short-term interest rates determined by the Federal Reserve. Since Ben Bernanke's takeover as Fed chairman, he continued to move short term interest rates upward to thwart possible inflation; most experts state that he will definitely error on the side of caution - raising rates higher in the foreseeable future. Borrowers already in an ARM mortgage should be bracing for a jump in their payments that in many cases will be quite substantial. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Fed 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. Depending on your loan balance and previous interest rate one simple adjustment can make your monthly payments much more of a burden.
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.
What to Expect from a Mortgage Broker
What to expect
A broker New Jersey should interview you about your mortgage needs and present you with a variety of options, which he or she should be able to explain in detail. Avoid brokers who give incomplete answers or try to push you toward one particular option without exploring alternatives. Also, don’t sign anything committing yourself to working with just that broker – you’re entitled to work with as many different brokers as you wish, and don’t have to commit to any until it’s time to actually submit a mortgage application.
Be aware that some lenders are reluctant to work with mortgage brokers New Jersey these days, because some brokers had a tendency to steer risky clients to them and hide their shortcomings. That’s another reason it’s important to find a reputable, professional broker – the good ones will still have their relationships with lenders intact.
You should also be aware that a broker is not necessarily obliged to look out for your best interest. In some cases, brokers have been known to steer borrowers to loans that were more profitable for them, rather than beneficial to the borrower. That’s why you have to stay on top of things by asking the right questions and preferably obtaining mortgage offers from several different brokers.
Ask about compensation
In particular, you should ask a broker how they get paid and what their compensation is for a particular loan – and does it differ from other loan offers you might consider. Other questions to ask include what is the APR (annual percentage rate) on a loan, what are the closing costs and any other fees that might be included.
If you’ve got a credit rating of 780 and can put 30 percent down on your home purchase, you probably won’t need a mortgage broker New Jersey – you can likely find a lender who’ll offer good terms on your own. But if you don’t fit the ideal borrower mold or are looking for a jumbo loan or have other special requirements, going through a mortgage broker may be the sensible thing to do.
A broker New Jersey should interview you about your mortgage needs and present you with a variety of options, which he or she should be able to explain in detail. Avoid brokers who give incomplete answers or try to push you toward one particular option without exploring alternatives. Also, don’t sign anything committing yourself to working with just that broker – you’re entitled to work with as many different brokers as you wish, and don’t have to commit to any until it’s time to actually submit a mortgage application.
Be aware that some lenders are reluctant to work with mortgage brokers New Jersey these days, because some brokers had a tendency to steer risky clients to them and hide their shortcomings. That’s another reason it’s important to find a reputable, professional broker – the good ones will still have their relationships with lenders intact.
You should also be aware that a broker is not necessarily obliged to look out for your best interest. In some cases, brokers have been known to steer borrowers to loans that were more profitable for them, rather than beneficial to the borrower. That’s why you have to stay on top of things by asking the right questions and preferably obtaining mortgage offers from several different brokers.
Ask about compensation
In particular, you should ask a broker how they get paid and what their compensation is for a particular loan – and does it differ from other loan offers you might consider. Other questions to ask include what is the APR (annual percentage rate) on a loan, what are the closing costs and any other fees that might be included.
If you’ve got a credit rating of 780 and can put 30 percent down on your home purchase, you probably won’t need a mortgage broker New Jersey – you can likely find a lender who’ll offer good terms on your own. But if you don’t fit the ideal borrower mold or are looking for a jumbo loan or have other special requirements, going through a mortgage broker may be the sensible thing to do.
Using a Mortgage Broker
Shopping for a mortgage can be an intimidating process. If you think you’d like some help, you might consider going through a mortgage broker.
A mortgage broker New Jersey doesn’t actually make loans, but instead helps you find a lender who will offer you a loan on attractive terms. In that respect they function like an independent insurance agent, having contacts with a variety of companies and able to match you up with the one that best suits your needs.
May be useful for jumbo loans or weak credit
Mortgage brokers New Jersey can be particularly helpful if you have circumstances that might make it difficult to shop for a mortgage on your own. You may have a weak credit score, have limited funds for a down payment and closing costs, be in the market for a jumbo loan or simply lack the time to research various lenders on your own.
In those situations, a broker may be able to recommend one or more lenders who will lend to someone in your situation or will offer more attractive terms than other lenders might.
You do have to pay for this service, of course. In most cases, the broker’s fee is rolled into the loan itself, either in the form of a slightly higher interest rate or added to the closing costs. You can save money by finding a lender on your own, but that depends on whether you have the time or inclination to research various lenders to find the best deal.
Finding a broker
So how do you find a good mortgage broker New Jersey? The best way, of course, is by personal recommendations from family and friends. Failing that, look up several in your that seem to specialize in loans for borrowers in your circumstances and contact them by phone. Eliminate any that seem unprofessional, don’t give you straight answers to your questions, try to pressure you in any way or who you just feel uncomfortable with.
Of the others, pick a few and meet with them at their offices – don’t let them come to you. You can tell a lot about a broker’s operation by the way their office is run- does it seem professional, courteous and efficient? If a broker doesn’t even have an office on the other hand, that may be a sign they’re new and inexperience or simply haven’t been able to generate enough business to afford one.
It’s also a good idea to look for a broker who is a member of the National Association of Mortgage Brokers (NAMB), which certifies mortgage brokers and demands that they adhere to certain ethical standards. The NAMB has three levels of certification, being general mortgage associate (GMA), certified residential mortgage specialist (CRMS) and certified mortgage consultant (CMC), in ascending order.
A mortgage broker New Jersey doesn’t actually make loans, but instead helps you find a lender who will offer you a loan on attractive terms. In that respect they function like an independent insurance agent, having contacts with a variety of companies and able to match you up with the one that best suits your needs.
May be useful for jumbo loans or weak credit
Mortgage brokers New Jersey can be particularly helpful if you have circumstances that might make it difficult to shop for a mortgage on your own. You may have a weak credit score, have limited funds for a down payment and closing costs, be in the market for a jumbo loan or simply lack the time to research various lenders on your own.
In those situations, a broker may be able to recommend one or more lenders who will lend to someone in your situation or will offer more attractive terms than other lenders might.
You do have to pay for this service, of course. In most cases, the broker’s fee is rolled into the loan itself, either in the form of a slightly higher interest rate or added to the closing costs. You can save money by finding a lender on your own, but that depends on whether you have the time or inclination to research various lenders to find the best deal.
Finding a broker
So how do you find a good mortgage broker New Jersey? The best way, of course, is by personal recommendations from family and friends. Failing that, look up several in your that seem to specialize in loans for borrowers in your circumstances and contact them by phone. Eliminate any that seem unprofessional, don’t give you straight answers to your questions, try to pressure you in any way or who you just feel uncomfortable with.
Of the others, pick a few and meet with them at their offices – don’t let them come to you. You can tell a lot about a broker’s operation by the way their office is run- does it seem professional, courteous and efficient? If a broker doesn’t even have an office on the other hand, that may be a sign they’re new and inexperience or simply haven’t been able to generate enough business to afford one.
It’s also a good idea to look for a broker who is a member of the National Association of Mortgage Brokers (NAMB), which certifies mortgage brokers and demands that they adhere to certain ethical standards. The NAMB has three levels of certification, being general mortgage associate (GMA), certified residential mortgage specialist (CRMS) and certified mortgage consultant (CMC), in ascending order.
Friday, March 5, 2010
ARM Resets
If you’ve got an adjustable rate mortgage (ARM), you may be feeling some pressure to refinance now before your rate resets. However, for some borrowers, waiting may not be such a bad idea.
Many people assume that your rate automatically increases when your ARM resets. But that’s not the case. It’s possible that your rate can actually go decrease after a reset, particularly when prevailing rates are low, such as they are now.
When your ARM resets, your new interest rate is based on a formula tied to some index representing prevailing market conditions. In most cases, it will be something like the Cost of Funds Index (COFI), London Interbank Offered Rate (LIBOR) or a Treasury-based index like the Constant Maturity Treasury (CMT). Your new rate is the index rate plus a fixed adjustment (called the margin), such as 2.5 or 3 percent, which is determined at the time you take out the loan.
Generally, the index rate plus the fixed adjustment will produce a new interest rate that’s somewhat higher than the initial interest rate you’d pay on a new ARM. But if market rates have declined since you first took out the mortgage, your rate could reset lower than what you were paying – from 6 percent to 4 percent, for example.
Finding out what will happen with your own mortgage is simple. Get out your mortgage documents and find out what index your reset will be based on and what your margin adjustment will be. Look up what the current rate on your index is, add the margin, and you’ll have what your new rate would be if you refinance today (the maximum increases or decrease is limited to a cap specified in your mortgage).
Refinancing to lock in rates
But even if you’d get a lower rate by letting your ARM reset, refinancing may still be a good idea. Rates are unusually low right now, and ARMs typically reset again each year after the initial reset. So if rates increase over the next few years, you might wish you’d locked down a long-term rate now while rates are low. And if your ARM isn’t due to reset for six months to a year, rates might already be higher by the time it resets.
Allowing your ARM to reset instead of refinancing can make sense for a variety of other reasons as well. Maybe you think you might be moving within the next two or three years and it wouldn’t be worth it to pay several thousand dollars to refinance for that short a time. Or your home value has dropped and you want to see the market stabilize before refinancing. Or you need additional equity to qualify for the best mortgage rates, so you need to pay down additional principal before refinancing.
Of course, if you have an option or Alt-A ARM where you’re going to need to make increased principal payments once your ARM resets, you’ll probably want to go ahead and refinance if possible. But that may be difficult, as many homeowners with those types of loans have not accumulated enough home equity to qualify for a refinance, particularly given the steep declines in home values in recent years.
Many people assume that your rate automatically increases when your ARM resets. But that’s not the case. It’s possible that your rate can actually go decrease after a reset, particularly when prevailing rates are low, such as they are now.
When your ARM resets, your new interest rate is based on a formula tied to some index representing prevailing market conditions. In most cases, it will be something like the Cost of Funds Index (COFI), London Interbank Offered Rate (LIBOR) or a Treasury-based index like the Constant Maturity Treasury (CMT). Your new rate is the index rate plus a fixed adjustment (called the margin), such as 2.5 or 3 percent, which is determined at the time you take out the loan.
Generally, the index rate plus the fixed adjustment will produce a new interest rate that’s somewhat higher than the initial interest rate you’d pay on a new ARM. But if market rates have declined since you first took out the mortgage, your rate could reset lower than what you were paying – from 6 percent to 4 percent, for example.
Finding out what will happen with your own mortgage is simple. Get out your mortgage documents and find out what index your reset will be based on and what your margin adjustment will be. Look up what the current rate on your index is, add the margin, and you’ll have what your new rate would be if you refinance today (the maximum increases or decrease is limited to a cap specified in your mortgage).
Refinancing to lock in rates
But even if you’d get a lower rate by letting your ARM reset, refinancing may still be a good idea. Rates are unusually low right now, and ARMs typically reset again each year after the initial reset. So if rates increase over the next few years, you might wish you’d locked down a long-term rate now while rates are low. And if your ARM isn’t due to reset for six months to a year, rates might already be higher by the time it resets.
Allowing your ARM to reset instead of refinancing can make sense for a variety of other reasons as well. Maybe you think you might be moving within the next two or three years and it wouldn’t be worth it to pay several thousand dollars to refinance for that short a time. Or your home value has dropped and you want to see the market stabilize before refinancing. Or you need additional equity to qualify for the best mortgage rates, so you need to pay down additional principal before refinancing.
Of course, if you have an option or Alt-A ARM where you’re going to need to make increased principal payments once your ARM resets, you’ll probably want to go ahead and refinance if possible. But that may be difficult, as many homeowners with those types of loans have not accumulated enough home equity to qualify for a refinance, particularly given the steep declines in home values in recent years.
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.
Chapter 7 Bankruptcy and Foreclosure
Chapter 7 can eliminate second liens after foreclosure
For a homeowner who has decided to go ahead and surrender their home through foreclosure, Ebert said a Chapter 7 may be useful for extinguishing potential claims by secondary lienholders, such as in the case of a home equity loan or second mortgage, who might otherwise seek repayment by laying claim to other assets held by the homeowner. Some states allow this, others do not - this is one of the areas where a bankruptcy attorney licensed to practice in your state can be helpful.
It should be noted that a bankruptcy does not provide relief from all debts - unpaid taxes, child support, alimony and loans obtained through fraud, among certain other debts, cannot be extinguished by bankruptcy.
Impacts on credit
Finally, there are the impacts on ones credit rating to consider. As mentioned above, a bankruptcy remains on your credit rating for 10 years, a foreclosure for only seven. However, many mortgage lenders may prefer to write a mortgage for someone with a bankruptcy on their record rather than a foreclosure.
Furthermore, many lenders will actively seek out persons who have recently filed for bankruptcy - Ebert said it's not uncommon for persons to receive credit card offers during the process itself. The bottom line is, credit can still be available after a bankruptcy - but it's going to be much more expensive than before. Bankruptcy and its impacts on your personal and financial life can be very complicated. That's why it's important to talk with a qualified bankruptcy attorney and preferably, a personal financial advisor as well to sort out the pros and cons before taking such a major step.
For a homeowner who has decided to go ahead and surrender their home through foreclosure, Ebert said a Chapter 7 may be useful for extinguishing potential claims by secondary lienholders, such as in the case of a home equity loan or second mortgage, who might otherwise seek repayment by laying claim to other assets held by the homeowner. Some states allow this, others do not - this is one of the areas where a bankruptcy attorney licensed to practice in your state can be helpful.
It should be noted that a bankruptcy does not provide relief from all debts - unpaid taxes, child support, alimony and loans obtained through fraud, among certain other debts, cannot be extinguished by bankruptcy.
Impacts on credit
Finally, there are the impacts on ones credit rating to consider. As mentioned above, a bankruptcy remains on your credit rating for 10 years, a foreclosure for only seven. However, many mortgage lenders may prefer to write a mortgage for someone with a bankruptcy on their record rather than a foreclosure.
Furthermore, many lenders will actively seek out persons who have recently filed for bankruptcy - Ebert said it's not uncommon for persons to receive credit card offers during the process itself. The bottom line is, credit can still be available after a bankruptcy - but it's going to be much more expensive than before. Bankruptcy and its impacts on your personal and financial life can be very complicated. That's why it's important to talk with a qualified bankruptcy attorney and preferably, a personal financial advisor as well to sort out the pros and cons before taking such a major step.
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