Should you pay off your mortgage early? If you’ve come through the recent economic crisis in a position to be able to make additional payments on your home loan Middletown, this may sound like an attractive option. It’s a safe, conservative financial strategy that many find appealing after being put through the financial wringer the past few years.
But it still may not be the smart thing to do. True, the practice of making double payments or otherwise paying a extra on one’s mortgage each month was long considered a hallmark of sound financial planning. But that was a different era and today, what made sense in the past may no longer be your best course of action.
The reason for paying down your mortgage early, of course, is to save money. Making bigger payments now reduces the interest you’ll have to pay over the life of the loan, perhaps by tens of thousands of dollars. It also moves up the date you’ll own the home free and clear, and eliminating the monthly mortgage payment from your budget completely.
Mortgage tax benefits reduce effective savings
But how much are you actually saving? If you purchased or refinanced your home in the past few years, probably not much. Because mortgage interest is tax-deductable, it reduces the effective interest rate you’re paying by about one-quarter. So if you’re paying 6 percent interest, your effective rate is likely around 4.5 percent, perhaps lower.
What this means is that any additional money paid toward your mortgage is effectively earning you a return of 4.5 percent – money saved is money earned, literally. If you’re in a higher tax bracket, the figure could be even lower.
The fact is, there are any number of fairly conservative investment approaches where you can earn a better than 4.5 percent return. Although the stock market took a big hit in 2008, the historic rate of return since the 1950s has averaged nearly 11 percent a year, including the recent downturn. Including bonds or investing in funds that include stocks and bonds can help even out the sharp peaks. If you’re looking at an investment period of 20 years or more, investing will nearly always provide a better return.
This wasn’t necessarily the case 20 or 30 years ago, when mortgage rates Middletown were running around 10 percent or even higher. Back then, paying down your mortgage as quickly as possible made much more sense.
Retirement saving, other needs may be more important
One of the other downsides of paying off your mortgage early is that it may distract you from other financial needs, such as saving for retirement. Paying off your mortgage early won’t do you much good if you don’t have a solid income to help you enjoy your home in your golden years – and most people don’t save nearly enough.
An IRA or Roth IRA also offer tax advantages that effectively increase their earning power, just the opposite of what happens with the tax deductions on your mortgage interest, which effectively reduce the return you get on paying off your mortgage early.
Also, you shouldn’t look to accelerate your mortgage payoff Middletown at the cost of personal savings. Most people don’t have nearly enough of an emergency fund held in reserve and you can’t count on being able to tap home equity if you need to in an emergency – such as if you lose your job, which will make your lender suddenly reluctant to extend you credit.
It’s a good idea to have a savings reserve equal to six months’ expenses, or at least three months, to tide you through emergencies. The fund doesn’t even have to be in a savings account, you can have most of it tied up in mutual funds or other equities, provided that you can quickly convert them to cash if need be.
Showing posts with label home purchasing. Show all posts
Showing posts with label home purchasing. Show all posts
Wednesday, April 14, 2010
Low Mortgage Rates to Hang Around For Awhile
Midnight has struck. The low-interest coach is turning back into a pumpkin. Borrowers who did not refinance or purchase a home by stroke of twelve have lost forever their opportunity to get a handsome prince of an interest rate.
At least, that’s the popular perception of what’s happening now that the Fed has officially concluded its purchases of mortgage-backed securities. With the Fed out of the picture, the thinking goes, rates must surely rise as far and as fast as they fell when the Fed announced it would buy $1.25 trillion in mortgage securities, sending mortgage rate plummeting to record lows.
Fortunately, that seems to be turning out to be a fairy tale. Although many experts began 2010 convinced that interest rates Middletown would rapidly rise by one-half to a full percentage point once the Fed quit buying securities at the end of March, there’s been no indication of that happening.
In fact, as the deadline approached, 30-year interest rates continued to fluctuate just below the 5 percent mark, as tracked by Freddie Mac, with no sign of moving upward. And analysts are now predicting a much smaller rate increase over the coming months, perhaps around a quarter of a percent.
What happened? For starters, the Fed has been gradually reducing its purchases of mortgage securities as the end of the program neared, rather than simply cutting things off after March 30. That lessened the shock that would have occurred if it had simply pulled out all at once.
Investors moving in to take up slack
For another, by buying up such a huge chunk of the mortgages issued over the past year, the Fed has not only driven interest rates downward, it’s also crowded out many of the private investors who were interested in mortgage securities. These investors are now starting to come back into the market, but the pent-up demand is helping to keep a lid on rates, at least for now.
What does this mean for borrowers? It means you should still be able to get an exceptionally good interest rate on a mortgage Middletown, either to purchase a home or refinance an existing loan, for some time to come. On a historical basis, anything below 5.5 percent for a 30-year loan is unusually good; rates below 5 percent, such as we’ve seen over most of the past year, are nearly unheard of.
From the perspective of Spring 2010, a rate of 5.25 percent come July might not sound that attractive, but three years down the road, it may turn out to be a screamingly good deal. And on home loans Middletown, it’s the long term that matters.
At least, that’s the popular perception of what’s happening now that the Fed has officially concluded its purchases of mortgage-backed securities. With the Fed out of the picture, the thinking goes, rates must surely rise as far and as fast as they fell when the Fed announced it would buy $1.25 trillion in mortgage securities, sending mortgage rate plummeting to record lows.
Fortunately, that seems to be turning out to be a fairy tale. Although many experts began 2010 convinced that interest rates Middletown would rapidly rise by one-half to a full percentage point once the Fed quit buying securities at the end of March, there’s been no indication of that happening.
In fact, as the deadline approached, 30-year interest rates continued to fluctuate just below the 5 percent mark, as tracked by Freddie Mac, with no sign of moving upward. And analysts are now predicting a much smaller rate increase over the coming months, perhaps around a quarter of a percent.
What happened? For starters, the Fed has been gradually reducing its purchases of mortgage securities as the end of the program neared, rather than simply cutting things off after March 30. That lessened the shock that would have occurred if it had simply pulled out all at once.
Investors moving in to take up slack
For another, by buying up such a huge chunk of the mortgages issued over the past year, the Fed has not only driven interest rates downward, it’s also crowded out many of the private investors who were interested in mortgage securities. These investors are now starting to come back into the market, but the pent-up demand is helping to keep a lid on rates, at least for now.
What does this mean for borrowers? It means you should still be able to get an exceptionally good interest rate on a mortgage Middletown, either to purchase a home or refinance an existing loan, for some time to come. On a historical basis, anything below 5.5 percent for a 30-year loan is unusually good; rates below 5 percent, such as we’ve seen over most of the past year, are nearly unheard of.
From the perspective of Spring 2010, a rate of 5.25 percent come July might not sound that attractive, but three years down the road, it may turn out to be a screamingly good deal. And on home loans Middletown, it’s the long term that matters.
Can You Still Get an Interest-Only Loan?
There are a few places you may still be able to get an interest-only loan Middletown, despite Fannie and Freddie’s withdrawal from the market. Foremost among these are portfolio lenders who lend out their own money and don’t sell the loans to Fannie or Freddie in the first place. Many of these are also the lenders who underwrite jumbo loans (loans above Fannie and Freddie’s $730,000 maximum), so you may still be able to obtain one there.
Savings and Loan associations also tend to loan their own money and not resell their mortgages, so they may be an option for someone looking for an interest-only loan Middletown. Be aware, though, that you’re going to pay a hefty interest rate and down payment in order to qualify, as well as being able to demonstrate ample fiscal reserves. That way, if the property does lose value, the lender is covered against likely losses.
ARMs as an alternative
One option remains for borrowers seeking to minimize their mortgage payments and that’s an adjustable rate mortgage Middletown (ARM). Although these do involve paying down principal, they are available at considerably lower rates than a 30-year fixed-rate mortgage – possibly three-quarters to a full percent lower. With low rates that lock in for one to 10 years before resetting, these can be a good option for borrowers who don’t plan to occupy a home long-term.
Interest-only loans are a traditional mortgage tool and will likely make a gradual comeback as the housing market stabilizes and conditions return to historical norms. But in the meantime, options for very low-cost loans are limited unless you’re in a position to take advantage of specialty lenders.
Savings and Loan associations also tend to loan their own money and not resell their mortgages, so they may be an option for someone looking for an interest-only loan Middletown. Be aware, though, that you’re going to pay a hefty interest rate and down payment in order to qualify, as well as being able to demonstrate ample fiscal reserves. That way, if the property does lose value, the lender is covered against likely losses.
ARMs as an alternative
One option remains for borrowers seeking to minimize their mortgage payments and that’s an adjustable rate mortgage Middletown (ARM). Although these do involve paying down principal, they are available at considerably lower rates than a 30-year fixed-rate mortgage – possibly three-quarters to a full percent lower. With low rates that lock in for one to 10 years before resetting, these can be a good option for borrowers who don’t plan to occupy a home long-term.
Interest-only loans are a traditional mortgage tool and will likely make a gradual comeback as the housing market stabilizes and conditions return to historical norms. But in the meantime, options for very low-cost loans are limited unless you’re in a position to take advantage of specialty lenders.
Interest-Only Loans Soon to be Extinct
If you’re looking to purchase a home or refinance a mortgage Middletown, your options are getting a bit slimmer.
Interest-only loans, already a rarity after the collapse of the subprime mortgage market, are just about to dry up completely. They won’t totally disappear, but getting one will go from difficult to extremely hard.
Freddie, Fannnie backing out
What’s happening is that Freddie Mac and Fannie Mae, the government-supported secondary lenders who insure most of the mortgages made in the United States, have said they will no longer purchase interest-only loans after Fall 2010. Given the time it takes these developments to work through the system, you can expect that lenders are already starting to shut the pipeline down.
That’s too bad, because interest-only loans Middletown can be an effective financial tool for qualified borrowers who use them correctly. The problem was that, during the housing bubble, they were issued to many borrowers who could never afford them unless housing prices continued to increase. When the economy and housing market soured, many of loans defaulted and continue to do so.
Those losses are why Fannie and Freddie are getting out of the interest-only loan business. Many private lenders have already done so as well.
Advantages of an interest-only loan
At first glance, an interest-only loan may sound like a dumb idea. You take out a mortgage pay only the interest for the first few years, typically five or 10. At that point, the loan resets to a fully amortizing loan, meaning you have to pay off the entire principal, plus the interest, over the remaining 20 to 25 years of the loan. Naturally, that’s going to make your payments go through the roof.
But it can work quite well for some borrowers, particularly in a normal market where prices are stable or gradually appreciate. In particular, it can be a good choice for someone who doesn’t plan to stay in a home more than five or 10 years, and has no desire to ever own the home free and clear.
In that event, an interest-only loan Middletown can allow you to stay in the home for next to nothing – because mortgage interest is tax-deductable. Sophisticated investors sometimes use interest-only mortgages to allow them to invest their money elsewhere, rather than using part of it to pay down mortgage principal on a home they never plan to own outright.
Interest-only loans, already a rarity after the collapse of the subprime mortgage market, are just about to dry up completely. They won’t totally disappear, but getting one will go from difficult to extremely hard.
Freddie, Fannnie backing out
What’s happening is that Freddie Mac and Fannie Mae, the government-supported secondary lenders who insure most of the mortgages made in the United States, have said they will no longer purchase interest-only loans after Fall 2010. Given the time it takes these developments to work through the system, you can expect that lenders are already starting to shut the pipeline down.
That’s too bad, because interest-only loans Middletown can be an effective financial tool for qualified borrowers who use them correctly. The problem was that, during the housing bubble, they were issued to many borrowers who could never afford them unless housing prices continued to increase. When the economy and housing market soured, many of loans defaulted and continue to do so.
Those losses are why Fannie and Freddie are getting out of the interest-only loan business. Many private lenders have already done so as well.
Advantages of an interest-only loan
At first glance, an interest-only loan may sound like a dumb idea. You take out a mortgage pay only the interest for the first few years, typically five or 10. At that point, the loan resets to a fully amortizing loan, meaning you have to pay off the entire principal, plus the interest, over the remaining 20 to 25 years of the loan. Naturally, that’s going to make your payments go through the roof.
But it can work quite well for some borrowers, particularly in a normal market where prices are stable or gradually appreciate. In particular, it can be a good choice for someone who doesn’t plan to stay in a home more than five or 10 years, and has no desire to ever own the home free and clear.
In that event, an interest-only loan Middletown can allow you to stay in the home for next to nothing – because mortgage interest is tax-deductable. Sophisticated investors sometimes use interest-only mortgages to allow them to invest their money elsewhere, rather than using part of it to pay down mortgage principal on a home they never plan to own outright.
More Types of Lenders
Hard Money Lenders
If you can’t qualify through a portfolio lender, a hard money lender may be your option of last resort. Hard money lenders tend to be private individuals with money to lend, though they may be set up as business operations. Interest rates tend to be quite high – 12 percent is not uncommon – and down payments may be 30 percent and above. Hard money lenders are typically used for short-term loans that are expected to be repaid quickly, such as for investment property, rather than long-term amortizing loans Middletown for a home purchase.
Direct Lenders
Another term you may encounter is “direct lender.” A direct lender simply means a lender that originates its own home loans Middletown – either with its own funds or borrowed funds. It can therefore be either a mortgage banker or portfolio lender. It does not, therefore, act as an agent for a wholesale lender. Direct lenders are inevitably retail lenders as well, because they do not involve third parties or middlemen in making loans to consumers.
Correspondent Lenders
A final term you may hear is “correspondent lender.” Whereas some types of lenders are distinguished by the process leading up to the loan, correspondent lenders are defined by what happens after the loan is issued. Correspondent lenders work with an investor, called a sponsor, who purchases any mortgages they make that meet certain criteria.
Correspondent lenders earn their money by collecting a point or two when the mortgage is issued. Immediately selling the loan to a sponsor pretty much guarantees they’ll make money, since the correspondent no longer carries the risk for a default. However, the sponsor may decline the loan if it turns out not to meet the sponsor’s standards, in which case the correspondent must either find another investor or carry the loan itself.
Again, these terms are not always exclusive, but instead generally describe types of mortgage functions that various lenders may perform, sometimes at the same time. But understanding what each of these does can be a great help in understanding how the mortgage process Middletown works and form a basis for evaluating mortgage offers.
If you can’t qualify through a portfolio lender, a hard money lender may be your option of last resort. Hard money lenders tend to be private individuals with money to lend, though they may be set up as business operations. Interest rates tend to be quite high – 12 percent is not uncommon – and down payments may be 30 percent and above. Hard money lenders are typically used for short-term loans that are expected to be repaid quickly, such as for investment property, rather than long-term amortizing loans Middletown for a home purchase.
Direct Lenders
Another term you may encounter is “direct lender.” A direct lender simply means a lender that originates its own home loans Middletown – either with its own funds or borrowed funds. It can therefore be either a mortgage banker or portfolio lender. It does not, therefore, act as an agent for a wholesale lender. Direct lenders are inevitably retail lenders as well, because they do not involve third parties or middlemen in making loans to consumers.
Correspondent Lenders
A final term you may hear is “correspondent lender.” Whereas some types of lenders are distinguished by the process leading up to the loan, correspondent lenders are defined by what happens after the loan is issued. Correspondent lenders work with an investor, called a sponsor, who purchases any mortgages they make that meet certain criteria.
Correspondent lenders earn their money by collecting a point or two when the mortgage is issued. Immediately selling the loan to a sponsor pretty much guarantees they’ll make money, since the correspondent no longer carries the risk for a default. However, the sponsor may decline the loan if it turns out not to meet the sponsor’s standards, in which case the correspondent must either find another investor or carry the loan itself.
Again, these terms are not always exclusive, but instead generally describe types of mortgage functions that various lenders may perform, sometimes at the same time. But understanding what each of these does can be a great help in understanding how the mortgage process Middletown works and form a basis for evaluating mortgage offers.
Different Types of Lenders
Wholesale and Retail Lenders
Wholesale lenders are banks or other institutions that do not deal directly with consumers, but offer their loans through third parties such as mortgage brokers, credit unions, other banks, etc. Often, these are large banks that also have retail operations that work with consumers directly. Many large banks, such as Bank of America and Wells Fargo, have both wholesale and retail operations.
In this type of lending, the wholesale lender is the one that is actually making the loan and whose name typically appears on loan documents. The third party – bank, credit union, or mortgage broker – in most cases is simply acting as an agent in return for a fee.
Retail lenders are exactly what they sound like, lenders who issue mortgages directly to individual consumers. They may either lend their own money or may act as an agent for Again, retail lending may simply be one function offered by a larger financial institution, which may also offer commercial, institutional and wholesale lending, as well as a range of other financial services.
Warehouse Lenders
Somewhat similar to wholesale lenders are warehouse lenders. The key difference here is that, instead of providing loans through intermediaries, they lend money to banks or other mortgage lenders Middletown with which to issue their own loans, on their own terms. The warehouse lender is repaid when the mortgage lender sells the loan to investors.
Mortgage Bankers
Another distinction is between portfolio lenders and mortgage bankers. The vast majority of U.S. mortgage lenders Middletown are mortgage bankers, who don’t lend their own money, but borrow funds at short-term rates from warehouse lenders (see above) to cover the mortgages they issue. Once the mortgage is made, they sell it to investors and repay the short-term note. Those mortgages are usually sold through Fannie Mae and Freddie Mac, which allows those agencies to set the minimum underwriting standards for most mortgages issue in the United States.
Portfolio Lenders
Portfolio lenders, on the other hand, use their own money when making home loans Middletown, which they typically maintain on their own books, or “portfolio.” Because they don’t have to satisfy the demands of outside investors, they can set their own terms for the loans they issue.
This makes portfolio lenders a good choice for “niche” borrowers who don’t fit the typical lender profile – perhaps because they’re seeking a jumbo loan, are considering a unique property, have flawed credit but strong finances, or may be looking at investment property. You may pay higher rates for this service, but not always – because portfolio lenders tend to be very careful who they lend to, their rates are sometimes quite low.
Wholesale lenders are banks or other institutions that do not deal directly with consumers, but offer their loans through third parties such as mortgage brokers, credit unions, other banks, etc. Often, these are large banks that also have retail operations that work with consumers directly. Many large banks, such as Bank of America and Wells Fargo, have both wholesale and retail operations.
In this type of lending, the wholesale lender is the one that is actually making the loan and whose name typically appears on loan documents. The third party – bank, credit union, or mortgage broker – in most cases is simply acting as an agent in return for a fee.
Retail lenders are exactly what they sound like, lenders who issue mortgages directly to individual consumers. They may either lend their own money or may act as an agent for Again, retail lending may simply be one function offered by a larger financial institution, which may also offer commercial, institutional and wholesale lending, as well as a range of other financial services.
Warehouse Lenders
Somewhat similar to wholesale lenders are warehouse lenders. The key difference here is that, instead of providing loans through intermediaries, they lend money to banks or other mortgage lenders Middletown with which to issue their own loans, on their own terms. The warehouse lender is repaid when the mortgage lender sells the loan to investors.
Mortgage Bankers
Another distinction is between portfolio lenders and mortgage bankers. The vast majority of U.S. mortgage lenders Middletown are mortgage bankers, who don’t lend their own money, but borrow funds at short-term rates from warehouse lenders (see above) to cover the mortgages they issue. Once the mortgage is made, they sell it to investors and repay the short-term note. Those mortgages are usually sold through Fannie Mae and Freddie Mac, which allows those agencies to set the minimum underwriting standards for most mortgages issue in the United States.
Portfolio Lenders
Portfolio lenders, on the other hand, use their own money when making home loans Middletown, which they typically maintain on their own books, or “portfolio.” Because they don’t have to satisfy the demands of outside investors, they can set their own terms for the loans they issue.
This makes portfolio lenders a good choice for “niche” borrowers who don’t fit the typical lender profile – perhaps because they’re seeking a jumbo loan, are considering a unique property, have flawed credit but strong finances, or may be looking at investment property. You may pay higher rates for this service, but not always – because portfolio lenders tend to be very careful who they lend to, their rates are sometimes quite low.
Monday, December 14, 2009
Fixed Rate Mortgages
The recent subprime mortgage crisis occurred because homeowners ignored a simple law of physics: What goes up must come down. This law pertains not only to the physical world, but to the world of real estate, as well. For the past decade, home values have been on what seemed to be a never-ending ascent. When the bubble burst, they came tumbling down.
Homeowners who had chosen adjustable-rate mortgages (ARMs) with teaser rates assumed that they could always refinance their mortgage out of a jam. Their modus operandi in the past was simple: When their introductory rate ended, they'd refinance to another ARM. With home values on the decline, however, they couldn't qualify for a new loan.
Now, when people are looking for a mortgage, both fixed rate and fixed term are at the top of the list
The most familiar types of home loans are the 30-year and 15-year fixed-rate mortgages. The 30-year fixed loan is more popular because it extends the payment term, resulting in lower monthly mortgage payments. However, since the payments are spread out over 30 years, these fixed-rate loans require greater long-term interest payments than its 15-year counterpart. The best part of the 30-year loan is the security of knowing that your rate won't increase.
A 15-year fixed mortgage has also been extremely popular for mortgage borrowers. It reduces the payback time to a lender, and saves you thousands of dollars in long-term interest. The monthly payments are relatively steep, however. A more affordable option might be a 20-year fixed mortgage.
Mortgage lenders are happy to give borrowers alternatives, especially if it hastens the sale of a loan. If people can't afford the traditional 30-year fixed mortgage or its cousins, they may opt for a 40-year fixed mortgage or a 50-year fixed mortgage. Recently introduced by some lenders, these types of loans aren't as widespread, but they can significantly lower monthly interest payments.
Other options are the 5-year fixed mortgage and the 10-year fixed mortgage. These are called balloon loans, because the rate is fixed for the introductory period, but the full amount of the loan is due at the end of five or 10 years. This type of loan is recommended only if you plan on paying your balance in full at the end of the introductory period, or if you have a guaranteed buyer for your home.
Fixed-rate mortgages have enjoyed a tremendous comeback as housing values have plummeted. The prices that went way, way up in recent years have gone down, down, down, and made ARMs an unreliable loan. As a result, the old standby, the fixed-rate mortgage, has returned. For homeowners who were burned by adjustable-rate mortgages, these fixed-rate loans may fix their mortgage problems for good.
Center State Mortgage is your #1 source for fixed-rate mortgages in Staten Island and New Jersey! They have the background and experience to get you the lowest interest rate on your perfect home loan! Choose Center State Mortgage for all you mortgage needs!
Homeowners who had chosen adjustable-rate mortgages (ARMs) with teaser rates assumed that they could always refinance their mortgage out of a jam. Their modus operandi in the past was simple: When their introductory rate ended, they'd refinance to another ARM. With home values on the decline, however, they couldn't qualify for a new loan.
Now, when people are looking for a mortgage, both fixed rate and fixed term are at the top of the list
The most familiar types of home loans are the 30-year and 15-year fixed-rate mortgages. The 30-year fixed loan is more popular because it extends the payment term, resulting in lower monthly mortgage payments. However, since the payments are spread out over 30 years, these fixed-rate loans require greater long-term interest payments than its 15-year counterpart. The best part of the 30-year loan is the security of knowing that your rate won't increase.
A 15-year fixed mortgage has also been extremely popular for mortgage borrowers. It reduces the payback time to a lender, and saves you thousands of dollars in long-term interest. The monthly payments are relatively steep, however. A more affordable option might be a 20-year fixed mortgage.
Mortgage lenders are happy to give borrowers alternatives, especially if it hastens the sale of a loan. If people can't afford the traditional 30-year fixed mortgage or its cousins, they may opt for a 40-year fixed mortgage or a 50-year fixed mortgage. Recently introduced by some lenders, these types of loans aren't as widespread, but they can significantly lower monthly interest payments.
Other options are the 5-year fixed mortgage and the 10-year fixed mortgage. These are called balloon loans, because the rate is fixed for the introductory period, but the full amount of the loan is due at the end of five or 10 years. This type of loan is recommended only if you plan on paying your balance in full at the end of the introductory period, or if you have a guaranteed buyer for your home.
Fixed-rate mortgages have enjoyed a tremendous comeback as housing values have plummeted. The prices that went way, way up in recent years have gone down, down, down, and made ARMs an unreliable loan. As a result, the old standby, the fixed-rate mortgage, has returned. For homeowners who were burned by adjustable-rate mortgages, these fixed-rate loans may fix their mortgage problems for good.
Center State Mortgage is your #1 source for fixed-rate mortgages in Staten Island and New Jersey! They have the background and experience to get you the lowest interest rate on your perfect home loan! Choose Center State Mortgage for all you mortgage needs!
Refinance that Risky Mortgage
The statements on TV ads and direct mailers may have caught your eye: "Refinance Risky Mortgage," or "Refinance Mortgage...Before It's Too Late." Mortgage lenders are urging homeowners with bad credit loans to consider refinancing in the face of a poor housing market.
Their warnings are dire, and for good reason. The housing market has experienced a precipitous drop in sales and home values. If you hold a bad credit mortgage, such as an adjustable-rate mortgage (ARM) or a balloon mortgage, it may indeed be "refinance mortgage time" for you.
No matter how many times history repeats itself, Americans don't seem to learn their lessons. Stock markets have crashed, bubbles have burst, but still consumers deny the fact that what goes up eventually comes back down. The housing market is a prime example. After years of sustained growth, the appreciation of housing prices at double-digit rates seemed to be a fact of life, instead of what it truly was: a natural economic cycle.
When the market reached its apex, many short-sighted homeowners and lenders were faced with a bitter reality. Home equity, which had been the equivalent of money growing on trees, vanished overnight as values plummeted. For people who were set in their fixed-rate mortgage and weren't in any hurry to move, the drop in prices wasn't catastrophic. But for those who lived life on the edge in the form of ARMs, the subprime crisis hit with hurricane force.
ARMs include a teaser rate. Designed to entice a mortgage borrower with its low rate and subsequent affordable monthly payments, the rates eventually adjust upward after a period of one, three, five, or seven years. The adjustments can be between two to five interest rate points, a fact that never used to give homeowners pause. Their strategy was to refinance their mortgage prior to the adjustment.
This has been a cozy arrangement for homeowners who consistently refinanced their properties, year in and year out, jumping from one subprime mortgage to the next. However, when home values sank, these individuals found that they no longer had the equity to qualify for a new loan. They were stuck with their ARMs that, in many cases, adjusted to a higher rate that they could no longer afford.
If you're currently holding an ARM, it may be time to think "refinance mortgage." Rates are solid, relatively low, and may be for the immediate future (although there's no telling what will happen with inflation on the rise). To avoid foreclosure, refinance to a fixed-rate product, like a 15- or a 30-year home loan. You won't enjoy the spectacularly low rates previously available with ARMs, but you'll avoid the sad fate of subprime borrowers across America.
Center State Mortgage is your #1 source for home loans and mortgages in New Jersey and Staten Island! They have the background and experience to make sure you get the perfect home loan! Choose Center State Mortgage for all your home loand and mortgage needs!
Their warnings are dire, and for good reason. The housing market has experienced a precipitous drop in sales and home values. If you hold a bad credit mortgage, such as an adjustable-rate mortgage (ARM) or a balloon mortgage, it may indeed be "refinance mortgage time" for you.
No matter how many times history repeats itself, Americans don't seem to learn their lessons. Stock markets have crashed, bubbles have burst, but still consumers deny the fact that what goes up eventually comes back down. The housing market is a prime example. After years of sustained growth, the appreciation of housing prices at double-digit rates seemed to be a fact of life, instead of what it truly was: a natural economic cycle.
When the market reached its apex, many short-sighted homeowners and lenders were faced with a bitter reality. Home equity, which had been the equivalent of money growing on trees, vanished overnight as values plummeted. For people who were set in their fixed-rate mortgage and weren't in any hurry to move, the drop in prices wasn't catastrophic. But for those who lived life on the edge in the form of ARMs, the subprime crisis hit with hurricane force.
ARMs include a teaser rate. Designed to entice a mortgage borrower with its low rate and subsequent affordable monthly payments, the rates eventually adjust upward after a period of one, three, five, or seven years. The adjustments can be between two to five interest rate points, a fact that never used to give homeowners pause. Their strategy was to refinance their mortgage prior to the adjustment.
This has been a cozy arrangement for homeowners who consistently refinanced their properties, year in and year out, jumping from one subprime mortgage to the next. However, when home values sank, these individuals found that they no longer had the equity to qualify for a new loan. They were stuck with their ARMs that, in many cases, adjusted to a higher rate that they could no longer afford.
If you're currently holding an ARM, it may be time to think "refinance mortgage." Rates are solid, relatively low, and may be for the immediate future (although there's no telling what will happen with inflation on the rise). To avoid foreclosure, refinance to a fixed-rate product, like a 15- or a 30-year home loan. You won't enjoy the spectacularly low rates previously available with ARMs, but you'll avoid the sad fate of subprime borrowers across America.
Center State Mortgage is your #1 source for home loans and mortgages in New Jersey and Staten Island! They have the background and experience to make sure you get the perfect home loan! Choose Center State Mortgage for all your home loand and mortgage needs!
Avoiding Home Foreclosure
Foreclosure prevention tops the wish list for many American homeowners; but avoiding foreclosure in today's market can be extremely challenging. It is possible, however, and borrowers should pursue solutions to avoid foreclosure--especially opportunities for loan modification.
About a quarter of a million people per month face foreclosure across the U.S.; but with mortgage companies and credit counselors overwhelmed and backlogged, few homeowners know what to do to avoid losing their homes. Here are several ideas and insights intended to help those confronted by a looming foreclosure to sidestep the harsh outcome.
Many mortgage companies and banks lose as much as 50 percent of their stake in a property if it goes all the way to foreclosure. Therefore, they'd much rather use a loan modification for foreclosure prevention. Lenders don't usually have the best interest of the borrower in mind, but they still share the same common goal: foreclosure avoidance. When you communicate with your lender, keep their needs in mind, as well as your own. It may be easier to discover a mutually beneficial solution.
Any foreclosure prevention strategy will be based almost entirely on market data, credit scores, and other pieces of information. The person working with you on behalf of the lender may never actually see your home, but will determine possible paths to avoid foreclosure based on a file-or pile-of paperwork. Many homeowners trying to avoid foreclosure have two mortgages with the same lender. By demonstrating an inability to pay both, they may be able to talk the lender into waiving a portion of the principal. Or the lender may allow the homeowner to consolidate two loans into one with a lower interest rate. Another way documentation comes in handy is when a homeowner wants to show the ability to handle a fixed-rate mortgage if the lender is agreeable to refinancing out of a problematic adjustable-rate loan.
Those suffering a temporary setback due to circumstances such as illness, job loss, death of a spouse, divorce, or other hardship can write a letter to lenders explaining the situation. Many mortgage companies will provide some form of relief through a temporary suspension of payments or loan modification to assist the borrower until he recovers from the crisis and gets back on his feet.
When all else fails and foreclosure prevention seems impossible, homeowners may be able to do a so-called "short sale," which involves selling the property and giving the proceeds to the lender to cover the outstanding balance. In many cases, the money will not be enough to satisfy the entire mortgage debt, but lenders agree to forgive the amount that comes up short. The homeowner loses the home through this strategy, but at least he can avoid foreclosure and credit ruin.
Center State Mortgage is your #1 source for home loans and mortgages in New Jersey and Staten Island! They have the background and experience to make home loan wishes come true! Choose Center State Mortgage for all your home loan needs!
About a quarter of a million people per month face foreclosure across the U.S.; but with mortgage companies and credit counselors overwhelmed and backlogged, few homeowners know what to do to avoid losing their homes. Here are several ideas and insights intended to help those confronted by a looming foreclosure to sidestep the harsh outcome.
Many mortgage companies and banks lose as much as 50 percent of their stake in a property if it goes all the way to foreclosure. Therefore, they'd much rather use a loan modification for foreclosure prevention. Lenders don't usually have the best interest of the borrower in mind, but they still share the same common goal: foreclosure avoidance. When you communicate with your lender, keep their needs in mind, as well as your own. It may be easier to discover a mutually beneficial solution.
Any foreclosure prevention strategy will be based almost entirely on market data, credit scores, and other pieces of information. The person working with you on behalf of the lender may never actually see your home, but will determine possible paths to avoid foreclosure based on a file-or pile-of paperwork. Many homeowners trying to avoid foreclosure have two mortgages with the same lender. By demonstrating an inability to pay both, they may be able to talk the lender into waiving a portion of the principal. Or the lender may allow the homeowner to consolidate two loans into one with a lower interest rate. Another way documentation comes in handy is when a homeowner wants to show the ability to handle a fixed-rate mortgage if the lender is agreeable to refinancing out of a problematic adjustable-rate loan.
Those suffering a temporary setback due to circumstances such as illness, job loss, death of a spouse, divorce, or other hardship can write a letter to lenders explaining the situation. Many mortgage companies will provide some form of relief through a temporary suspension of payments or loan modification to assist the borrower until he recovers from the crisis and gets back on his feet.
When all else fails and foreclosure prevention seems impossible, homeowners may be able to do a so-called "short sale," which involves selling the property and giving the proceeds to the lender to cover the outstanding balance. In many cases, the money will not be enough to satisfy the entire mortgage debt, but lenders agree to forgive the amount that comes up short. The homeowner loses the home through this strategy, but at least he can avoid foreclosure and credit ruin.
Center State Mortgage is your #1 source for home loans and mortgages in New Jersey and Staten Island! They have the background and experience to make home loan wishes come true! Choose Center State Mortgage for all your home loan needs!
Improve the Chance to Sell Your Home
Desperate times don't always call for desperate measures; sometimes, they just call for innovation and intelligence. In today's housing market, selling real estate takes a mixture of all three.
Two methods for selling real estate have been gaining popularity. The first is home staging, a tried and true technique that can be used whether you're using a realtor, or if your home is "for sale by owner." The second method is the increasingly popular alternative of house trading.
Marketing is all about perception. Whether your house is "for sale by owner" or listed by a realtor, you still need to develop a strategy for influencing a buyer's perception of the house. Home staging can help.
Home staging is the art of transforming a home's décor so that prospective buyers can visualize themselves living there. While not always popular with homeowners who have an emotional attachment to their dwelling, this methodology helps buyers see themselves actually owning the house.
The key to this approach is to remove both clutter and any type of personal belongings from the home. De-cluttering gives the house a neat, clean appearance, and makes it feel larger. By removing such personal belongings, you take the first step in transferring ownership. Take down family pictures or religious artifacts that you have in the house. You'll also want décor that's very neutral, and doesn't feature one distinctive style.
As the housing market tightens, a new practice called house trading has become increasingly popular. Instead of listing your home on the market, you can visit a house trading website. These match prospective traders, not unlike the way a computer dating service works. To make a match, they take into account location, house style, and a variety of other preferences.
The matchmaking is an ideal way to remove a realtor's commission from the process. In many cases, the deal is simply worked out between the two parties. For a family who simply needs a change of venue, and doesn't want to go through the rigorous house selling process, this could be a viable alternative.
The real estate market is not for the faint of heart. Even industry veterans are reeling from the turbulent economy and the stagnant inventories. For the smart homeowner, alternatives to the traditional "for sale" sign are in order, and they include such breakthrough ideas as home staging and home trading. In today's market, only the smart will survive, and they'll do it by using these types of innovative tactics
Center State Mortgage is your #1 source for the lowest interest rates on home loans in New Jersey and Staten Island! They have the background and experience to ensure a perfect home loan for you and your family. Choose Center State Mortgage for all your home loan needs!
Two methods for selling real estate have been gaining popularity. The first is home staging, a tried and true technique that can be used whether you're using a realtor, or if your home is "for sale by owner." The second method is the increasingly popular alternative of house trading.
Marketing is all about perception. Whether your house is "for sale by owner" or listed by a realtor, you still need to develop a strategy for influencing a buyer's perception of the house. Home staging can help.
Home staging is the art of transforming a home's décor so that prospective buyers can visualize themselves living there. While not always popular with homeowners who have an emotional attachment to their dwelling, this methodology helps buyers see themselves actually owning the house.
The key to this approach is to remove both clutter and any type of personal belongings from the home. De-cluttering gives the house a neat, clean appearance, and makes it feel larger. By removing such personal belongings, you take the first step in transferring ownership. Take down family pictures or religious artifacts that you have in the house. You'll also want décor that's very neutral, and doesn't feature one distinctive style.
As the housing market tightens, a new practice called house trading has become increasingly popular. Instead of listing your home on the market, you can visit a house trading website. These match prospective traders, not unlike the way a computer dating service works. To make a match, they take into account location, house style, and a variety of other preferences.
The matchmaking is an ideal way to remove a realtor's commission from the process. In many cases, the deal is simply worked out between the two parties. For a family who simply needs a change of venue, and doesn't want to go through the rigorous house selling process, this could be a viable alternative.
The real estate market is not for the faint of heart. Even industry veterans are reeling from the turbulent economy and the stagnant inventories. For the smart homeowner, alternatives to the traditional "for sale" sign are in order, and they include such breakthrough ideas as home staging and home trading. In today's market, only the smart will survive, and they'll do it by using these types of innovative tactics
Center State Mortgage is your #1 source for the lowest interest rates on home loans in New Jersey and Staten Island! They have the background and experience to ensure a perfect home loan for you and your family. Choose Center State Mortgage for all your home loan needs!
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!
Know Your Mortgage Documents
Many of the mortgages written within the past decade were complicated, exotic, and highly risky. Homeowners signed documents pledging their homes as collateral for adjustable-rate loans (ARMs) with scheduled interest rate hikes. Some agreed to negative amortization loans, while others signed off on interest-only or hybrid loans that have now backfired. Now that these potentially toxic loans have precipitated a major foreclosure crisis, it's essential that homeowners study their mortgage documents and gain a full understanding of their legal obligations and options.
•Check your mortgage paperwork and most recent account statement. It will indicate how much you owe in principal and interest. Does your loan have a fixed or adjustable rate? See if there's a pre-payment clause in your mortgage agreement; if so, you could be penalized for selling your home and paying the loan off early.
•If you have an ARM, see what the maximum rate can be at the first adjustment period, and whether the new rate has a cap that limits it from rising beyond a certain level. Some loans, for instance, can rise no more than 2 percent in a single year.
•Next, figure out which underlying adjustable-rate index your mortgage is tied to. Some go up or down based on what United States treasury bills do, for example, whereas many mortgages react instead to the Libor index, which is based on monetary activity in London. Another is the COFI or cost of funds index. The specific treasury product or index that the loan rate corresponds to can play a significant role in determining how much actual interest you pay.
•One of the most important documents to hold on to and study is the HUD settlement statement that the lender gives you at closing. This will show a variety of useful information related to the cost basis for your property, and the closing costs and fees. Should you decide to sell your home, this could help you determine your tax gains or losses.
Center State Mortgage is your #1 source for the lowest interest rates on loan in New Jersey and Staten Island! They have the background and experience to nab you your dream home! Choose Center State Mortgage for all your home loan needs!
•Check your mortgage paperwork and most recent account statement. It will indicate how much you owe in principal and interest. Does your loan have a fixed or adjustable rate? See if there's a pre-payment clause in your mortgage agreement; if so, you could be penalized for selling your home and paying the loan off early.
•If you have an ARM, see what the maximum rate can be at the first adjustment period, and whether the new rate has a cap that limits it from rising beyond a certain level. Some loans, for instance, can rise no more than 2 percent in a single year.
•Next, figure out which underlying adjustable-rate index your mortgage is tied to. Some go up or down based on what United States treasury bills do, for example, whereas many mortgages react instead to the Libor index, which is based on monetary activity in London. Another is the COFI or cost of funds index. The specific treasury product or index that the loan rate corresponds to can play a significant role in determining how much actual interest you pay.
•One of the most important documents to hold on to and study is the HUD settlement statement that the lender gives you at closing. This will show a variety of useful information related to the cost basis for your property, and the closing costs and fees. Should you decide to sell your home, this could help you determine your tax gains or losses.
Center State Mortgage is your #1 source for the lowest interest rates on loan in New Jersey and Staten Island! They have the background and experience to nab you your dream home! Choose Center State Mortgage for all your home loan needs!
Bad Choices for Borrowing
Even if you're not an economist, the country's current financial slump has everyone thinking about the economy. The housing market crash and volatile stock market have caused everyone to reconsider their investments and their debt. The impulsive use of a home equity loan to pay for a vacation or a nice car has decreased, and budgeting and smart money management are on the rise.
People are wising up, and they're steering clear of four bad borrowing choices.
1. Buying bigger. When home values were booming, people didn't think twice about tapping their home equity to buy a bigger house or a nicer car. Now, homeowners are approaching their financial choices on a pay-as-you-go basis. Everyone now understands that home values aren't guaranteed to rise forever. If you tap into too much home equity to pay for the finer things in life, you could wind up trapped in your home, as you try to pay off a loan that's worth more than your house.
2. Using home equity for investments. There's a school of thought that if you borrow money at 8 percent, and put it in an investment that returns 10 percent, you'll come out ahead. That's a best-case scenario. In a worst-case scenario, the value of your home will decrease, along with your stock market portfolio, and you'll have nothing to show for it except excessive debt. Guess which scenario has struck people after the housing market collapse and the stock market nosedive?
3. Tapping equity for a tax deduction. Ask any accountant and he'll tell you: Don't spend your money to get a tax deduction. If it fits within the overall structure of your tax planning, a deduction is great. But spending a dollar to get 25 or 30 cents off your taxes makes no sense at all. Consider the deductibility of mortgage interest to be a nice perk, not a means to generate wealth.
4. Refinance to defer debt. A typical move by cash-strapped consumers is to use home equity for debt consolidation. This type of refinance works only if you change your spending habits after you've paid off those credit cards. If you continue to spend outrageously, those cards will get maxed out again, and you'll have even less home equity for another debt consolidation loan. Change your spending habits instead.
Center State Mortgage is your #1 source for the lowest interest rates on home loans and mortgages in New Jersey and Staten Island! They have the background and experience to get you pre-qualified for that perfect home! Choose Center State Mortgage for all your home loan needs!
People are wising up, and they're steering clear of four bad borrowing choices.
1. Buying bigger. When home values were booming, people didn't think twice about tapping their home equity to buy a bigger house or a nicer car. Now, homeowners are approaching their financial choices on a pay-as-you-go basis. Everyone now understands that home values aren't guaranteed to rise forever. If you tap into too much home equity to pay for the finer things in life, you could wind up trapped in your home, as you try to pay off a loan that's worth more than your house.
2. Using home equity for investments. There's a school of thought that if you borrow money at 8 percent, and put it in an investment that returns 10 percent, you'll come out ahead. That's a best-case scenario. In a worst-case scenario, the value of your home will decrease, along with your stock market portfolio, and you'll have nothing to show for it except excessive debt. Guess which scenario has struck people after the housing market collapse and the stock market nosedive?
3. Tapping equity for a tax deduction. Ask any accountant and he'll tell you: Don't spend your money to get a tax deduction. If it fits within the overall structure of your tax planning, a deduction is great. But spending a dollar to get 25 or 30 cents off your taxes makes no sense at all. Consider the deductibility of mortgage interest to be a nice perk, not a means to generate wealth.
4. Refinance to defer debt. A typical move by cash-strapped consumers is to use home equity for debt consolidation. This type of refinance works only if you change your spending habits after you've paid off those credit cards. If you continue to spend outrageously, those cards will get maxed out again, and you'll have even less home equity for another debt consolidation loan. Change your spending habits instead.
Center State Mortgage is your #1 source for the lowest interest rates on home loans and mortgages in New Jersey and Staten Island! They have the background and experience to get you pre-qualified for that perfect home! Choose Center State Mortgage for all your home loan needs!
Rent or Buy a Home?
Not too long ago, home buying was considered a safe bet. Buy a great house and live in it as a primary residence for two out of five years, and reap tax benefits from the mortgage interest payments while building home equity. When it was time to move on, you could sell the property and not pay taxes on capital gains up to $250,000 in profit. Then, the cycle would start over in the next, presumably larger and more expensive home.
That's not how it works anymore. Home prices that had been climbing steadily skyward for years hit a wall and then came crashing down. Many homeowners are sitting on larger loan balances than equity values. Suddenly, renters look very smart.
A house is probably the largest purchase you'll ever make, and almost always financed by the biggest loan of your life. For many years, the vast majority of your mortgage payments will do nothing but pay interest charges. The huge equity balance comes much later, and many owners will move before getting that far. The dream of home buying seems a bit silly from that perspective.
Furthermore, a homeowner has to worry about upkeep and maintenance, as well as property taxes and community fees. Those who rent don't have such headaches.
On the flip side, home buying can be incredibly profitable when the market isn't working against you. And in at least a few areas around the country, home prices may already have dipped as far down as they're going to go. Sure, the gravy train of the early 2000s won't magically restart again; but when you're truly at the bottom, the only way to go is up.
It's simple mathematics, really. If you believe that home prices will rise from here, at an annual rate that would beat the returns you'd expect from investing that cash elsewhere, it might make sense for you to buy a home. It's a great way to build a solid credit history, and the profit at the end of the road is extra gravy. And let's be honest-the stock market hasn't impressed anybody lately, either.
If you don't want the risk or bother of home ownership, renting a house, condo, or nice apartment would be the better way to go. While it's true that a homeowner can build a sun deck or repaint the walls anytime he chooses, many people aren't really into home improvement, and would rather leave upkeep and improvements to the landlord.
Center State Mortgage is your #1 source for the lowest interest rates on home loans in New Jersey and Staten Island! They have the background and experience to ensure that you get the right home loan for your situation. Choose Center State Mortgage for all your home loan needs!
That's not how it works anymore. Home prices that had been climbing steadily skyward for years hit a wall and then came crashing down. Many homeowners are sitting on larger loan balances than equity values. Suddenly, renters look very smart.
A house is probably the largest purchase you'll ever make, and almost always financed by the biggest loan of your life. For many years, the vast majority of your mortgage payments will do nothing but pay interest charges. The huge equity balance comes much later, and many owners will move before getting that far. The dream of home buying seems a bit silly from that perspective.
Furthermore, a homeowner has to worry about upkeep and maintenance, as well as property taxes and community fees. Those who rent don't have such headaches.
On the flip side, home buying can be incredibly profitable when the market isn't working against you. And in at least a few areas around the country, home prices may already have dipped as far down as they're going to go. Sure, the gravy train of the early 2000s won't magically restart again; but when you're truly at the bottom, the only way to go is up.
It's simple mathematics, really. If you believe that home prices will rise from here, at an annual rate that would beat the returns you'd expect from investing that cash elsewhere, it might make sense for you to buy a home. It's a great way to build a solid credit history, and the profit at the end of the road is extra gravy. And let's be honest-the stock market hasn't impressed anybody lately, either.
If you don't want the risk or bother of home ownership, renting a house, condo, or nice apartment would be the better way to go. While it's true that a homeowner can build a sun deck or repaint the walls anytime he chooses, many people aren't really into home improvement, and would rather leave upkeep and improvements to the landlord.
Center State Mortgage is your #1 source for the lowest interest rates on home loans in New Jersey and Staten Island! They have the background and experience to ensure that you get the right home loan for your situation. Choose Center State Mortgage for all your home loan needs!
Get a Down Payment from Your Parents
Wondering what to tell your folks to give you this holiday season? How about some down payment assistance to help you buy a home? It's not the kind of gift you can unwrap, but it will last a lot longer than a pair of slippers.
Homes are getting cheaper, but that doesn't mean they're more affordable. Consider the cost of a single-family home in Southern California's Anaheim-Santa Ana metro area: a year ago, it cost about $714,200. Today, the metro's median home price is $517,300. This 28 percent decline would be great from an affordability standpoint, if only mortgage lenders hadn't changed their loan underwriting policies.
The problem relates to changes in down payment requirements. A 2008 National Association of Realtors (NAR) study reports that median down payments by first-time home buyers increased to 4 percent of the purchase price, versus 2 percent in the prior year. While 4 percent doesn't seem bad, NAR chief economist Lawrence Yun has pointed out that this number is already outdated. "The study covers transactions through the middle of 2008," he says, "so we can assume the down payment numbers have shifted recently because credit tightened, and no-down payment loans all but disappeared around the close of the survey."
If the no-down payment mortgage has disappeared, that leaves homebuyers scrambling to come up with a 20 percent cash down payment. Continuing with the example above, 20 percent of $517,300 equates to $103,460.
Even if you did have $100,000 sitting in the bank, you might be reluctant to tap every last dime of your savings-particularly at a time when unemployment is on the rise. But it's more likely that you don't have anything close to that kind of money sitting around. Not many first-time buyers do.
Here's where your parents can help. Your lender will allow you to use gifted funds from a family member as your down payment. Parents are usually the most suitable donors because they're more likely to have the savings to spare. You'll have to document that it's truly a gift and not a loan. This is generally done with a gift letter that's signed by both you and your parents. Your folks may also have to provide the lender a bank statement to prove that the money is really there. And finally, your parents will have to file a gift tax return if the amount given exceeds the annual gift tax exclusion, which $12,000 in 2008. They won't have to pay gift taxes unless they exceed the lifetime exclusion ($1 million in 2008), but they still have to file the return.
Accepting the generosity of your parents is particularly attractive right now, because it enables you to take advantage of today's low home prices and relatively low interest rates. So this holiday season, ask for the ultimate holiday gift: a new home!
Center State Mortgage is your #1 source for the lowest interest rate mortgages in New Jersey and Staten Island! They have the background and experience to ensure that you find the perfect home loan for your perfect home. Choose Center State Mortgage for all your home loan needs!
Homes are getting cheaper, but that doesn't mean they're more affordable. Consider the cost of a single-family home in Southern California's Anaheim-Santa Ana metro area: a year ago, it cost about $714,200. Today, the metro's median home price is $517,300. This 28 percent decline would be great from an affordability standpoint, if only mortgage lenders hadn't changed their loan underwriting policies.
The problem relates to changes in down payment requirements. A 2008 National Association of Realtors (NAR) study reports that median down payments by first-time home buyers increased to 4 percent of the purchase price, versus 2 percent in the prior year. While 4 percent doesn't seem bad, NAR chief economist Lawrence Yun has pointed out that this number is already outdated. "The study covers transactions through the middle of 2008," he says, "so we can assume the down payment numbers have shifted recently because credit tightened, and no-down payment loans all but disappeared around the close of the survey."
If the no-down payment mortgage has disappeared, that leaves homebuyers scrambling to come up with a 20 percent cash down payment. Continuing with the example above, 20 percent of $517,300 equates to $103,460.
Even if you did have $100,000 sitting in the bank, you might be reluctant to tap every last dime of your savings-particularly at a time when unemployment is on the rise. But it's more likely that you don't have anything close to that kind of money sitting around. Not many first-time buyers do.
Here's where your parents can help. Your lender will allow you to use gifted funds from a family member as your down payment. Parents are usually the most suitable donors because they're more likely to have the savings to spare. You'll have to document that it's truly a gift and not a loan. This is generally done with a gift letter that's signed by both you and your parents. Your folks may also have to provide the lender a bank statement to prove that the money is really there. And finally, your parents will have to file a gift tax return if the amount given exceeds the annual gift tax exclusion, which $12,000 in 2008. They won't have to pay gift taxes unless they exceed the lifetime exclusion ($1 million in 2008), but they still have to file the return.
Accepting the generosity of your parents is particularly attractive right now, because it enables you to take advantage of today's low home prices and relatively low interest rates. So this holiday season, ask for the ultimate holiday gift: a new home!
Center State Mortgage is your #1 source for the lowest interest rate mortgages in New Jersey and Staten Island! They have the background and experience to ensure that you find the perfect home loan for your perfect home. Choose Center State Mortgage for all your home loan needs!
Layaway House Buying
"No money down" mortgage loans have gone out of style, like granny dresses and pet rocks. Homebuilders are scrambling to come up with new ways to put their inventory into the hands of consumers, so they're borrowing an idea from department stores. If layaway plans work for lawnmowers and evening wear, why not for real estate?
The down payment layaway idea for a new home purchase is both simple and elegant: sign a purchase agreement, and start saving up cash. When the escrow account holds enough to cover closing costs and the down payment, the builder will start constructing your new house. Or, if you picked out a pre-built model from existing inventory, you can sign the closing papers and pick up the key.
The builder will help you come up with a savings plan, set up the escrow account, and give you incentives for meeting your goals. Finish on time, and you might get a price break on the property, kitchen upgrades, or a better landscaping package. They'll even send you reminders to make those payments. While it's not really a monthly bill, those payment slips can help you overcome years of imperfect savings habits.
These builders aren't coming up with these programs out of some philanthropic desire to help you out. The homebuilding industry is pulling out all the stops to get buyers back into their open-house models, and then hopefully into a new home. With the mortgage side of the equation tightening up recently, it takes some creative thinking to come up with new incentives that actually work.
At least three of the largest homebuilders in the nation are setting up layaway programs right now, and you can expect more to come if they work. For some, it's a great way to start a savings habit.
Center State Mortgage is your #1 source for layaway house buying in New Jersey and Staten Island! They have the background and experience to make sure that you get your perfect home loan! Choose Center State Mortgage for all your home loan need!
The down payment layaway idea for a new home purchase is both simple and elegant: sign a purchase agreement, and start saving up cash. When the escrow account holds enough to cover closing costs and the down payment, the builder will start constructing your new house. Or, if you picked out a pre-built model from existing inventory, you can sign the closing papers and pick up the key.
The builder will help you come up with a savings plan, set up the escrow account, and give you incentives for meeting your goals. Finish on time, and you might get a price break on the property, kitchen upgrades, or a better landscaping package. They'll even send you reminders to make those payments. While it's not really a monthly bill, those payment slips can help you overcome years of imperfect savings habits.
These builders aren't coming up with these programs out of some philanthropic desire to help you out. The homebuilding industry is pulling out all the stops to get buyers back into their open-house models, and then hopefully into a new home. With the mortgage side of the equation tightening up recently, it takes some creative thinking to come up with new incentives that actually work.
At least three of the largest homebuilders in the nation are setting up layaway programs right now, and you can expect more to come if they work. For some, it's a great way to start a savings habit.
Center State Mortgage is your #1 source for layaway house buying in New Jersey and Staten Island! They have the background and experience to make sure that you get your perfect home loan! Choose Center State Mortgage for all your home loan need!
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!
Saturday, December 5, 2009
So the Lender Rejects Your House
So you’ve found the house of your dreams. The price is right, the buyer accepts your offer and your lender has already prequalified you for a mortgage of that size. So you submit your paperwork, the lender takes it under consideration and then after a few weeks – rejects the sale.
So what happened? Getting that close to a sale, only to have it rejected by the lender, can feel like a punch in the gut. But it’s an increasingly common occurrence these days, as lenders take a more conservative approach to home loans and cast a wary eye on properties that they fear might not be up to snuff.
If your loan application for a home purchase is rejected after everything appeared to be in order, it could be due to any of several reasons. The bank may have decided that you’re a bigger credit risk than they initially thought. But another reason, one that’s becoming more common these days, is that they may have found some reason to be wary of the appraisal and the home itself.
So what can you do if the lender just doesn’t think the house will support the mortgage you’re seeking? Well, the first thing you should do is think again – if the bank is wary of this property, is it a home you really want to own? You can also order another appraisal, to see if it will support the first and hopefully persuade the bank to reconsider. Or, if it comes in lower, the seller might be persuading to lower the price.
Center State Mortgage has your back for getting your loan approved and with the lowest interest rates in Staten Island and New Jersey! Their experience in the business helps you get the loan to get the home of your dreams. Choose Center State Mortgage for all your home loan needs!
So what happened? Getting that close to a sale, only to have it rejected by the lender, can feel like a punch in the gut. But it’s an increasingly common occurrence these days, as lenders take a more conservative approach to home loans and cast a wary eye on properties that they fear might not be up to snuff.
If your loan application for a home purchase is rejected after everything appeared to be in order, it could be due to any of several reasons. The bank may have decided that you’re a bigger credit risk than they initially thought. But another reason, one that’s becoming more common these days, is that they may have found some reason to be wary of the appraisal and the home itself.
So what can you do if the lender just doesn’t think the house will support the mortgage you’re seeking? Well, the first thing you should do is think again – if the bank is wary of this property, is it a home you really want to own? You can also order another appraisal, to see if it will support the first and hopefully persuade the bank to reconsider. Or, if it comes in lower, the seller might be persuading to lower the price.
Center State Mortgage has your back for getting your loan approved and with the lowest interest rates in Staten Island and New Jersey! Their experience in the business helps you get the loan to get the home of your dreams. Choose Center State Mortgage for all your home loan needs!
Don't Forget Maintenance Costs
How much will you need to spend on home maintenance? It's a crucial thing to know when figuring out what you can afford when taking out a mortgage to buy a house, but one that many potential homeowners pay shockingly little attention to.
Too many homeowners take a casual approach to budgeting for home repairs, figuring they can tighten their belts when occasional expenses like replacing the dishwasher pop up or borrowing for major expenses like replacing the roof or septic field. But that can lead to disaster, particularly in today's credit markets, when you can no longer count on simply tapping a home equity loan to cover major repairs.
These days, you want to be sure you can cover at least part of the cost of a major repair yourself, to improve your chances of being able to borrow the balance to cover a major repair. Other credit options, including borrowing against a credit card, may still be available, but are going to be much more costly than a few years ago, particularly if you take longer than a year to pay them off.
Center State Mortgage is your #1 source for mortgage services in the Staten Island and New Jersey areas! They have all the mrotgage tools and experience you will need to make sure the loan process is fast and easy! Choose Center State Morgage for all your home loan needs!
Too many homeowners take a casual approach to budgeting for home repairs, figuring they can tighten their belts when occasional expenses like replacing the dishwasher pop up or borrowing for major expenses like replacing the roof or septic field. But that can lead to disaster, particularly in today's credit markets, when you can no longer count on simply tapping a home equity loan to cover major repairs.
These days, you want to be sure you can cover at least part of the cost of a major repair yourself, to improve your chances of being able to borrow the balance to cover a major repair. Other credit options, including borrowing against a credit card, may still be available, but are going to be much more costly than a few years ago, particularly if you take longer than a year to pay them off.
Center State Mortgage is your #1 source for mortgage services in the Staten Island and New Jersey areas! They have all the mrotgage tools and experience you will need to make sure the loan process is fast and easy! Choose Center State Morgage for all your home loan needs!
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