If you can't afford to buy a new home because of a lack of down payment or insufficient monthly income, you do have one thing in your favor. Lenders are just as eager to generate loans as you are to move into a new home. As a result, they often create flexible, innovative ways to create new homeowners.
Analyze your budget. If you have a low monthly cash flow, a typical mortgage payment may seem unrealistic. In this case, you need to carefully analyze your finances and find out exactly how much you can actually afford to spend on a monthly basis. Then try cutting expenses to free up cash.
Find loans with low monthly payments. Now that you've established what you can comfortably pay, you can begin the process of shopping for loans. To get an affordable monthly payment, you should look for mortgage loans with the lowest interest rates and longest terms. Check the Internet for pricing, and call local lenders. One possible option is to pay "points" on your mortgage to buy-down your interest rates. A point is 1 percent of your loan's overall amount, and you can use it to buy a lower rate- and subsequently a lower payment.
Home mortgage options
If you don't have much money for monthly payments or a down payment, there are lending options:
Interest-only mortgage: For this loan, your payments during an introductory period (typically the first five to seven years) are low and applied directly to your interest. Eventually, your monthly payment amounts will increase and be applied to principal. Be careful with these types of loans, however. Some are structured as "balloon" mortgages, in which the entire payment is due after those first years of interest-only payments. Make sure that you understand the specifics before you sign on the dotted line.
Piggyback loans: For borrowers who can't afford to make a down payment, there are lenders who provide "piggy-back loans," or 80-10-10 financing. For these loans, 80 percent of the loan is borrowed on a first mortgage, followed by 10 percent borrowed on a second mortgage with a higher rate. You would provide the remaining 10 percent down. There are lenders who will even provide 80-15-5 financing, and some even 80-20-0 loans. Shop around, but don't be surprised at the high interest rates on those second mortgages.
As you can see, there are plenty of innovative ways to buy that house. The American Dream can become a reality with some good old-fashioned American ingenuity involving smart budgeting and the right loan package.
Showing posts with label new york mortgage company. Show all posts
Showing posts with label new york mortgage company. Show all posts
Monday, February 1, 2010
Home Mortgages for the Long Haul
Longer-term loans have many advantages, including smaller monthly payments. In addition, there's more time for equity appreciation, career advancement, and other potential factors that can contribute to your ability to better manage mortgage payments. Whether a 40- or 45-year mortgage is appropriate for you depends upon factors that need to be individually evaluated before you make a decision.
Home mortgages for high-priced properties
The advantages become more evident when compared to interest-only loans, which are the rage with many buyers in the market for high-priced homes. With interest-only loans, there are no principal payments during the first few years, which results in a big balloon payment. But with a 40- or 45-year loan, the principal shrinks over time and reduces the burden of debt on the homeowner.
Refinancing strategies
One way to get the most leverage out of these long-term loans is to take advantage of the lower monthly payments for the first few years, and then refinance to a more conventional 15- or 30-year loan after you gain more financial stability. In that way, you'll get the low monthly payments in the beginning that are associated with an interest-only loan, but pay down principal along the way. Or, if you plan to sell your home in a short period of time, a longer loan with lower payments still makes it easier for you to make payments while living in the house.
If you plan to stay in your home for the rest of your life, you may fare better with a 30-year loan. Compare, for example, a $300,000 loan at 7 percent interest paid back over 30 years, with the same loan paid back over 45 years. The monthly payment would be approximately $160 less each month for the 45-year mortgage, adding up to out-of-pocket savings of around $2,000 per year. But, the interest paid over the full term would be about a quarter of a million dollars more for the 45-year loan-almost as much as the entire amount of the original loan. Even with the annual savings subtracted from the equation, the longer loan would cost about $150,000 more over the entire life of the loan, making the 30-year option a wiser choice.
Home mortgages for high-priced properties
The advantages become more evident when compared to interest-only loans, which are the rage with many buyers in the market for high-priced homes. With interest-only loans, there are no principal payments during the first few years, which results in a big balloon payment. But with a 40- or 45-year loan, the principal shrinks over time and reduces the burden of debt on the homeowner.
Refinancing strategies
One way to get the most leverage out of these long-term loans is to take advantage of the lower monthly payments for the first few years, and then refinance to a more conventional 15- or 30-year loan after you gain more financial stability. In that way, you'll get the low monthly payments in the beginning that are associated with an interest-only loan, but pay down principal along the way. Or, if you plan to sell your home in a short period of time, a longer loan with lower payments still makes it easier for you to make payments while living in the house.
If you plan to stay in your home for the rest of your life, you may fare better with a 30-year loan. Compare, for example, a $300,000 loan at 7 percent interest paid back over 30 years, with the same loan paid back over 45 years. The monthly payment would be approximately $160 less each month for the 45-year mortgage, adding up to out-of-pocket savings of around $2,000 per year. But, the interest paid over the full term would be about a quarter of a million dollars more for the 45-year loan-almost as much as the entire amount of the original loan. Even with the annual savings subtracted from the equation, the longer loan would cost about $150,000 more over the entire life of the loan, making the 30-year option a wiser choice.
What's the Best Mortgage Term for You
There are so many decisions to make when shopping for a home mortgage loan. Should you choose a fixed or adjustable rate? Should you pay interest-only for a period of time? How much money should you put down? One of the simpler, but absolutely crucial decisions that will confront you is the choice of term. How long a mortgage is right for you?
While the most popular terms are still 15- or 30-years, you can find a range of variations, including 10-, 20-, 25-, or even 40-year home loans. In order to find the perfect match, ask yourself the following questions:
1. How long do I plan to stay in the house?
2. How much money can I afford to pay for my mortgage each month and still have enough to save for retirement and other important financial matters?
3. How does the pay-off date fit in with my financial goals and dreams?
Advantages of 30-Year Mortgages
Like your father's Oldsmobile, the 30-year mortgage is the granddaddy of home loans. It will have lower monthly payments than a comparable shorter-term loan. As a result, you'll have more disposal income for your living expenses, or to funnel towards saving for retirement, college tuition, or whatever goals are important to you. In addition, when you have access to extra cash, you can use it to pay down the balance of your mortgage, which will automatically shorten the term of your loan. Because the term is longer, it's often easier to get approval, and you may be able to afford a larger house. If you plan to stay in the home for a long time, the longer term makes sense.
Advantages of 15-Year Mortgages
This mortgage can be shorter and sweeter than its longer counterpart. You can snag a lower interest rate, and build up your home equity more rapidly. However, your monthly payment will be higher than its longer-term counterpart. And a huge perk is that you'll pay less interest over the life of the loan, which ultimately will result in more money in your pocket.
Whichever term you choose, you always have the option to do a home refinancing if your financial situation changes. If there's too much pressure meeting your monthly payments on your 15-year loan, you can refinance for a longer term. If interest rates drop, you can take advantage of them by opting for a shorter-term.
The ultimate decision will be based on your cash flow and how you want to spend it, as you work towards the ultimate goal of the American dream: owning your home free and clear.
While the most popular terms are still 15- or 30-years, you can find a range of variations, including 10-, 20-, 25-, or even 40-year home loans. In order to find the perfect match, ask yourself the following questions:
1. How long do I plan to stay in the house?
2. How much money can I afford to pay for my mortgage each month and still have enough to save for retirement and other important financial matters?
3. How does the pay-off date fit in with my financial goals and dreams?
Advantages of 30-Year Mortgages
Like your father's Oldsmobile, the 30-year mortgage is the granddaddy of home loans. It will have lower monthly payments than a comparable shorter-term loan. As a result, you'll have more disposal income for your living expenses, or to funnel towards saving for retirement, college tuition, or whatever goals are important to you. In addition, when you have access to extra cash, you can use it to pay down the balance of your mortgage, which will automatically shorten the term of your loan. Because the term is longer, it's often easier to get approval, and you may be able to afford a larger house. If you plan to stay in the home for a long time, the longer term makes sense.
Advantages of 15-Year Mortgages
This mortgage can be shorter and sweeter than its longer counterpart. You can snag a lower interest rate, and build up your home equity more rapidly. However, your monthly payment will be higher than its longer-term counterpart. And a huge perk is that you'll pay less interest over the life of the loan, which ultimately will result in more money in your pocket.
Whichever term you choose, you always have the option to do a home refinancing if your financial situation changes. If there's too much pressure meeting your monthly payments on your 15-year loan, you can refinance for a longer term. If interest rates drop, you can take advantage of them by opting for a shorter-term.
The ultimate decision will be based on your cash flow and how you want to spend it, as you work towards the ultimate goal of the American dream: owning your home free and clear.
Home Mortgages, How Exactly Do They 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 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 primarily comes from three major institutions: The bank that holds your loan is responsible primarily for "servicing" it.
When you have a mortgage loan, 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
Home Mortgage interest rates come in several varieties. With a "fixed rate mortgage loan," the rate and your monthly payment remains the same for the life of the loan. With an "adjustable rate mortgage loan," the interest rate changes based on a specified index. As a result, your monthly payment amount will fluctuate.
Mortgage loans come in a variety of types, including conventional, non-conventional, fixed and variable-rate, home equity loans, interest-only and reverse mortgages. At Mortgageloan.com, we can help make this part of your American dream as easy as apple pie.
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 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 primarily comes from three major institutions: The bank that holds your loan is responsible primarily for "servicing" it.
When you have a mortgage loan, 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
Home Mortgage interest rates come in several varieties. With a "fixed rate mortgage loan," the rate and your monthly payment remains the same for the life of the loan. With an "adjustable rate mortgage loan," the interest rate changes based on a specified index. As a result, your monthly payment amount will fluctuate.
Mortgage loans come in a variety of types, including conventional, non-conventional, fixed and variable-rate, home equity loans, interest-only and reverse mortgages. At Mortgageloan.com, we can help make this part of your American dream as easy as apple pie.
Mortgage Tips for a Sane Mind
1. Shop, Shop, Shop: Do not just jump on the first mortgage offer that seems remotely appealing. If you have nothing to compare it to, then how do know it is a great deal? Shop several lenders before you make a move on establishing your mortgage. Try to obtain at least comparisons so that you will be able to determine what the average pricing should be for your mortgage.
2. Don't Take the Bait: If something sounds too good to be true, then most likely it probably is too good to be true. Do not let yourself be drawn into a mortgage based solely on one appealing factor, such as a low introductory rate. Remember that introductory means that it will change after some determined period of time.
3. Think Small: Do not just limit yourself to the big national lenders. Consider local and community banks that offer mortgage lending. If you are a member of a credit union, there may be benefits to you for doing your loan through them. Try to include a couple of different types of lenders n your comparison shopping to see what the difference may actually be.
4. Read, Learn & Listen: Gain your own knowledge about mortgages. Learn how interest rates are set, how mortgage brokers are paid, and what standard mortgage fees are so that you aren't gullible. Gullible mortgage shoppers can find themselves getting ripped off.
5. Consider A Professional: Consider hiring a mortgage broker. They have the resources to shop your loan a lot faster and easier than you will be able to. They do this in return for a small fee paid by you directly or it is figured into the costs that the lender charges you for processing your mortgage. It pays off in the long-run to save a lot of time and hassle on your part to go down the mortgage road with a professional.
These are just a few mortgage tips to get you started. Use them as a guideline when you are on your mortgage shopping expedition. Good luck, and happy shopping!
2. Don't Take the Bait: If something sounds too good to be true, then most likely it probably is too good to be true. Do not let yourself be drawn into a mortgage based solely on one appealing factor, such as a low introductory rate. Remember that introductory means that it will change after some determined period of time.
3. Think Small: Do not just limit yourself to the big national lenders. Consider local and community banks that offer mortgage lending. If you are a member of a credit union, there may be benefits to you for doing your loan through them. Try to include a couple of different types of lenders n your comparison shopping to see what the difference may actually be.
4. Read, Learn & Listen: Gain your own knowledge about mortgages. Learn how interest rates are set, how mortgage brokers are paid, and what standard mortgage fees are so that you aren't gullible. Gullible mortgage shoppers can find themselves getting ripped off.
5. Consider A Professional: Consider hiring a mortgage broker. They have the resources to shop your loan a lot faster and easier than you will be able to. They do this in return for a small fee paid by you directly or it is figured into the costs that the lender charges you for processing your mortgage. It pays off in the long-run to save a lot of time and hassle on your part to go down the mortgage road with a professional.
These are just a few mortgage tips to get you started. Use them as a guideline when you are on your mortgage shopping expedition. Good luck, and happy shopping!
Mortgage Interest Rates
Mortgage interest rates favorable to home buying are still available. Mortgage interest rates have moved higher than the sub-six percent levels that were available from 2003-2005, however, the current 30-year 6.34 percent fixed mortgage average is still well below the eight percent average over the last 20 years. The most important characteristic of mortgage interest rates is whether they are fixed or adjustable.
Since July of 2002, the average 30-year fixed rate mortgage has remained below 6.5 percent. While Federal Reserve short term interest rate increases affect fixed mortgage rates other indicators are also crucial; yields on long term government bonds and fixed rate mortgages are closely linked. Demand for US government bonds and domestic inflation that weighs heavy on that demand must be examined. Low six percent mortgage interest rates will become a luxury of the past as rates move into the upper 6s in the second half of 2006 bound to revisit the ten-year average of 6.9 percent. Regardless, borrowers are still favoring fixed-rate mortgages over adjustable-rate mortgages because the difference in initial rates is not enticing; current 30-year fixed rate averages 6.34 percent, while a 5/1 ARM is 6.08 percent and a one-year ARM is 5.73 percent.
Adjustable Rates & the ARM
If you have an adjustable rate mortgage (ARM) it might be smart to keep a close eye on interest rate movements in the market. ARMs bound to reset in 2010 with a hefty increase in their monthly mortgage payment may be an unpleasantly surprise some folks. Those people whose ARMs have already reset know that substantial increases in monthly mortgage payments can be burdensome to say the least. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Federal Reserve is done raising interest rates, add on the margin of 2.5 percentage points and many ARM borrowers will be looking at a rate of 7.5 percent. Households that can withstand an increase in their monthly mortgage payment may opt for an ARM in hopes of seeing mortgage interest rates fall if the Federal Reserve does have to lower short term interest rates in the further off future. For people on a more fixed income who have or are thinking about an adjustable rate mortgage beware that short term interest rates, which are on an upward trend, can drastically affect a person's mortgage debt load.
Mortgage Interest Rates - Where do we go from here?
Mortgage interest rates are still on an upward trend and the hot refinance market has been cooling off. People are refinancing, but their motivations are different. Most refinancing that is going on right now is more need-driven than rate-driven, people are getting out of ARM mortgages as opposed to everyone looking for lower rates. That being said, for people who have not refinanced and can qualify for a lower rate, immediately is always the best time to get started. The 30-year fixed rate average, mentioned above, of 6.34 percent very well may rise to match the 6.9 percent ten-year average in the latter half of 2009; however, that is still well below the 20-year average of eight percent.
More Indicators
Mortgage interest rates have more indicators than discussed above that can predict the movements of mortgage interest rates with decent accuracy. Of course, the short term interest rate is a vital metric, but let's takes another look at the link between 30-year fixed mortgage rates and long term government bonds. You already know that the fluctuations of 30-year fixed mortgage rate averages are closely tied to the yields of 10 year Treasury notes. Those Treasury notes rose precisely a quarter-point during the eight weeks between Federal Reserve meetings, from 4.53 percent on January 31 to 4.78 percent on March 28. Similar to that mentioned above, fixed mortgage rates don't move in lock step with long term Treasury yields, but it's a pretty good indicator. One last thing to remember, currently variable interest rates on adjustable mortgages seem to be moving in tandem with federal fund rates, which are moving upward - that's one last warning for you folks with adjustable rate mortgages.
Since July of 2002, the average 30-year fixed rate mortgage has remained below 6.5 percent. While Federal Reserve short term interest rate increases affect fixed mortgage rates other indicators are also crucial; yields on long term government bonds and fixed rate mortgages are closely linked. Demand for US government bonds and domestic inflation that weighs heavy on that demand must be examined. Low six percent mortgage interest rates will become a luxury of the past as rates move into the upper 6s in the second half of 2006 bound to revisit the ten-year average of 6.9 percent. Regardless, borrowers are still favoring fixed-rate mortgages over adjustable-rate mortgages because the difference in initial rates is not enticing; current 30-year fixed rate averages 6.34 percent, while a 5/1 ARM is 6.08 percent and a one-year ARM is 5.73 percent.
Adjustable Rates & the ARM
If you have an adjustable rate mortgage (ARM) it might be smart to keep a close eye on interest rate movements in the market. ARMs bound to reset in 2010 with a hefty increase in their monthly mortgage payment may be an unpleasantly surprise some folks. Those people whose ARMs have already reset know that substantial increases in monthly mortgage payments can be burdensome to say the least. The one year Treasury, a common index for adjustable rate mortgages, may top five percent by the time the Federal Reserve is done raising interest rates, add on the margin of 2.5 percentage points and many ARM borrowers will be looking at a rate of 7.5 percent. Households that can withstand an increase in their monthly mortgage payment may opt for an ARM in hopes of seeing mortgage interest rates fall if the Federal Reserve does have to lower short term interest rates in the further off future. For people on a more fixed income who have or are thinking about an adjustable rate mortgage beware that short term interest rates, which are on an upward trend, can drastically affect a person's mortgage debt load.
Mortgage Interest Rates - Where do we go from here?
Mortgage interest rates are still on an upward trend and the hot refinance market has been cooling off. People are refinancing, but their motivations are different. Most refinancing that is going on right now is more need-driven than rate-driven, people are getting out of ARM mortgages as opposed to everyone looking for lower rates. That being said, for people who have not refinanced and can qualify for a lower rate, immediately is always the best time to get started. The 30-year fixed rate average, mentioned above, of 6.34 percent very well may rise to match the 6.9 percent ten-year average in the latter half of 2009; however, that is still well below the 20-year average of eight percent.
More Indicators
Mortgage interest rates have more indicators than discussed above that can predict the movements of mortgage interest rates with decent accuracy. Of course, the short term interest rate is a vital metric, but let's takes another look at the link between 30-year fixed mortgage rates and long term government bonds. You already know that the fluctuations of 30-year fixed mortgage rate averages are closely tied to the yields of 10 year Treasury notes. Those Treasury notes rose precisely a quarter-point during the eight weeks between Federal Reserve meetings, from 4.53 percent on January 31 to 4.78 percent on March 28. Similar to that mentioned above, fixed mortgage rates don't move in lock step with long term Treasury yields, but it's a pretty good indicator. One last thing to remember, currently variable interest rates on adjustable mortgages seem to be moving in tandem with federal fund rates, which are moving upward - that's one last warning for you folks with adjustable rate mortgages.
Monday, January 18, 2010
Tips to Buying a Condo!
Homeowners get tired of the responsibilities involved. First it's a leaky roof. Then it's a plumbing problem of mysterious origin. The last straw is usually when the septic system backs up. Finally, you realize that moving into a condominium and sharing the responsibilities of your "home" with others could solve most of your problems.
Originally, condos were apartments that were converted into permanent living units with owners sharing common areas-grass, hallways, laundry rooms, pools, etc. Nowadays, condos are designed with permanent occupancy in mind. Often, the interior of a condo is just as deluxe and spacious as a single-family home.
Houses often have a higher sale price, as well as a higher rate of appreciation. On the surface, this seems like an argument for buying a house; but sale price and appreciation don't address maintenance costs. With a condo, all the owners share expenses and pay for them out of the reserve fund-a pool of money made up of the residents' fees
Before buying a condo, investigate the reserve fund. Most condos have a Board to collect fees and keep records. You can request information directly from them about: a) how much cash is in the reserve fund; b) costs of scheduled repairs and maintenance; and c) any special rules or bylaws that the condo board has passed. If you find all the conditions agreeable, you may want to buy.
You'll go through the same process to finance a mortgage for a condo as you would for a house purchase loan. Paperwork and mortgage rates will be identical, and you can get mortgage quotes from any reputable lender in person or over the Internet.
Condominiums offer an equivalent living space to that of a single-family home, but without the worry of bank account-shattering repairs. Once you find a condo that you like, find a competitive mortgage rate loan and introduce yourself to your new neighbors.
Originally, condos were apartments that were converted into permanent living units with owners sharing common areas-grass, hallways, laundry rooms, pools, etc. Nowadays, condos are designed with permanent occupancy in mind. Often, the interior of a condo is just as deluxe and spacious as a single-family home.
Houses often have a higher sale price, as well as a higher rate of appreciation. On the surface, this seems like an argument for buying a house; but sale price and appreciation don't address maintenance costs. With a condo, all the owners share expenses and pay for them out of the reserve fund-a pool of money made up of the residents' fees
Before buying a condo, investigate the reserve fund. Most condos have a Board to collect fees and keep records. You can request information directly from them about: a) how much cash is in the reserve fund; b) costs of scheduled repairs and maintenance; and c) any special rules or bylaws that the condo board has passed. If you find all the conditions agreeable, you may want to buy.
You'll go through the same process to finance a mortgage for a condo as you would for a house purchase loan. Paperwork and mortgage rates will be identical, and you can get mortgage quotes from any reputable lender in person or over the Internet.
Condominiums offer an equivalent living space to that of a single-family home, but without the worry of bank account-shattering repairs. Once you find a condo that you like, find a competitive mortgage rate loan and introduce yourself to your new neighbors.
Should You Pay Cash for Your Home?
If you could pay for your next home with cash, why wouldn't you? This could be one of the nicest problems that you'll ever have.
Most homeowners spend decades paying down their mortgage loans. When it's all said and done and the last payment is complete, most people pop a bottle and celebrate. Why in the world, then, would you ever take on a mortgage loan if you actually have the money to buy a house in cold, hard cash?
The traditional answer is that you could put that money to better use. Let's say you have a 6 percent interest rate on your mortgage loan, and you fall ino the 33 percent tax bracket. After deducting mortgage interest from your taxes, you'll end up with an effective 4 percent interest rate. If that's readily available in the market through certificates of deposit (CDs) or money market accounts, you could have a higher return on your money.
Here's how it works: You'd take the loan money and invest it into a 5 percent savings account for a tiny (but welcome) 1 percent return on your investment, or into stocks for an even greater return if your risk tolerance is higher. That's the magic of offsetting interest payments with investment returns.
An all-cash home payment ties up your assets in a very real way. If you need a sudden burst of money for medical bills, a dream vacation, or to pay for college tuition, it won't be readily available. In a tight mortgage market, like the one we're currently experiencing, you might not be able to draw equity out of your home as quickly and easily as you need to. If you had a mortgage payment instead, with the money parked in more accessible investment vehicles, you could easily pay those unexpected bills.
There are financial pros and cons in the all-cash strategy. But don't forget about the emotional impact. Owning your home free and clear is worth a little celebration whether you paid down the mortgage or bought it outright. It offers a peace of mind that no loan can ever match. In the end, that may be enough to outweigh the slim financial rewards of reinvesting the loan balance. That house is yours, and no bank can ever take it away.
Most homeowners spend decades paying down their mortgage loans. When it's all said and done and the last payment is complete, most people pop a bottle and celebrate. Why in the world, then, would you ever take on a mortgage loan if you actually have the money to buy a house in cold, hard cash?
The traditional answer is that you could put that money to better use. Let's say you have a 6 percent interest rate on your mortgage loan, and you fall ino the 33 percent tax bracket. After deducting mortgage interest from your taxes, you'll end up with an effective 4 percent interest rate. If that's readily available in the market through certificates of deposit (CDs) or money market accounts, you could have a higher return on your money.
Here's how it works: You'd take the loan money and invest it into a 5 percent savings account for a tiny (but welcome) 1 percent return on your investment, or into stocks for an even greater return if your risk tolerance is higher. That's the magic of offsetting interest payments with investment returns.
An all-cash home payment ties up your assets in a very real way. If you need a sudden burst of money for medical bills, a dream vacation, or to pay for college tuition, it won't be readily available. In a tight mortgage market, like the one we're currently experiencing, you might not be able to draw equity out of your home as quickly and easily as you need to. If you had a mortgage payment instead, with the money parked in more accessible investment vehicles, you could easily pay those unexpected bills.
There are financial pros and cons in the all-cash strategy. But don't forget about the emotional impact. Owning your home free and clear is worth a little celebration whether you paid down the mortgage or bought it outright. It offers a peace of mind that no loan can ever match. In the end, that may be enough to outweigh the slim financial rewards of reinvesting the loan balance. That house is yours, and no bank can ever take it away.
A Good Faith Estimate
As of Jan.1, 2010, lenders will be providing more straightforward information to potential borrowers and making it easier to understand the costs involved in obtaining a new mortgage.
It’s not that they’re turning over a new leaf or making a New Year’s resolution. Instead, Jan. 1 is the date that a new Good Faith Estimate (GFE) form detailing the various charges and interest borrowers can expect to pay on a mortgage makes its debut.
The three-page form, which lenders are required to complete and provide to borrowers applying for a mortgage, is intended to make it easier for borrowers to compare mortgage offers from different lenders. It’s required under new Real Estate Settlement Procedures Act (RESPA) rules that take effect that day.
Some critics within the industry have complained the three-page form will confuse borrowers even more, noting that the old GFE was only a single page. But other mortgage professionals say it will make it easier by clearly distinguishing between what the lender is charging and third party fees for completing the loan, charges that were often difficult to sort out in the past.
So what does a potential homebuyer or someone looking to refinance an existing home mortgage need to know about the form?
The first thing is that there are actually two new forms. The first is the Good Faith Estimate itself, and must be provided when you apply for the loan. The second is the Settlement Statement, which breaks down and details all final costs, and is provided before the actual closing. The two are designed to allow the borrower to compare the estimated and final costs to ensure they are either unchanged or that any changes are within the limits allowed by law. Links to the new documents are provided here and here.
The form also details your initial loan balance, interest rate and monthly payments, and whether any of these can rise during the course of the loan and if so, by how much. It also requires disclosure of any prepayment penalties and whether there is a balloon payment on the loan. Many of these elements were blamed for snagging unwary borrowers who obtained loans that later went bad in the subprime mortgage crisis, particularly in the case of adjustable rate mortgages.
Finally, the form spells out which charges on the GFE cannot increase at the time of settlement (as detailed on the Settlement Statement), which can increase up to 10 percent and which can change without limit. There’s also a “shopping chart” that allows borrowers to compare terms on up to four different mortgages.
It’s not that they’re turning over a new leaf or making a New Year’s resolution. Instead, Jan. 1 is the date that a new Good Faith Estimate (GFE) form detailing the various charges and interest borrowers can expect to pay on a mortgage makes its debut.
The three-page form, which lenders are required to complete and provide to borrowers applying for a mortgage, is intended to make it easier for borrowers to compare mortgage offers from different lenders. It’s required under new Real Estate Settlement Procedures Act (RESPA) rules that take effect that day.
Some critics within the industry have complained the three-page form will confuse borrowers even more, noting that the old GFE was only a single page. But other mortgage professionals say it will make it easier by clearly distinguishing between what the lender is charging and third party fees for completing the loan, charges that were often difficult to sort out in the past.
So what does a potential homebuyer or someone looking to refinance an existing home mortgage need to know about the form?
The first thing is that there are actually two new forms. The first is the Good Faith Estimate itself, and must be provided when you apply for the loan. The second is the Settlement Statement, which breaks down and details all final costs, and is provided before the actual closing. The two are designed to allow the borrower to compare the estimated and final costs to ensure they are either unchanged or that any changes are within the limits allowed by law. Links to the new documents are provided here and here.
The form also details your initial loan balance, interest rate and monthly payments, and whether any of these can rise during the course of the loan and if so, by how much. It also requires disclosure of any prepayment penalties and whether there is a balloon payment on the loan. Many of these elements were blamed for snagging unwary borrowers who obtained loans that later went bad in the subprime mortgage crisis, particularly in the case of adjustable rate mortgages.
Finally, the form spells out which charges on the GFE cannot increase at the time of settlement (as detailed on the Settlement Statement), which can increase up to 10 percent and which can change without limit. There’s also a “shopping chart” that allows borrowers to compare terms on up to four different mortgages.
Sunday, January 10, 2010
What Mortgage Term is For You?
The fact that mortgage calculators are free and online makes them enormously appealing. The big payoff that comes with using a mortgage calculator is that you can compare home loans by calculating your monthly payment. There is, however, more to a monthly payment than meets the eye. You also need to have a solid understanding of which mortgage term is right for you before you start working with the numbers. Loan terms primarily fall into the following general categories:
1. Fixed-rate loans: These home mortgages have a fixed rate during the entire term of the loan. A 30-year fixed rate loan, for example, carries the same rate throughout the entire 30-year life of the loan.
2. Adjustable rate mortgages (ARMs): ARMs come in varying terms, and tend to have a teaser rate that can adjust on an annual basis. For example, a "5/1-year" ARM includes a five-year introductory rate, followed by a rate adjustment every year, based on current market conditions.
3. Two-step mortgages: These loans have an introductory rate, which then adjusts one time. A 7/23 two-step mortgage means that there's a 7-year introductory rate, followed by one adjustment that will remain in effect for the remaining 23 years of the mortgage.
4. Balloon mortgages: A low introductory rate, generally for a 7-year period, attracts people to this loan. But the buyer should be aware that at the end of the loan, the entire balance of the mortgage is due at once.
A fixed-rate term works better for people who plan on staying in their home for long periods of time. Conversely, mortgages with adjustable rates or balloons are a better option for people who plan to move or refinance before the end of the teaser rate.
A mortgage calculator can help you calculate your monthly payments for any of these loan programs. They can also help you with other mortgage items, including amortization and calculating interest only payments. Be sure to use this valuable tool when deciding on the term that's right for you. It's fast, free, and a whole lot easier than trying to count up long-term interest using your fingers.
1. Fixed-rate loans: These home mortgages have a fixed rate during the entire term of the loan. A 30-year fixed rate loan, for example, carries the same rate throughout the entire 30-year life of the loan.
2. Adjustable rate mortgages (ARMs): ARMs come in varying terms, and tend to have a teaser rate that can adjust on an annual basis. For example, a "5/1-year" ARM includes a five-year introductory rate, followed by a rate adjustment every year, based on current market conditions.
3. Two-step mortgages: These loans have an introductory rate, which then adjusts one time. A 7/23 two-step mortgage means that there's a 7-year introductory rate, followed by one adjustment that will remain in effect for the remaining 23 years of the mortgage.
4. Balloon mortgages: A low introductory rate, generally for a 7-year period, attracts people to this loan. But the buyer should be aware that at the end of the loan, the entire balance of the mortgage is due at once.
A fixed-rate term works better for people who plan on staying in their home for long periods of time. Conversely, mortgages with adjustable rates or balloons are a better option for people who plan to move or refinance before the end of the teaser rate.
A mortgage calculator can help you calculate your monthly payments for any of these loan programs. They can also help you with other mortgage items, including amortization and calculating interest only payments. Be sure to use this valuable tool when deciding on the term that's right for you. It's fast, free, and a whole lot easier than trying to count up long-term interest using your fingers.
Tuesday, January 5, 2010
Get In for a Short Sale!
Short sales are on the rise as borrowers and lenders struggle to stay afloat during a housing market correction.
Today's housing market is working its way through a hangover. Following the freewheeling, party days of lending mortgage dollars to anyone and everyone, lenders are finally pulling back. As the money supply tightens up, housing values are getting hit hard.
For homeowners who can continue to meet their monthly mortgage obligation, the logical strategy in these tough times is to ride out the cycle. But if cash flow issues are turning your mortgage payment into an impossible burden, you'll need to look at other options. First, consider a mortgage refinance. Your lender might help you by restructuring the debt, as long as your home's value hasn't dipped below your mortgage balance. If you owe more than the home is worth, you might be stuck choosing between a foreclosure and a short sale.
When you sell short, you sell your home at market value and turn over the sales proceeds to the lender. The lender then pays off the real estate agent, and cancels your mortgage obligation.
Still, the short sale might be the lesser of two evils for the lender and for you. Lenders don't like to get involved in foreclosure; it's very messy and time-consuming. After using an inordinate amount of resources to wade through the legal necessities, the lender still has to sell the home before it sees any cash. A short sale, on the other hand, allows the lender to cut its losses and get out faster.
You'll benefit from avoiding a foreclosure, too. Your credit history will be bruised somewhat from any missed mortgage payments and the short sale itself. But the marks left behind won't be as damaging to your credit score as a foreclosure would be.
If your mortgage obligation becomes impossible to meet, open the lines of communication with your lender as soon as you start missing payments. If you address the problems early, you might be able to refinance the debt and keep your house-by far the best solution for everyone involved. If refinancing won't work, team up with a real estate agent who has experience in short sales. The agent can help prepare you for gaining your lender's approval to proceed with the short sale.
This is undoubtedly a stressful situation for you. Just remember that your lender is reeling too, and neither one of you has the option of sleeping it off.
Today's housing market is working its way through a hangover. Following the freewheeling, party days of lending mortgage dollars to anyone and everyone, lenders are finally pulling back. As the money supply tightens up, housing values are getting hit hard.
For homeowners who can continue to meet their monthly mortgage obligation, the logical strategy in these tough times is to ride out the cycle. But if cash flow issues are turning your mortgage payment into an impossible burden, you'll need to look at other options. First, consider a mortgage refinance. Your lender might help you by restructuring the debt, as long as your home's value hasn't dipped below your mortgage balance. If you owe more than the home is worth, you might be stuck choosing between a foreclosure and a short sale.
When you sell short, you sell your home at market value and turn over the sales proceeds to the lender. The lender then pays off the real estate agent, and cancels your mortgage obligation.
Still, the short sale might be the lesser of two evils for the lender and for you. Lenders don't like to get involved in foreclosure; it's very messy and time-consuming. After using an inordinate amount of resources to wade through the legal necessities, the lender still has to sell the home before it sees any cash. A short sale, on the other hand, allows the lender to cut its losses and get out faster.
You'll benefit from avoiding a foreclosure, too. Your credit history will be bruised somewhat from any missed mortgage payments and the short sale itself. But the marks left behind won't be as damaging to your credit score as a foreclosure would be.
If your mortgage obligation becomes impossible to meet, open the lines of communication with your lender as soon as you start missing payments. If you address the problems early, you might be able to refinance the debt and keep your house-by far the best solution for everyone involved. If refinancing won't work, team up with a real estate agent who has experience in short sales. The agent can help prepare you for gaining your lender's approval to proceed with the short sale.
This is undoubtedly a stressful situation for you. Just remember that your lender is reeling too, and neither one of you has the option of sleeping it off.
Saturday, December 5, 2009
How to Get a Loan When Self-Employed
Getting or refinancing a mortgage when you’re self-employed can be a real challenge these days. With the virtual disappearance of stated income loans, it’s become much more difficult for anyone who doesn’t get a regular paycheck to qualify for a home loan. But it still can be done.
Stated income/stated asset loans, also known as Alt-A mortgages, used to be one of the most common ways for the self-employed to obtain a mortgage. You simply told the bank what your income was and the bank took your word for it. When housing values were rising, it really wasn’t that big of a risk for the lender.
But Alt-A mortgages got a bad reputation as “liar loans” during the housing bubble, when they were abused to exaggerate incomes for borrowers who otherwise would never qualify for a loan. When the housing market and economy went sour, stated income/asset loans accounted for some of the highest rates of defaults and foreclosures, and most banks simply stopped offering them.
But for the self-employed, what that really means is that you’re going to have to be more thorough documenting your income when applying for a mortgage; the same rules apply to refinancing a mortgage as well. And if you’re in business for yourself, you’re probably already accustomed to filing tax reports and documenting expenses, so documenting your income for a mortgage application won’t be that much different.
Center State Mortgage has all the tools you will need to obtain a loan if you are self-employed in the Straten Island and New Jersey area. They have professionals ready to assist you with purchasing your home! Choose Center State Mortgage for all your self-employed loan needs!
Stated income/stated asset loans, also known as Alt-A mortgages, used to be one of the most common ways for the self-employed to obtain a mortgage. You simply told the bank what your income was and the bank took your word for it. When housing values were rising, it really wasn’t that big of a risk for the lender.
But Alt-A mortgages got a bad reputation as “liar loans” during the housing bubble, when they were abused to exaggerate incomes for borrowers who otherwise would never qualify for a loan. When the housing market and economy went sour, stated income/asset loans accounted for some of the highest rates of defaults and foreclosures, and most banks simply stopped offering them.
But for the self-employed, what that really means is that you’re going to have to be more thorough documenting your income when applying for a mortgage; the same rules apply to refinancing a mortgage as well. And if you’re in business for yourself, you’re probably already accustomed to filing tax reports and documenting expenses, so documenting your income for a mortgage application won’t be that much different.
Center State Mortgage has all the tools you will need to obtain a loan if you are self-employed in the Straten Island and New Jersey area. They have professionals ready to assist you with purchasing your home! Choose Center State Mortgage for all your self-employed loan needs!
Thursday, November 12, 2009
Mortgage Glossary Part 3
Housing Expense Ratio
The percentage of gross monthly income budgeted to pay housing expenses.
HUD-1 statement
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing.
Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM)
A combination fixed rate and adjustable rate loan - also called 3/1,5/1,7/1 - can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a "5/1 loan" has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable rate loan, based on then-current rates for the remaining 25 years. It's a good choice for people who expect to move or refinance, before or shortly after, the adjustment occurs.
Index
The index is the measure of interest rate changes a lender uses to decide the amount an interest rate on an ARM will change over time.The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. Some index rates tend to be higher than others and some more volatile.
Initial Interest Rate
This refers to the original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). It's also known as "start rate" or "teaser."
Installment
The regular periodic payment that a borrower agrees to make to a lender.
Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).
Interest
The fee charged for borrowing money.
Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
Interest Rate Buydown Plan
An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor's monthly payments during the early years of a mortgage.
Interest Rate Ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
Interest Rate Floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
Center State Mortgage is your #1 source for the best mortgage rate loans in Straten Island including: Chelsea, Clifton, and Concord. They are experienced specialists who really care about you and will help you through the entire process to make it fast and easy! Choose Center State Mortgage for your home loan needs!
The percentage of gross monthly income budgeted to pay housing expenses.
HUD-1 statement
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing.
Hybrid ARM (3/1 ARM, 5/1 ARM, 7/1 ARM)
A combination fixed rate and adjustable rate loan - also called 3/1,5/1,7/1 - can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable rate loans. For example, a "5/1 loan" has a fixed monthly payment and interest for the first five years and then turns into a traditional adjustable rate loan, based on then-current rates for the remaining 25 years. It's a good choice for people who expect to move or refinance, before or shortly after, the adjustment occurs.
Index
The index is the measure of interest rate changes a lender uses to decide the amount an interest rate on an ARM will change over time.The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. Some index rates tend to be higher than others and some more volatile.
Initial Interest Rate
This refers to the original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). It's also known as "start rate" or "teaser."
Installment
The regular periodic payment that a borrower agrees to make to a lender.
Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).
Interest
The fee charged for borrowing money.
Interest Accrual Rate
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
Interest Rate Buydown Plan
An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor's monthly payments during the early years of a mortgage.
Interest Rate Ceiling
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
Interest Rate Floor
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
Center State Mortgage is your #1 source for the best mortgage rate loans in Straten Island including: Chelsea, Clifton, and Concord. They are experienced specialists who really care about you and will help you through the entire process to make it fast and easy! Choose Center State Mortgage for your home loan needs!
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