Archive for March, 2010

Different types of home loans – 7 different types of home loans

Sunday, March 21st, 2010

Are you looking for a home loan, but you are not sure which one is right for you? There are many different types of home loans and it can be very confusing to try to pick the best option for yourself. Here are 7 different types of home loans and what they should be used for.

The first one is the traditional purchase mortgage. This is a home loan you get to buy an existing home. Be careful not to do the 100% financing option because you will start with no equity and it will take you 10 years or so to build any real equity. You should always put at least 10% down.

The second type of home loan is a refinance loan. This is a loan that is used to get a lower rate, pay off debt against your home, or to add on to your home. This is a first mortgage that is usually between 80% and 90% of the value of your home. Make sure the benefits of your refinance out weighs the loan itself.

The third loan is the second mortgage. This is similar to a refinance, but can go up to 100% and sometime 125% of your home value. These are used in emergency situations, especially the 125% loan because the rate is much higher and you will be tying up all your equity.

The fourth different type of home loan is the construction loan. This is a loan that is used to start building a home. It has 4 stages of funding as the home is build and if you are not quite wealthy, then you are wasting your time building. It usually takes a new home around 10 years to appreciate to the value of the original construction loan.

The fifth type of loan is the first time home buyers loan. This is a purchase mortgage that is designed for anybody that is purchasing their first home.

The sixth type of loan is the home equity loan. This is similar to a second mortgage, but many times the rate is prime plus a percentage. These are good for people that just need a little bit of money.

The seventh different type of home loan is a line of credit. This is a revolving account that works much like a credit card only your home is the collateral. These are good for people with a business or with an addition to their home because if either one gets more expensive than planned for you can take out more money on your line of credit.

There Seven different types of home loan. Now just pick the right choice for you and run the application.

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Bad Credit Home Improvement Loans – tips to increase your chances for approval

Thursday, March 18th, 2010

People suffer from a bad credit history because of various reasons; the most likely reasons are mismanagement of their finances and failed to pay back their loan obligation. But there are people with bad credit history due to sudden illness and loss of their jobs.

Can you still get a home improvement loan if you have bad credit? The most common reason why people want such a loan is to increase the market value of their house. Other reason is to repair the house; perhaps the paints on the wall are crumbling down; the kitchen ventilation is not working properly; etc. All these can also be considered as home improvements as the value of your house would likely be raised after such improvements.

The main reason why bad credit home improvement loans are possible is the fact that you’re actually borrowing money from your home equity. In other words, you’re putting up your home as collateral; if you can’t pay back your loan, you might lose your home. So, please keep that in mind as there is a risk of losing your house here.

There are people who use home improvement loan because they are planning to sell their houses; so they treat such loan as an investment; they get the funds to finance the costs of fix up and remodelling of the entire house so that the house’s value is raised considerably.

To increase your chances of getting approval for your bad credit home improvement loans, it’s advisable that you go to your current mortgage lending bank first. The lender knows you and will have firsthand knowledge of how well you’ve been paying your mortgage bills. They will also have easier access to your personal mortgage that you have on the house right now.

However, you shouldn’t just take whatever your lender or bank has to offer. Listen and take notes of their suggestions, then talk to other lenders and do some comparisons. You want to compare everything from the interest rates to all the closing fees they will charge you. Different lenders offer different rates and charge different fees. So, make sure you do your due diligence in order to get a great deal.

Another tip you should remember when applying for bad credit home improvement loans is to have a detailed plan ready; the plan should include all the calculated and estimated costs for the improvements and repairs you want to carry out. This can help to increase your The possibility of obtaining a loan as lenders know that you intend to use the credits for.

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According to mortgage refinancing adjustable home equity lines of credit

Tuesday, March 16th, 2010

A study conducted from October 10-12, 2006 by Harris Interactive ® by Countrywide Home Loans indicates that Americans don’t fully comprehend or utilize their home equity as a financial tool. “There’s a prevalent misperception about mortgages that may prevent many Americans from realizing their home’s full financial potential,” says Dan Hanson, managing director of Countrywide Home Loans. If you understand that your home equity can be leveraged for personal and financial goals, you are one step ahead of most Americans.

There are a lot of reasons to consider utilizing your equity and refinancing your home equity loans into a new first mortgage. Just because you already have an equity loan doesn’t mean that you can’t still use your home equity as a financial tool. If you are in debt with credit cards or have other revolving debt, debt consolidation may be an excellent way to make use of your equity. Your interest rates and payments are likely to be lower, especially if you cash out. If you can be responsible with your credit cards after consolidating, you will ultimately save money in interest.

If you have already taken out home equity loans or have a 100 % first mortgage you can still refinance. You can pay off your 2nd with a new 1st mortgage refinance or consider converting 80-20 home loans that you took out to avoid PMI. 100% percent mortgage financing is not an impossibility. If there is equity in your home, you can still cash out and a select group of mortgage lenders will allow you to refinance up to 110% and there is still no PMI. However, if you refinance for 90% or more, keep in mind that there will be a higher interest rate because the LTV exceeds 90%. You should also consider a home equity refinance if you have an adjustable rate loan with rising payments.

Consider all your second mortgage options carefully. The trick to realizing your home’s full financial potential is to stay educated and make wise decision. Equity that is used for further investment or for saving money in interest may be a smart choice. Just be sure get all the information for each home equity loan quote, so you can and to work with a lender that you trust.

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Home Equity Loans No income verification – Why would you want one?

Sunday, March 14th, 2010

Why in the world would anybody want home equity loans, no income verification required? Simple, these loans are easy to obtain if you have good credit. When should you consider this type of loan and when should you avoid this type of loan? The answer to that question and more can be found below.

First, what is a home equity loan with no income verification? Basically this is a loan that does not require you to prove how much money you make. The downfall is your rate is going to be higher, they are harder to qualify for, and you will probably pay a bit more in fees to get this loan approved.

The upside is that if you are self employed, a tipped employee, or an independent contractor, then you will be able to get a home equity loan without the hassle of trying to prove what you really make each year. It can be difficult for these individuals to prove exactly what their real income is and this is why these no income verification loans exist.

The problem is that mortgage brokers have become greedy and they want your money. So what do they do? They use these no income verification home loans for people that cannot afford the conventional loan. They use them for people with good credit, but a very high debt to income ratio so that they can get the loan done.

This is not acting in the best interest of the client and is not good for you if you are considering this option. Home equity loans, No income verification will be needed for those who find it difficult to prove income, but not those who can prove that this is simply not enough for a traditional loan.

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Subprime Cheat Sheet

Friday, March 12th, 2010

It’s a challenge trying to keep track of the events of the current subprime mortgage crisis. Compare it to an over laden cart gathering momentum on a steep and rocky slope – now it’s built up so much speed, it’s passing by as a blur.

When looking at the causes of this crisis we’re hit with catch phrases such as Banking Liquidity Crisis, Mortgage Backed Securities, Interest-only Loans, Subprime Mortgages, and as of late the dreaded Bailout.

We gather around the water cooler, absently nodding in agreement when a co-worker mentions how Hedge fund losses have contributed to the crisis, but what does it really mean?

Consider this your subprime mortgage cheat sheet, defining some of these terms and explaining their contribution to current economic climate.

Subprime Mortgages: An alternative to a conventional mortgage, subprime mortgages allowed people with bad or no credit history to buy homes with very little or no money down. Not only are these considered high risk mortgages, but history has demonstrated that these homeowners are most likely to default when times get bad. Subprime Mortgages are considered the primary cause of the housing slump; eventually spreading their infectious roots throughout the stock market and general economy.

Interest-Only Loans: Generally used in conjunction with a subprime mortgage, homeowners were offered a payment plan where for a pre-determined length of time, they paid off only the interest, and no principal on their home. The banks and lending companies found quite a niche and it wasn’t long before the market was saturated with borrowers that should never have received mortgages to begin with.

When their “interest-only” period expired, borrowers switched to a conventional mortgage, but monthly payments often rose to unaffordable levels and forced them to default, leading to widespread foreclosures. Adding insult to injury, housing prices began to fall and often, these distressed home owners owed more money than their house was worth.

Mortgage-Backed Securities: Banks, laden with high risk mortgages, bundled them into mortgage-backed securities and sold them off to Fannie Mae, whose sole purpose was to resell these mortgages to private investors.

Hedge Funds: These are a higher risk, investment fund not privy to the same controls and safeguards as mutual funds. Hedge funds have invested billions in Mortgage-Backed Securities – when this unlikely pair met up, the stock market was flooded with unstable investment funds.

Suddenly the effects of these irresponsible lending and investment practices were visible in the form of a nationwide housing slump and economic crisis. Huge financial institutions the likes of Washington Mutual Bank, AIG and Lehman Brothers were over-burdened by the weight of high risk mortgages they could no longer sell off, and the resulting flood of foreclosures. Existing customers reacting out of fear, closed their accounts, withdrawing their life-savings.

Instilled with panic, investors recently withdrew over $140 billion from their money-market accounts, transferring the funds to U.S. Treasuries, causing values to decline to zero.

Federal Bailout: In an effort to stabilize the economy, a $700 billion bailout scheme has been proposed and rejected by congress. However, a 2nd draft was in the works during the writing of this article. In the proposal, the government would eradicate these debts from the banks, Hedge funds and pension funds, and basically give them a clean slate.

Some feel that this removes any burden of responsibility from the corporate giants who saw an opportunity and exploited it, and instead transfer the debt to the taxpayer. Alternatively, experts say if we don’t instigate some sort of bailout, it will be next to impossible for the average consumer to get a loan or mortgage. On the surface, this doesn’t seem so bad, after all that’s how the trouble began, with shaky borrowers getting loans they couldn’t handle. However, considering the amount of employment and industry that just those two products alone support, and the negative effect on the economy if people stopped buying cars and houses, this may be the bitter pill Americans need to swallow.

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Refinancing Home Loans

Wednesday, March 10th, 2010

Many people have had a long run with bad credit. Even so, they can get a home loan by opting for bad credit home loans. Many times you may need to refinance your home loans. You may want to do go in for it but you are unsure about how to get it. Various tips and tricks are mentioned below that will help you get a home mortgage refinance even if you have a history of bad credit.

What are the reasons for refinancing your mortgage?

There are various reasons to explain why people go in for refinancing mortgage. Some persons may consider it as a way to rebuild their credit. Some others may view it as an option by which they can save themselves from defaulting on their loan. This is because refinancing will give you loans of lower interest rate with easier repayment schedules. Thus, it will reduce your monthly repayments.

Should you seek expert advice?

Before signing the contract for mortgage refinance, it is always better to get expert advice relating to the scheme. He will see to it that you get all the benefits from the scheme. You can also get help from friends or relatives who have already taken mortgage refinance before. They will clearly guide you about what is the best mortgage refinance loan suitable for you.

How much should be the rate of interest in a refinanced home loan?

Rate of interest is not only an important factor that determines the choice of a home mortgage refinance loan but it is a vital factor that determines whether a person will go in for refinancing or not.

If you get a refinanced home loan at a low interest rate, it will be a big boon. Your interest payment outflow will be less and you will not have any need to default on your loan. Thus, your credit situation and your credit score will improve a lot.

Therefore take quotes from as many lenders as Perhaps before choosing one. If you are lucky, then, of course, to hit someone who refinance housing loan with low interest rate. Read the newspaper Agreement, including the small print of loan documents carefully to make sure there are no hidden costs or unexpected charges hidden in the contract.

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Failure to pay the mortgage payments

Monday, March 8th, 2010

You have taken out a mortgage loan, and have been paying your dues regularly as a responsible home owner. You have been paying your home owner insurance and keeping all the tax dues well up to date. But things do go wrong with people. You are suddenly faced with retrenchment and you lose your job. You may meet with an accident and get injured. You may be faced with a dilemma, whether to pay your mortgage installment or have your car repaired, which takes you to your job, by which you get to pay your mortgage installments. It is a catch 22 situation. Hoping that you would never face such situations, it is helpful to have knowledge, which could be helpful to you.

Under normal circumstances, mortgage loans carry a grace period of 15 days. In some cases this grace period is 10 days. Many of us put off our payments or delay the payments thinking of the grace period in the terms of the mortgage contract. Very little is thought about this, and even the lender, at times, does not take notice of this delay. As the grace period of 15 days end, on the 16th day a late fee is assessed, and there could be a friendly call from your lender regarding the matter. It just could be that this delay in payment would not even show up in your credit report. The total scenario changes on day 30. Things start to turn serious at this time onwards.

Mortgage defaulting laws varies from state to state in the US, and so does foreclosure law. The lenders approach the defaulters in various ways, which differ from how big the mortgage lenders are. On the 30th day, you incur an additional mortgage fee, which is usually 3% of the principal amount outstanding, which is a typical figure of $600,000 mortgage loan. As you pass the day 30, the lender would perhaps allow you to pay a partial sum out of the past due amount. Some lenders may also insist upon you to clear up all the dues and bring the account up-to-date.

By day 45, you will start to get phone calls from the mortgage collectors, and the frequency will gradually increase, limiting them to the law in that particular state. There may be aggressive demands of helping you with the foreclosure. By the end of 60 to 90 days, the lender will send you a demand notice for the amount pending. This notice is usually sent by certified mail, in which the lender provides you with a definite time, asking you to clear the outstanding within that time. The amount mentioned could carry additional charges of collection fees. If this goes unattended by you, the lender’s legal department will now take over the matter, and you will start incurring serious legal charges.

The law provides every opportunity to the owner to stop the process leading up to the foreclosure, even to the minute before the auctioneer’s hammer comes down. In some instances the opportunity may be available even beyond that. In some of the States, the statutory right of redemption shall come into force. You must know the law, so as not to mislead the ethics of some banks. The process of recovery can take place in the courtyard in front of the building in question, or it may be a "public outcry" on the steps of the District Court. This is inconvenient and scary, the owner of the house.

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Negative equity

Saturday, March 6th, 2010

Negative equity is the term used to describe a situation when a person’s mortgage exceeds the value of their home. It usually occurs during a period of falling house prices, and last reached a peak in the UK during 1990-93, when an estimated 1,680,000 homeowners were affected.

Although most people would prefer to avoid negative equity, as they perceive themselves to be worse off, it really only affects those who sell, or more likely are forced to sell, at times when house prices are falling. In the past, such periods have been followed by better times, when house prices have risen. So the majority of people, who were happy and able to ’stay put’ eventually, saw their property prices increasing again. At times, such increases have vastly outstripped previous paper losses, and houses have proved to be a sound investment, over the medium to long term.

People sell their houses for all sorts of reasons, but the worst reason in a depressed market, is to sell because you’ve got to. If this happens and you have negative equity, you will not have sufficient funds to pay off your mortgage. In such situations some mortgage lenders are more helpful than others.

If you find yourself having to sell whilst stuck with negative equity, discuss the situation with your mortgage provider, or other qualified financial adviser, as early as possible. You will want to avoid repossession, and a forced sale situation, whereby your house is sold at auction, possibly for even less than it is worth, even in a depressed market.

It may be that your mortgage provider will be prepared to offer terms that are more affordable to your existing circumstances. Such an arrangement could tide you over until property prices recover. Another way of preventing a forced sale, in a negative equity situation, could be obtaining a loan from parents or other close relatives, to help out, until personal circumstances improve.

In the past, most people burdened by negative equity, have been able to ride the storm until things got better. It can be a bitter blow to have to dispose of any asset when prices are falling fast. This is particularly so if the asset happens to be your home. However, for the majority who have sufficient funds to meet their obligations, negative equity may be no more than a passing phase.

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2 Mortgage with bad credit – Made Easy

Wednesday, March 3rd, 2010

There are many varied reasons why people want or need a second mortgage.

One common motive it that people want to pay off existing debts such as personal loans and credit cards. Such short term finance is usually more expensive than te longer term finance of a mortgage so in certain circumstances it can make sense to take out a second mortgage to clear such debts. Doing so can not only lower the amount of interest you pay each month on your debts but it can also help you to improve your credit score by paying off any other debts that are in arrears.

Another reason why many people take out a second mortgage is to fund some large one of expenditure such as home improvements, a new car or a holiday.

Most homeowners should be eligible for a 2nd mortgage. As with other forms of credit the better your credit score the better the mortgage you will be able to get. The worse your credit score the higher rate of interest you will have to pay on any additional finance products.

Another option to taking a separate 2nd mortgage loan is to refinance you existing mortgage loan and simply borrow a larger amount of money. This is known as releasing equity from you home. To do this you will need to have some existing equity in your home. In other words it is only possible if the market value of your home is grater than the current outstanding Balance of your mortgage loan.

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Avoid penalties for buying a second home

Monday, March 1st, 2010

Some homeowners, when facing the threat of a potential financial hardship, decide that their current house is just too expensive and will most likely become a target of foreclosure. The homeowners may not be behind yet, but they know there will be a loss of income or their mortgage payment will reset to a higher payment that they can not afford. So, there is often a tendency to purchase a new, smaller home before the crisis occurs and allow the old home to be taken away by foreclosure. In some cases, this is not such a bad idea. However, this is a decision that needs to be carefully considered and its outcome will depend on how quickly the homeowners can close on buying the new home. If they are already missing mortgage payments, then it will be difficult, if not impossible, to qualify for a new home loan. But if their credit still allows them to qualify for a mortgage, then they may want to attempt to get the new house as soon as possible and begin making a transition to a more affordable lifestyle.

Once homeowners start missing payments on the old house, the foreclosure process will start (especially if they planning on letting it go into foreclosure and are doing nothing to gain foreclosure advice or seek out options to save their home). The bank will sell the house at a sheriff sale, and the new owners will be able to evict the foreclosure victims and anything that is left in the old house. Purchasing a new house after this process has begun will be impossible due to the foreclosure status of the old house and the negative effect on one’s credit after several mortgage payments go unpaid.

Foreclosure victims should also be concerned about the danger of the bank suing them after foreclosure and trying to take the new house or attach a lien to it. If the house does not sell at sheriff sale for an amount to pay off the defaulted loan plus the extra foreclosure costs and late fees, the bank may be able to sue for a deficiency judgment and come after any other assets owned by the former homeowners. The bank will have to proceed with a new lawsuit after the foreclosure process is over, though, which will cost them additional time and resources.

However, banks almost never sue their former homeowners, because they know that homeowners face foreclosure because they are unable to continue paying the mortgage, and the mortgage company will not be able to collect on the judgment anyway. It costs them more time and money to sue the foreclosure victims and obtain a judgment, and there is little chance they will get the money in the end. At this point, most banks would rather prepare the foreclosure property to be sold on the open market and make their money back that way, rather than chase after a few hundred or thousand dollars, at most, from the former homeowners.

Not every state allows deficiency judgments after foreclosure, so homeowners spend some time researching their state foreclosure laws. There may be no danger at all after the foreclosure of the old house, and homeowners can close on a deal to purchase a new home before the foreclosure is even an issue. This is a bit of an underhanded technique to obtain a second home while intending to let the old house go into foreclosure, but homeowners who know they will not be able to afford a higher payment or will lose a portion of their income soon have a responsibility to plan for their own future and the future of their families. This whole method does raise moral questions, of course, which homeowners must answer in the context of their own family’s long-term financial health.

Purchasing a new home to bail out on a mortgage that will soon be too expensive can often provide homeowners with additional benefits in terms of their credit, as well. With two mortgages, the late payments and foreclosure of the first house will not drag down the homeowners’ credit scores as much as if they owned only one home. This can offset some of the devastating effects of foreclosure and allow foreclosure victims to obtain new credit in a much shorter time than if their only home was foreclosed. If homeowners understand the moral and financial consequences of such an action, this method of avoiding becoming a former homeowner can give families a great head start on the road to financial recovery despite a very Last foreclosures.

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