Wednesday, January 31, 2007

Take Finance at Easier Terms on Opting for Secured Home Loan

Are you facing hurdles in availing loan at your terms and conditions so that you get the much desired finance at low cost? Well, you can opt for secured home loan as both interest rate and overall cost are lower as per your budget. Its utilization is flexible with lenders offering the loan for a variety of purposes like renovation of home, making payments towards medical bills, buying vehicle, enjoying vacations or meeting expenses. Even previous debts can be paid off through the loan.

As is clear, borrowers can avail secured home loan against their property preferably home by placing it as collateral with the lender. For the lender, collateral serves the purpose of securing the loan as in case the loan is not paid back, lender is free to sell the property to get back the loan amount.

Because of collateral, secured home loan is offered at lower interest rate which is always way lower then unsecured loans. One advantage with secured home loan is that borrowers are in strong position in bargaining for further reduction in interest rate. This is possible if equity in the collateral or home in this case is higher and also the borrower asks for lower amount of loan then equity. Another way to achieve lowest possible interest rate is to take advantage of growing competition in the loan market. You should compare different loan offers for lower interest rate.

The loan is capable of meeting every borrower’s requirement. Lenders provide secured home loan in wide range from £5000 to £75000. If greater loan is the requirement then lenders will go for evaluation of equity in the collateral. Higher equity enables in getting larger loan.

As per financial standing, borrowers can choose a repayment term from 5 to 30 years that lenders usually provide. If one is going through bad phase the larger repayment term enables in regaining financial health. If saving money for expenses is also a concern then larger repayment term helps lot as monthly payment towards the loan installments is reduced.

In case of borrower labeled bad credit, secured home loan is available without hassle. Since the loan is well secured through collateral, lenders can ignore bad credit history as they are free to sell the property of the borrower if there is payment default.

To take secured home loan at low cost, apply online. You are flooded with loan offers from as many lenders with each one of them having own terms and conditions. You should compare loan packages to pick up the one having interest rate suitable to your budget.

Secured home loan is best source of cheaper finance that you were looking for. The loan not only meets monetary requirements but improves financial health. Make sure that monthly installments are cleared in time to escape pitfalls.

Applying For A Home Loan

Applying for a home loan may not be the most exciting way to spend your time, but if you are like many potential homeowners, it is probably a necessary evil. If you have some knowledge of the process ahead of time, however, it will go much more smoothly.

Home loan applications tend to be very long, but if you are prepared ahead of time you can finish the application procedure without breaking a sweat. Before you begin filling out the form, make sure you have available your Social Security number, information pertaining to previous employers and residences, recent pay stubs, copies of credit card and loan statements, copies of bank statements and asset information such as stocks, pension and retirement funds. Begin the form by simply filling out each line with the requested information but leave Section I, entitled Type of Mortgage and Terms of Loan, blank.

Next fill out Section II, Property Information and Purpose of Loan, with any of your available information. Only fill in the subject property address line, however, after you have an accepted offer on a property. If you don’t have a property yet, simply state the purpose of the loan as purchase or refinance, as well as the type of property the loan will cover (primary, secondary, or investment). Also write down all the names in which the title will be held, how the title will be held, and the source of the down payment (this is usually in cash).

In Section III, Borrower Information, you must fill out your personal information including name, Social Security number, phone, age, years in school, marital status, number of children and their ages, and present and previous employers.

Section IV is Employment Information, while Section V is Monthly Income and Combined Housing Expense Information (use your pay stubs for this section).

Section VI, Assets and Liabilities, can be filled out using bank statements, as well as credit card and loan statements. Leave Section VII, Details of Transaction, blank.

Finally, answer the question in Section VIII, Declaration, then sign and date the application. Also sign Section IX, Acknowledgement and Agreement.

Home Loan Applications Explained

You have finally found the home of your dreams. You have searched all over and are ready to purchase it. Before you even make your offer you should seek out the financing first. In some cases, it is easier to have a pre-approval in hand before making any financial commitment through a contract. Why get your hopes up after you purchase the home when you can buy with assurance and wait by the settlement table. Before you can buy anything, you will need to get accepted by a reputable lender. There is much you will need to know, as this will be the largest purchase you will ever make. You will need to fill out a mortgage application first.

As with any mortgage application, you will need to provide the necessary information to the lender so they can weigh the option to grant you the loan. This information is based upon your financial picture. It consists of your social security number, date of birth, and where you have worked for the past 3 years. This information will give the lender a good picture about your spending habits through a credit score. Depending on the score itself, the lender will make a financial decision to grant or deny your request. You may also have to explain certain circumstances in your life such as a job loss or credit rating should they not be up to par.

Upon completing the mortgage application review, you will be given an amount in which you can afford. Usually the sales price of the home is based upon 3� times your annual income. It is also equivalent to the percentage of debt to income ration determined by FHA (Federal Housing Authority). Should you meet these guidelines you will be given a green light to go and look for a house in this range. You may be able to afford more should you have a sizeable deposit. There are also programs that you can use to get into a house with only 3% down. Some lenders ask that you fill out the home loan application in person rather than online so that they can answer any questions during the process.

More Bang For Your Buck With Mortgages

Choosing a knowledgeable mortgage lender can make a difference in the quality of home you are able to purchase with your finances. I prefer to recommend a mortgage broker to my clients, because they usually offer 50 or more programs. Regular mortgage companies are usually locked into one source. Take time to research a mortgage lender. And, remember, creative financing can be the way to go if you need a higher priced home with more space.

Home buying is different now then when your parents or grandparents purchased a home. When they bought real estate, 30-year mortgages were the standard. That�s because 10-15 years ago, a person bought one or no more than two homes in their lifetime. Currently, Americans tend to own more than three homes in their lifetime.

Creative Financing

Find a lender who knows the business inside and out and can make your dollar go further. Ask your realtor to research the housing market in your area, to predict a rise in property value for that area. When you seek a mortgage, obtain quotes from three or more lenders. Make certain at least one of these is a mortgage broker. Ask how many loan products they have to choose from.

Flexible Mortgage

The 30 year mortgage is just one of many choices in the real estate loan market. Rebecca Nichols, a loan officer with Breakwater Mortgage in Virginia Beach, says, �It�s not so popular anymore to do a 30-year fixed loan. People want options to help them get the most value from their investment. Some want to pay lower monthly mortgages so out-of-pocked expenses are less. There�s no real reason anymore to be locked into a 30 year amortized loan.� Rebecca pointed out that in the beginning of the loan stages, most consumers are paying off the interest anyway.

A Twelve Mat Loan

This popular loan is based on the treasury market index, which is usually lower than the prime rate. For the first year the mortgage is at 1% interest. After that, it�s usually a loan that is 3-5%. Some advantages of this type of loan include a choice between three different types of payment plans: minimum payment, interest only or principal and interest.

Interest Only Mortgages

One new trend in mortgages that is very popular right now is interest only loans. The buyer may elect to make lower payments for two years, five years, or ten years.

Adjustable Rate Mortgage (ARM)

Generally, a homebuyer is locked into a certain interest rate for a 3-year period with an ARM loan. After this the rate fluctuates with the prime rate. Rebecca Nichols, a mortgage broker, says, �I usually recommend people commit to an ARM rate for 3 years. When the value of the home has gone up, I recommend they refinance into a 30-year fixed mortgage or another ARM, depending upon whether they want to stay in the home.� There are interest only ARM loans available too. These loans are popular with real estate investors because the mortgage is easier to cover if they lack a tenant for several months. Interest only ARMS often homebuyers will be able to obtain a bigger house or something closer to what they want with an ARM.

80/20 Combo � Fixed or ARM

Some clients prefer to avoid paying mortgage insurance, which is not tax deductible. If this is their preference, Nichols recommends �finance 80% of the loan in one loan, and 20% in another. ARMS can also be split this way.

30 Year Fixed Mortgage

If you plan on residing in the same home for at least 20 years, this is the perfect way to go. It�s a standard, fixed rate for the whole loan duration.

Remember to shop for a mortgage, just as you would for auto, home, health insurance, or auto loans. Be wary of obtaining your lender on the internet. Some sites may promise rock bottom interest rates, but the hidden costs and fees can add up. Also, having a lender present at the closing is an invaluable resource to the homebuyer. The loan officer or mortgage broker should be present to make certain the loan documents are correct and answer questions. A lender on another coast is probably not going to provide you with this type of service.

If you�re in the market for a home and a mortgage, choosing the right lender will help you get more bang for your buck and the type of dwelling you desire.

Second Mortgage Can Offer Fast Cash, Piece Of Mind

If used properly, there may not be a more effective financial option a homeowner can exercise than to take a second mortgage on their property. More and more American consumers have become aware of revolving debt and the implications it can have on them and their loved one � not just now but in the future.

Second mortgages can be used for practically anything, but they are most typically pay for outstanding education expenses, repairs ob your home or property, to procure higher value real estate, and to pay off high interest rate credit cards as well as to consolidate or eliminate other debts.

Naturally, it wouldn�t be fiscally sound to take out a second mortgage if it would not be in your best interest as a homeowner. With so many refinancing, borrowing, and other transaction options available to the modern consumer, when is taking out a second mortgage the right way to go? A second mortgage is a good choice for the homeowner who has a need for a substantial amount of cash and also has sufficient equity in a home.

Essentially, a second mortgage is a second lien against the value of the property, one which is paid back in monthly installments exactly the same as was the case with your first mortgage. Unlike the interest on unsecured loans and credit cards, second mortgage interest is generally tax deductible, and is therefore a viable solution to rid yourself of high interest rates which is often associated with other forms of debt.

An often overlooked nuance of obtaining a second mortgage is the very same due process which was involved in the first. All too often homeowners will take out seconds from the same financial institution used to obtain the initial mortgage. This stands to reason, as the mere thought of mortgaging your home once is overwhelming enough for a surprising amount of individuals who might otherwise benefit from the act to avoid it altogether. A second mortgage, though, is a very important financial decision (just as, if not more important than the first) and should be treated with the same diligence and research as the first. Obtaining information through several lenders or brokers on the second mortgage regarding home mortgages such as; how much can you afford, as well as ascertaining how much of a down payment you will need, and find out all the costs involved in the loan is as vital to the process the second time around as it is the first. Simply seeing the monthly payment or the interest rate on the lien itself is not enough. Knowing information about the same loan amount, loan term, and type of loan will allow you to compare the information from each lender and broker.

Do your homework; get a hold of the current mortgage rates and understand whether the rates are being quoted the lowest for that day or week. Question whether the rate is fixed or adjustable, keeping in mind all the while that interest rates for adjustable-rate loans go up, which will also make the monthly payment go up. If the rate is quoted for an adjustable-rate loan, determine how your rate payment will vary. Again, these factors are as important during the process of obtaining a second mortgage as they are during the first.

You might find that in considering a second mortgage, your financial situation would also lend itself to potentially refinancing a portion or even all of your existing debt. While serving essentially the same purpose as a refinance, a second mortgage can oftentimes be a more efficient and, ultimately inexpensive consolidation option. Of first and foremost concern to most with enough debt to consider a second mortgage on their home to pay off debt, a second mortgage enables you to eliminate high interest debt much more quickly than would be possible with a refinance alone.

The principle advantage of taking a second mortgage is its ability to allow the accomplishment of a specific goal, including but not limited to a reduction in the amount of interest being paid on credit cards (the principle reason homeowners choose a second mortgage as their most effective and efficient consolidation option). If the lien has a shorter pay-off term, the homeowner can look forward to one payment when the second mortgage is paid off. Once the decision is made that the goal is worth the investment, homeowners should shop for the right second mortgage lender, making sure that the one they select is reputable, responsive to their specific needs, and willing to discuss all of the costs up front. Keep in mind that these decisions have serious implications on your credit and foreseeable financial future. If your payments remain regular you�ll alleviate most of the interest rates pertaining to the loan and raise your credit rating.

Unfortunately, second mortgages are far from federalized; they vary widely from state to state and private institution to institution. Nearly as important to performing regular due diligence in observing and researching companies which you might do business with in obtaining a second mortgage is to ascertain the nature of state laws which may or may not limit the capabilities and rights you have as a consumer. In some states, for example, second mortgages do not require borrowers to have equity in their home and many new loans are available up to 125% of value of the security in question (of your home). Many consumers have also found these loans useful for paying off their bills, making home improvements, and taking out funds from the loan for personal use. In other areas, such policies are not possible. Ignorance of a state�s laws or financial regulations may not be used as an excuse and will not protect you from excessive obligations or pitfalls which may result from problems which arise down the road.

A second mortgage is more often than not the best option available for homeowners with large amounts of unsecured debt. Realizing the nuances of the mortgage process can not only help you to evade some of the problems you may have encountered during acquiring your first mortgage, but use the process to benefit you financially in the long run.

Home Mortgage Refinancing Tips

If you haven�t found the time to refinance your existing home mortgage, it�s time to take action. Every time Alan Greenspan, Federal Reserve Board Chairman, opens his mouth, you can bet that the federal funds rates will rise by at least a quarter of a point, or by 25 basis points in investorese. What that means to you is that home mortgages will rocket as well.

A quarter of a percentage point may not seem like much, given that the federal funds rate currently stands at 2 � per cent, but a reality check quickly reveals that you, personally, have probably never seen 2 � per cent interest on anything in your lifetime. Take a look at your credit card statements. Are you paying 2 � per cent on your credit? What about your home mortgage? Without getting technical, there�s little correlation between the federal funds rate and home mortgage rates except the direction in which they travel, and right now that direction is headed to the sky.

You�ve already missed the opportunity of a lifetime to lock in the lowest rates you�ll see for the foreseeable future, but you have a little more time to get your hands on relatively cheap money. The window of opportunity is rapidly closing, so if you�re going to refinance, you must do it as soon as possible.

Things you may not know about refinancing:

A small rate cut can pay off handsomely in smaller monthly mortgage payments.

Smaller monthly mortgage payments will decrease your tax deduction, because you will no longer be paying as much interest as you�ve been paying. Factor this in, because it�s the total savings that matters.

You can and should ask to have fees waived or reduced: application fees, origination fees, appraisal fees, legal fees, points, and closing costs.

If you don�t have cash on hand to pay fees, you can get them tacked on to the mortgage, paying nothing out of pocket for your refinanced home mortgage.

If you refinance and shorten the term of a home mortgage, you will pay a higher monthly payment, but you�ll save a significant amount of money over the term of the mortgage in addition to paying off your home and building equity faster.

Standard mortgage terms run 15 years or 30 years. If you�d prefer a term somewhere in between the standard terms, ask for a custom loan and designate a term that works better for you. Find a term that strikes a balance between a term shorter than 30 years and monthly payments lower than those of a 15-year mortgage.

If you cannot get a custom term, settle for a 30-year mortgage and pay more than the monthly payment to pay off the loan sooner. You must also negotiate no pre-payment penalty.

Where to go from here

1. Review your credit record with each of the three credit bureaus: Equifax, TransUnion and Experian. Mistakes are common in credit reports, and you may be surprised at what you find: accounts that do not belong to you, balances that do not match your statements, an identity mistake or worse. Correct any bad information.

2. Compare mortgage rates and fees online among several finance companies.

3. Use a good mortgage calculator. Using refinance calculators is the only way to determine which loan is the better all-around deal.

Work fast, but negotiate hard to make a deal that works for you. The loan company wants your business as badly as you want a better rate.

Interest Only Mortgage Loans

There are many benefits to interest only mortgage loans. There are many situations where an interest only mortgage loan could be best for you.

Here are some of the situations where an interest only mortgage loan might be beneficial to you:

1. If you are in a situation where your income is sporadic and would rather have the option of paying as little as possible sometimes and then paying larger amounts when there is more income, for example, a real estate agent or loan officer.

2. If you are investing your mortgage payment savings in something else that is low risk, and has a much higher return on your money than your house payment.

3. If you are temporarily in a situation where your income will be low for a while but then increase later on.

4. If your mortgage is only temporary, for example, an investor looking to flip a property or someone who is working on a fixer upper. It would be good in any situation where it would be in your best interest to keep the payment low as opposed to creating equity in the home.

How much can you save with an interest only mortgage loan? For loan amounts under 500,000 you can usually save around 10% or more off of your mortgage payment. However, that number can vary depending on your individual situation.

An interest only mortgage loan can be very beneficial because it can help you save money on your payment when there are other things that you would like to invest your money in. It also gives you flexibility when your income is sporadic and you need to make sure that you will always be able to make your payment on time.

There are many lenders that can help you with an interest only mortgage loan.

Home Equity Loan Onlines

If you are wanting to get a home equity loan, rates are still low enough that you may want to make use of that equity in your home. Do you need some ideas on what you could do to multiply your equity or make some extra money off of the capital that could be available to you?

Here are some suggestions of ways to put the equity to good use when you go to take out a home equity or cash out refinance loan.

1. Do a home improvement that will increase the equity in your home more than the cost of doing the improvement. As an example, I have heard rumors that adding a deck to a home, because of the amount it increases the homes resale value, can add up to 4 times the cost of actually installing the deck.

2. If you have a low interest rate on your home, invest your equity in a low risk investment that has a much higher return on your money.

3. Buy an existing business or start a new business with the equity capital in your home. If you can start a low risk business, take the opportunity to let your equity work for you.

4. Use the equity as a down payment on an investment property or a rental.

5. Use it to consolidate high interest debt and possibly save yourself hundreds of dollars a month to put toward something else.

6. Use it to finance your education and increase your earning power.

7. If you live in an area zoned for this, you could finish a basement or area of the house to rent out. You could create a separate living space or apartment on your property.

Just be careful to not do anything risky with the equity in your home. If you can get a low enough rate, it may be worth taking that money and investing it somewhere else.

Home Equity Lines Explained

More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please, at an interest rate that is relatively low. Furthermore, under the tax law-depending on your specific situation-you may be allowed to deduct the interest because the debt is secured by your home.

If you are in the market for credit, a home equity plan may be right for you or perhaps another form of credit would be better. Before making this decision, you should weigh carefully the costs of a home equity line against the benefits. Shop for the credit terms that best meet your borrowing needs without posing undue financial risk. And, remember, failure to repay the line could mean the loss of your home.

What Is a Home Equity Line of Credit?

A home equity line is a form of revolving credit in which your home serves as collateral. Because the home is likely to be a consumer’s largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses.

With a home equity line, you will be approved for a specific amount of credit-your credit limit-meaning the maximum amount you can borrow at any one time while you have the plan.

Many lenders set the credit limit on a home equity line by taking a percentage (say, 75 percent) of the appraised value of the home and subtracting the balance owed on the existing mortgage. For example:

Appraisal of home $100,000
Percentage x75%
Percentage of appraised value
Less mortgage debt
Potential credit line

In determining your actual credit line, the lender also will consider your ability to repay, by looking at your income, debts, and other financial obligations, as well as your credit history.

Home equity plans often set a fixed time during which you can borrow money, such as 10 years. When this period is up, the plan may allow you to renew the credit line. But in a plan that does not allow renewals, you will not be able to borrow additional money once the time has expired. Some plans may call for payment in full of any outstanding balance. Others may permit you to repay over a fixed time, for example 10 years.

Once approved for the home equity plan, usually you will be able to borrow up to your credit limit whenever you want. Typically, you will be able to draw on your line by using special checks.

Under some plans, borrowers can use a credit card or other means to borrow money and make purchases using the line. However, there may be limitations on how you use the line. Some plans may require you to borrow a minimum amount each time you draw on the line (for example, $300) and to keep a minimum amount outstanding. Some lenders also may require that you take an initial advance when you first set up the line.

What Should You Look for When Shopping for a Plan?

If you decide to apply for a home equity line, look for the plan that best meets your particular needs. Look carefully at the credit agreement and examine the terms and conditions of various plans, including the annual percentage rate (APR) and the costs you’ll pay to establish the plan. The disclosed APR will not reflect the closing costs and other fees and charges, so you’ll need to compare these costs, as well as the APR’s, among lenders.

Interest Rate Charges and Plan Features

Home equity plans typically involve variable interest rates rather than fixed rates. A variable rate must be based on a publicly available index (such as the prime rate published in some major daily newspapers or a U.S. Treasury bill rate); the interest rate will change, mirroring fluctuations in the index. To figure the interest rate that you will pay, most lenders add a margin, such as 2 percentage points, to the index value. Because the cost of borrowing is tied directly to the index rate, it is important to find out what index and margin each lender uses, how often the index changes, and how high it has risen in the past.

Sometimes lenders advertise a temporarily discounted rate for home equity lines-a rate that is unusually low and often lasts only for an introductory period, such as six months.

Variable rate plans secured by a dwelling must have a ceiling (or cap) on how high your interest rate can climb over the life of the plan. Some variable-rate plans limit how much your payment may increase, and also how low your interest rate may fall if interest rates drop. Some lenders may permit you to convert a variable rate to a fixed interest rate during the life of the plan, or to convert all or a portion of your line to a fixed-term installment loan. Agreements generally will permit the lender to freeze or reduce your credit line under certain circumstances. For example, some variable-rate plans may not allow you to get additional funds during any period the interest rate reaches the cap.

Costs to Obtain a Home Equity Line

Many of the costs in setting up a home equity line of credit are similar to those you pay when you buy a home. For example:

A fee for a property appraisal, which estimates the value of your home.

An application fee, which may not be refundable if you are turned down for credit.

Up-front charges, such as one or more points (one point equals one percent of the credit limit).

Other closing costs, which include fees for attorneys, title search, mortgage preparation and filing, property and title insurance, as well as taxes.

Certain fees during the plan. For example, some plans impose yearly membership or maintenance fees.

You also may be charged a transaction fee every time you draw on the credit line.

You could find yourself paying hundreds of dollars to establish the plan. If you were to draw only a small amount against your credit line, those charges and closing costs would substantially increase the cost of the funds borrowed. On the other hand, the lender’s risk is lower than for other forms of credit because your home serves as collateral. Thus, annual percentage rates for home equity lines are generally lower than rates for other types of credit. The interest you save could offset the initial costs of obtaining the line. In addition, some lenders may waive a portion or all of the closing costs.

How Will You Repay Your Home Equity Plan?

Before entering into a plan, consider how you will pay back any money you might borrow. Some plans set minimum payments that cover a portion of the principal (the amount you borrow) plus accrued interest. But, unlike the typical installment loan, the portion that goes toward principal may not be enough to repay the debt by the end of the term. Other plans may allow payments of interest alone during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that entire sum when the plan ends.

Regardless of the minimum payment required, you can pay more than the minimum and many lenders may give you a choice of payment options. Consumers often will choose to pay down the principal regularly as they do with other loans. For example, if you use your line to buy a boat, you may want to pay it off as you would a typical boat loan.

Whatever your payment arrangements during the life of the plan-whether you pay some, a little, or none of the principal amount of the loan-when the plan ends you may have to pay the entire balance owed, all at once. You must be prepared to make this balloon payment by refinancing it with the lender, by obtaining a loan from another lender, or by some other means. If you are unable to make the balloon payment, you could lose your home.

With a variable rate, your monthly payments may change. Assume, for example, that you borrow $10,000 under a plan that calls for interest-only payments. At a 10 percent interest rate, your initial payments would be $83 monthly. If the rate should rise over time to 15 percent, your payments will increase to $125 per month. Even with payments that cover interest plus some portion of the principal, there could be a similar increase in your monthly payment, unless the agreement calls for keeping payments level throughout the plan.

When you sell your home, you probably will be required to pay off your home equity line in full. If you are likely to sell your house in the near future, consider whether it makes sense to pay the up-front costs of setting up an equity credit line. Also keep in mind that leasing your home may be prohibited under the terms of your home equity agreement.

Comparing a Line of Credit and a Traditional Second Mortgage Loan

If you are thinking about a home equity line of credit you also might want to consider a more traditional second mortgage loan. This type of loan provides you with a fixed amount of money repayable over a fixed period. Usually the payment schedule calls for equal payments that will pay off the entire loan within that time. You might consider a traditional second mortgage loan instead of a home equity line if, for example, you need a set amount for a specific purpose, such as an addition to your home.

In deciding which type of loan best suits your needs, consider the costs under the two alternatives. Look at the APR and other charges. You cannot, however, simply compare the APR for a traditional mortgage loan with the APR for a home equity line because the APRs are figured differently.

The APR for a traditional mortgage takes into account the interest rate charged plus points and other finance charges.

The APR for a home equity line is based on the periodic interest rate alone. It does not include points or other charges.

Disclosures from Lenders

The Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable-rate feature. And in general, neither the lender nor anyone else may charge a fee until after you have received this information. You usually get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened. If any term has changed before the plan is opened (other than a variable-rate feature), the lender must return all fees if you decide not to enter into the plan because of the changed term.

When you open a home equity line the transaction puts your home at risk. For your principal dwelling, the Truth in Lending Act gives you three days from the day the account was opened to cancel the credit line. This right allows you to change your mind for any reason. You simply inform the creditor in writing within the three-day period. The creditor must then cancel the security interest in your home and return all fees-including any application and appraisal fees-paid in opening the account.

Reward yourself for your good credit!

No lump sum at close of Escrow! You may use the money for remodeling, college, vacation, investments or money needed over a long period of time. You have access to your credit amount through checks or credit card. Your payment is based on the outstanding balance for any month (Not on the entire credit amount!). The money you pay back can be used over and over again. You can also use the money for the first 5 years (draw period) and must be paid back during the last 10 years (payback period).

You interest rate is adjustable based on prime +. During the draw period, you can make a minimum payment of 1% any month. In the pay back period, the full rate is paid. This is especially great if you need some cash but plan to pay off the loan in less than 5 years because you will pay less interest during that time!

Good credit scores are usually required - because of the risk.

Getting A Mortgage Loan After Bankruptcy

If you have a recent bankruptcy on your credit and are looking to get financing for a home, there is hope. Buying a home with bad credit will just put more emphasis on the other two factors needed to get a mortgage loan, which are; income verification and a down payment.

After bankruptcy most lenders want you to wait at least 2 years from the time of the bankruptcy discharge before they will consider you for a mortgage loan. After the two year waiting period is over, you should be able to get financing easily. You should also be able to get 100% financing as well. You can usually achieve this as long as at least most of your payments have been reported to the credit bureau as having been paid on time since the discharge of your bankruptcy.

If you are looking to get a mortgage loan after bankruptcy sooner than the 2 years from the time of discharge, you will need to have almost flawless payment history since your bankruptcy discharge. Also, you may need to have a down payment. If you have even 3-5% to use as a down payment, that may be enough to help you get approved.

There are ways to get a down payment for your mortgage besides having the money saved in the bank. Here are some ideas of ways to do that:

1. Borrow or ask for a gift from relatives. After you have financed the house, you can usually go and take out a 2nd or 3rd mortgage up to the full value of your house, and then you could repay the relatives. Keep in mind that if you intend the money to be as a loan only from the relatives, you would need to disclose that to the lender before you close. Lenders usually have regulations about where the down payment is coming from and if you are not honest, it could be considered defrauding a lender.

2. There are down payment assistance programs like Neighborhood Gold or the Nehemiah program. These programs basically aid the seller in helping you with a down payment. Receiving a down payment from the seller of the property is illegal, but through these programs, it is legal. There are also other down payment assistance programs which are grants and do not need to be repaid or paid for by anyone. To find out about these, do a search on �down payment assistance� with your favorite search engine.

3. You could cash out a 401K or another investment and like in the first example, repay yourself with a 2nd or 3rd mortgage after the loan has closed.

Mortgage loans after bankruptcy are getting to be much easier to obtain these days.

Buying A House With No Money Down

The current home buying frenzy has resulted in rapid escalation of home values during the last several years. Certain areas of the country have seen values climb by 100% or more during the last four years. Many first time home buyers have sat on the sidelines watching as the cost of owning a home has spiraled out of reach.

Traditionally, future home buyers were taught to save their money to get into their first home. This thinking left many with a dilemma. How does one save money when they are stretched too thin on a monthly budget with high rental prices and little to no tax deductions? It is and has always been nearly impossible. Federal Housing Administration (FHA) was the only option for low down payments up to the late 1990s until some of the larger mortgage investors came up with their own low down payment options and took on the larger risk of home depreciation by requiring little to no money down.

How do you get a low to no money down loan?

First, talk with a qualified company that has experience with 100% financing and first time home buyers. Check local mortgage Web sites to see some innovative programs.

Second, find out how much you can afford based on your monthly income and budget. It is a good idea to add in all of your expenses so you are leaving room for entertainment. Yes, many people sacrifice a bit of their �Pleasure� expenditures when buying their first home. You will not be alone in this respect. Don�t forget the tax deduction you will receive as a home owner, in most cases. The tax savings should improve your monthly cash flow.

Third, get a good credit check up. You can obtain a credit report on yourself. You should obtain the credit score version because they will be important on most 100% financing programs. Your scores should be somewhere above 640 or more to qualify for most programs, though some programs allow lower scores than that.

Forth, obtain a pre approval letter from your lender or broker so you can present this to your Realtor when shopping for your home. Make sure the terms and costs are accurate so you don�t have any surprises at the closing table.

Fifth, don�t bite off a larger payment than you can afford. Many times, lenders allow you to spend 50% to 55% of your monthly gross income on your credit items. This doesn�t always leave much for essentials like groceries and utilities.

Lastly, remember the first year of home ownership is usually the toughest. After a year or two, you can generally refinance your home loan into one loan that may be a better interest rate, depending on where interest rates are at the time of refinancing. The plan is to eventually have equity and start your nest egg growing.

Choosing The Right Lender

The real estate market has been hot for many years. The real estate market stayed hot even though the economy has been on a virtual roller coaster. This has resulted in a large number of mortgage lenders entering the market with varying mortgage programs for people with different economic backgrounds and credit histories.

Home loans are now available for people with pristine credit, good credit, average credit, below average credit and even bad credit. There are loan packages available for people with large down payments, small down payments and no down payments at all.

For many first time homebuyers, choosing the right lender and the right home loan package may seem like a daunting task. There are so many competing lenders promising so many different things. They see advertisements for amazing interest rates and packages. Of course, those packages are only available for a small percentage of homebuyers who fit very specific criteria.

Many first time homebuyers fall into the trap of applying for home loans through various lenders offering different loan packages. While on one level this may seem like a good idea since it, at least in theory, opens up the number of possibilities for obtaining the right loan package for that homebuyer, the simple truth of the matter is these group of lenders may actually have less mortgage packages at their disposal, even added together, than some lenders and lending networks will have individually.

If you apply to a number of home loan lenders, each will invariably run your credit report. An inquiry on a credit report is noted and will affect your overall FICO score. Your FICO score is a credit score that compares you to all other people in the country with a credit history. This number can put you in certain mortgage programs and take you out of others. The last thing you want to do is engage in any activities which could lower your FICO score at the time you want it to be the highest possible.

With proper homework you can find a mortgage lender or network of lenders that will have enough loan packages at their disposal to have one that is right for you. The more they have at their fingertips the more likely it is that they can create a mortgage package that fits your unique circumstances. Even if you think your home loan will be fairly straightforward you may still benefit from a home loan lender that has a number of varying packages. Perhaps they can show you unique ways to have lower payments, avoid PMI, reduce the down payment you were going to make without it impacting your monthly payments and so forth.

Most first time homebuyers are typically unaware of the nuances involved in home loans. They are typically unaware of things like PMI, escrow payments, fixed rate loans versus variable rate mortgages and their respective benefits and drawbacks. A skilled mortgage lender will be able to explain these differences and show you a number of different options, including the option that may be right for you.

It is important to completely honest with your mortgage lender, unfortunately, too many homebuyers try to pull the wool over the eyes of the lender - this never works. In the end everything comes out in the wash - the more honest you are upfront the more options your mortgage lender will be able to review for you.

Look for a lender that clearly states that they can assist people with various types of home loan packages, including differences in credit history, employment history and down payment size. Again, the more tools they have in their toolbox, the more likely it is that they can craft the right loan for you.

Many websites now offer pre-screening services that can match you up with the right lender without each lender running your credit. Accurate and honest information is important when using these websites otherwise you may be paired with the wrong lender which will delay your getting the loan you need and could also hinder your chance to get the home you are hoping to get.

When speaking with your lender you should always feel comfortable to ask questions. The lender may not always be able to give you an instant response, but you should prefer that they find out the answer before giving you a quick but wrong answer. You should also feel that your lender is giving you honest information. If you feel like he or she is lying to you then that is not the right lender for you to be working with.

It is a good practice to provide your lender with whatever information they request. Never give them an original document and always make sure you have additional copies of anything they request. Calendar all cut-off dates they give you and make sure you stay on top of it. You will want a lender that is responsive to your inquiries and prompts you when things are needed or cut-off dates are approaching.

Picking a lender is picking a partner. You want to find the right partner for you that will be able to provide you with what you need while you provide them with what they need. Together, you and the lender will have you well on your road to homeownership and a stronger financial portfolio.

Mortgage Glossary

Adverse Credit

The term used if the borrower has a poor credit history. This could include previous mortgage or loan arrears, bankruptcy or CCJ’s. Other terms used to describe an adverse credit mortgage include bad credit mortgage, poor credit mortgage, non status mortgage, credit impaired mortgage, no credit mortgage, low credit score mortgage

APR (Annual Percentage Rate)

The interest rate reflecting the cost of a mortgage as a yearly rate. The APR provides home buyers with the ability to compare different types of mortgages based on the annual cost of each.

Arrangement Fee

The fee you pay your Lender in return for them providing you with a mortgage. Usually paid on completion or with your application, these fees usually apply when you take out a fixed rate, discount or cashback mortgage.

AST (Assured Shorthold Tenancy)

A form of tenancy that gives the landlord the right to repossess their property after a set amount of time laid out in the tenancy agreement. New tenancies are automatically ASTs unless otherwise stated.

Assured tenancy

The landlord can charge a market rent (the current rate for similar property in that area) and take back the property under certain conditions, as set out in the Housing Acts of 1988 and 1996.

Bridging Loan/Finance

Short term loan to enable the purchase of one property before the sale of another essentially releasing funds that are required for the purchase. You should always consult a professional before considering any bridging finance as it could be a solution that is worse than the problem.

Brokers Fee

A fee charged by an intermediary or advisor for locating the most appropriate mortgage for the borrower.

Buildings Insurance

Insurance you can take out when you buy a property that will cover the cost of any damage to the house and or contents..

Buy to Let

A mortgage meant for those who wish to purchase a property to rent out to others. The decision on whether you are able to repay this type of mortgage is often based up on the future rental income from the property rather than the personal income of you the borrower.

CCJ (County Court Judgment)

A judgement reached in the County Court generally realted to non payment of a loan, mortgage etc debt in general. If you pay off the debt, the CCJ will be satisfied and a note is put on your records that states this.


A housing ‘chain’ made up of a number of buyers and sellers, essentially the line of buyers and sellers involved in each house move.


Any right or interest, especially with a mortgage, to which a freehold or leasehold property may be held. Basically a charge is the claim the lender has on the property until the mortgage or loan is satisfied.


The term used when the seller and buyer exchange the finances required to buy a property through their respective solicitors. At exchange of contracts a deposit, usually 10%, will have been paid. At this point the buyer becomes legal owner of the property.


The legal process in which ownership of the property is transferred from the seller to the buyer. Generally undertaken by a solicitor, or licensed conveyancer.

Early Redemption Fee

If you decide that you want to sell your property or remortgage then you will be redeeming you mortgage early. Most lenders charge a penalty fee, especially during any period of a fixed, capped or discounted rate. Be sure you are clear about any potential penalties when you are about to take on a mortgage.

Equity and negative equity

The amount of value in a property that isn’t covered by a mortgage - simply take the amount of the mortgage from the valuation to work out the equity. vThis is where the money you owe on the mortgage is greater than the value of your property.

Exchange of contracts

The contract is a written agreement that lays out the terms between the buyer and the seller. When both parties exchange
contracts, usually weeks before completion, the deal becomes legally binding. Often a deposit of around 10%, is paid at this stage.

Fixed Rate

A set interest rate on a mortgage fixed for a period of time. This varies from lender to lender.


If you are the property owner outright then your property is freehold. Most houses are freehold wheres many flats are leasehold, since you are not the owner of the whole building containing the flats.


If you are in the process of purchasing a property and your offer has been accepted but the seller gets a better offer, before you complete, and takes it then, you’ve just been ‘Gazumped’.

Interest Only Mortgage

A mortgage whereby the borrower is only required to pay inerest on the amount borrowed during the mortgage term. It is the borrowers responsibility to ensure that enough funds will exist (either through an investment policy or other means) to repay the full mortgage at the end of the term.


A mortgage broker or advisor who finds the most suitable mortgage for a borrower and arranges the mortgage on their behalf.


If you buy a leasehold property you don’t own the property rather the right to live there for a specified period of time, however much time remains on the lease. The owner of the property is called the freeholder or landlord.


This relates more to commercial mortgages. With a commercial mortgage liability for the repayment of the loan depends on the legal structure of the business:

A sole trader will be personally liable for the mortgage debt. Personal assets could be seized if the business defaults.
Partners are jointly liable for the debts of the partnership and their personal assets are at risk.
With a limited-liability partnership and a limited company, the liability falls firstly on the business rather than on the individual partners and directors. The lender may take a floating charge on business assets in general, rather than simply on the current property being purchased.

The lender may also insist on personal guarantees as a condition of granting the loan, in which case the partners and directors may be held personally liable anyway.

Life Insurance

If you have a joint mortgage, life insurance can be acquired that will see the mortgage paid of should one of you pass on.

LTV (Loan to Value)

The size of the mortgage as a percentage of the value of the property i.e. A �90k mortgage on a house valued at �100k would mean an LTV of 90%.

MIG (Mortgage Indemnity Guarantee)

A one off payment made when you set up a mortgage a kind of insurance policy for the lender. This offers them protection against the value of the home falling to less than the mortgage. It is generally only charged to borrowers with a less than 10% deposit, but this can vary.


A loan to buy a property where the property is used as security against you paying back the loan.


The company or organisation that lends you the money.


The person taking out the mortgage.


Where a lender may not require income details from you or may accept some previous poor credit history i.e. CCJ’s or previous mortgage arrears.

Payment Holiday

A period during which the borrower makes no mortgage payments.

Regulated tenancy

A legal right to live in your accommodation for a period of time. Your tenancy might be for a set period such as a year (this is known as a fixed term tenancy) or it might roll on a week-to-week or month-to-month basis (this is known as a periodic tenancy).You are a regulated tenant if you moved in before 15 January 1989, you pay rent to a private landlord and your landlord does not live in the same building as you.


The taking on of a second mortgage to pay off the first. The most common reasons for doing this are that another mortgage is available at a better rate or that the value of the property has gone up allowing for the opportunity to borrow more money against the property.

Right to Buy

For example, a tenant in a council owned property may purchase the property at a discount depending on length of their tenancy.

Self Certified

Generally when a borrower applies for a mortgage he or she will be asked to provide pay slips or company accounts to prove their income. If it is difficult or inconvenient for you to provide this evidence, you can choose to self-certify your income. This involves signing a declaration which states your income sources and amounts. Lenders will charge you higher rates than average and offer you a limited range of mortgages if you choose to self-certify your income, in general it’s not a good idea to self-certify just to avoid some paperwork.

Stamp Duty

Tax paid by the buyer of a property set at 1% for properties over �60k, 3% for properties over �250k and 4% for properties over �500k.

Structural survey

The most wide ranging check of the structure of a property. This is carried out by professional surveyor and should uncover any defects or faults with the building.


A legal written agreement between a landlord and tenant that sets out the terms of the rental.


The period of years over which you take the mortgage and repay it.

Term Assurance

An insurance policy designed to repay the mortgage on the death of the insured person. Level Term Assurance covers a principal sum throughout the policy term and pays out the full amount on death. Reducing Term Assurance is designed to repay the balance outstanding on a repayment type mortgage upon death. Term Assurance may also pay out early on the diagnosis of a terminal illness.


The process of evaluating a loan application to determine the risk involved for the lender. This involves an analysis of the borrower’s creditworthiness and the quality of the property itself.


Where the property is owned outright and no mortgages or loans are secured against it.


A simple check of the property in order to find out how much it is worth and whether it is suitable to secure a mortgage against.

Valuation Fee

The fee paid by a borrower to cover the cost of the lender checking that the property is suitable security for the mortgage.

Variable Rate

A type of interest rate the lender can charge. It goes up and down and your repayments change accordingly.


The person selling the property.

When Not To Agree To A Home Equity Loan

Before you borrow money on your home’s equity, think twice so you don’t end up paying more than you expected.

According to the Federal Trade Commission, homeowners-particularly elderly, minority and those with low incomes or poor credit should be careful when borrowing money based on their home equity. Certain abusive or exploitative lenders target these borrowers, who unwittingly may be putting their home on the line. Abusive lending practices range from equity stripping and loan flipping to hiding loan terms and packing a loan with extra charges.

When not to agree to a home equity loan:

- If you don’t have enough income to make the monthly payments.

- If the loan terms are incredibly unfavorable to you, with enormous up-front costs and high interest rates (sometimes exceeding 50 percent).

- If there are discrepancies between the promised or stated interest rate and the annual percentage rate (APR) figure required in all consumer loan contracts (Truth in Lending). If that figure is significantly higher than the rate stated in the contract, the loan contains hidden interest charges.

- If you can�t determine who the lender is. A lender could be nothing more than a few individuals in for a quick score. Does the agent have an office? Is the company an old and established one with community ties?

- If you haven�t read or if you don�t understand the loan terms or you�re being pressured into signing the loan document.

- If the loan includes extra products you don’t want.

What to do before you Agree to a home equity loan:

Have a financial adviser such as an attorney or accountant review all papers before signing anything. Paperwork for a loan contract is often technical and unclear. Read all items carefully. If you need an explanation of any terms or conditions, talk to someone you can trust, such as a knowledgeable family member or an attorney. Keep careful records of what you’ve paid, including billing statements and cancelled checks. Consider all the costs of financing before you agree to a loan.

Refinance Your Property Online

By refinancing your property online you can take advantage of competitive rates in the convenience of your home. You should consider refinancing your property if interest rates are lower, your financial situation has improved, or your credit rating has improved. Once you are ready to refinance, search for lenders� rates online for easy comparison shopping.

When To Refinance

Lower interest rates for mortgage loans are a prime time to refinance, but there are other times to consider refinancing too. For instance, if your financial situation has improved through a higher salary or extra cash reserves, then you may qualify for lower interest rates even if rates for mortgages in general haven�t fallen. The same applies for improved credit ratings.

In addition to lowering rates, you can also withdraw equity from your property to invest in land improvements or pay off high interest credit cards.

Finding Lenders

Lenders� rates vary as much as 5% between financing companies, so it makes sense to shop around. Online lending websites allow you to quickly compare rates through general quotes. For an actual refinancing quote, you will need to provide more detailed information, but general quotes will give you a rough idea of who is the most competitive.

Besides comparing rates, look at lenders� fees and points. These hidden loan costs can mean the difference of thousands of dollars. When comparing loans, add the interest you will pay over the course of the loan and all fees and points to get the total cost of the loan.

Requesting Quotes

Once you have picked a handful of potential lenders, request actual loan quotes from them. Online lenders will require you to fill out a detailed questionnaire, providing information about you and the property. Job history, property location, and other details are all factors in determining your refinancing rates. Requesting refinancing quotes will not lock you into a loan, but will ensure you are getting a competitive financing package.

Applying Online

You can finish the refinancing process online by completing your application through the lender�s website. Typically, if you have received a detailed quote, your application is practically finished. Once you have given the go ahead, the lender will send out the final paperwork for your signature and approval. The loan process from beginning to end usually takes less than six weeks.

Make Money the Right Way

Do what you love. Do it legally. Provide real value. Enhance your life as you work in a profession that fills you up instead of sucking the life out of you. Lots of people work in jobs they hate due to a feeling of obligation and a lack of hope. You can make your dreams come true, but doing that usually involves working in a field that provides value to others and at the same time is enjoyable to you.

Working a job that doesn’t renew your spirit and or put a smile on your face in the morning is a slow death. Life is too short for that. If you are working a job that drains you, sit down and have a heart to heart talk with yourself. You’ve really got two options: find a way to love or at least tolerate the job you’re currently working or switch to a new job that will really light your fire. Things to consider are your current skills and interests, but under no circumstances should you underestimate what you can achieve. If you can believe it and feel good about it, you can do it. If you don’t currently have the skills, you’ll acquire them. If you need something to facilitate doing your new job, you’ll acquire that too. Blind faith will work miracles in your life if you just get your logical mind out of the way long enough to let it.

An illogical concept that can really gum up your prospects is the idea of scarcity; the idea that there’s a finite supply of things to go around – and if you don’t take yours, maybe you won’t get any. There is an infinite supply of things in the universe. There is an infinite supply of opportunities. They are created by what you think and what you feel. Take responsibility for the potential of your own greatness and kick some butt out there. All the money you could ever want and need is yours – you just have to believe in yourself.

Monday, January 29, 2007

Types of Homeowner Insurance

There are 6 different types of Homeowner insurancemeowners insurance in general that are consistently utilized. Of these Homeowner insurance-3 is the most usual policy then it is followed by Homeowner insurance-4 and Homeowner insurance-6. Others less used, but still important, are Homeowner insurance-1, Homeowner insurance-2 and Homeowner insurance-5. Everyone is described below:

Homeowner insurance-1

A limited policy that offers varied degrees of coverage but includes items that are specifically included in the policy. These may be used to include a valuable object in the Homeowner insuranceme, such a painting or certain types of jewelry.

Homeowner insurance-2

Similar to Homeowner insurance-1, Homeowner insurance-2 is a limited policy in that it will cover only specific portions of a Homeowner insuranceme against damage. The coverage is ordinarily a "named perils" policy, which lists the cases that would be covered. As above, these factors must be spelled come in the policy.

Homeowner insurance-3

This policy is the most common one written for a owner and is designed to cover all aspects of the Homeowner insuranceme, its structure and it contents. Also includes any liability that will arise from daily living. This includes visitors in the Homeowner insuranceme that might encounter an accident or even injury on the premises. Covered aspects of liability must be clearly spelled out in the policy to insure proper coverage. The coverage is ordinarily called "all risk".

Homeowner insurance-4

This is unremarkably referred to as renter's insurance. Similar to Homeowner insurance-6, this policy covers tHomeowner insurancese aspects of the living accommodations and its contents not specifically covered in the blanket policy written for the renter's complex. This policy can, as well, cover liabilities arising from accidents and injuries for guests and passers-by up to 150' of the renter's complex.

Extremely low in cost and high in coverage, this is an extremely recommended policy for anyone renting an apartment.

Homeowner insurance-5

This policy, similar to Homeowner insurance-3, covers a Homeowner insuranceme (not a dwelling or even apartment), the owner and its possessions. Liability that might arise from visitors or even passers-by. This coverage is differentiated therein it covers a wider scope and depth of incidents and losses than AN Homeowner insurance-3.

Homeowner insurance-6

As a form of supplemental Homeowner insurancemeowner's insurance, Homeowner insurance-6, a.k.a. a Condominium Coverage, is designed especially for the owners of condos. It includes coverage for the share of the building closely-held per insured and for the property Homeowner insuranceused in that of the insured.

Designed to span the gap between what the Homeowner insurancemeowner's association can cover in a blanket policy written for associate entire neighborHomeowner insuranceod and tHomeowner insurancese things of importance to the insured. Occasionally the Homeowner insurance-6 covers liability for residents and guests on their private property. The liability coverage, contingent to the underwriter, premium paid, and more factors of the policy, can cover incidents up to 150' from the insured property, all valuables in the Homeowner insuranceme from theft, fire or even water damage or even more forms of loss.

It's significant to read the Associations By-laws to determine the aggregate amount of insurance needful on your lodging.

Extremely low in cost and high in coverage, this is a extremely recommend policy for anyone owning a condo

Home Loans For People With Poor Credit

Home loans for people with poor credit demand that you understand the requirements for a subprime mortgage loan to get the best rates and terms. By satisfying the requirements, you can be assured of securing a subprime mortgage to buy a home.

Time To Rebuild Credit

Depending on subprime mortgage lenders, you can be approved for a mortgage loan after two to three years of a foreclosure or bankruptcy. Within those three years, by making regular payments, you can end up having a good credit score.

If you simply have a poor credit score due to late payments, you will probably still qualify for a subprime mortgage. However, the longer period you have of on time payments, the better your score and rates will be.

Down Payments

Down payments reduce the risk for mortgage lenders. So with a FICO score of 600, you could apply for a zero down mortgage. A FICO score of 585 or higher will require at least 5% down.

Debt To Income Ratio

Another factor in subprime lending is your debt to income ratio. The amount you pay out for loans, like credit cards and car payment, are deducted from your income's buying power. The less debt you have, the more you can qualify to borrow. The less debt you have, also makes you more appealing to mortgage lenders, even with poor credit.

Cash Reserves

Subprime mortgage lenders also take a look at your cash reserves in determining your credit risk. Mortgage lenders like to see a minimum of two month's worth of payments in a savings account or bonds. A larger cash reserve will increase the likelihood of your mortgage loan's approval.

Be Your Own Advocate

Subprime mortgage lenders offer a service to people who would not otherwise qualify for a mortgage loan. But, you still need to be your own advocate and compare subprime lenders. Interest rates, fees, and terms vary widely in the financing industry, so research to find the best deal.

The internet allows for easy comparison of subprime mortgage brokers with instant quotes. You can also find better financing deals online, since Internet subprime lenders have lower overhead and personnel costs.

First Time Buyer Home Loans

As a first time home buyer, there are several things you should consider when applying for a home loan online. First, do you know what type of home loan you want? Secondly, do you want personal service or better rates? And finally, how do you plan on scheduling in a home loan?

Type Of Home Loan

Mortgage loans come in a variety of financing forms to best suit your needs. You can choose a fixed rate loan, which is a traditional choice. Or you can choose an adjustable rate loan that will lock rates in three years or later. Other options include an interest only loans, balloon loans, or jumbo loans.

All these different types of mortgage loans have their advantages and disadvantages. To pick the best one for your financial situation, read up on mortgage loans. Most online mortgage lenders offer helpful articles on their websites to help you understand terms and rates. You can also email them if you have a particular question.

Online mortgage lenders handle all the same loans that a traditional bank would handle. In fact, mortgage brokers can find financing packages that a traditional bank might not be able to offer.

Better Rates With Streamlined Online Home Loan Process

Trading in an office visits for a streamlined online home loan process allows you to save money on your mortgage loan. Some mortgage lenders eliminate loan fees, while others reduce their interest rates. Add up the cost of the interest and fees to find the lowest priced financing package.

Scheduling A Home Loan

One surprise for new home buyers is the amount of time required to apply for a mortgage loan. Filling out the application is simple enough, but a traditional bank may require you to go in multiple times to review paperwork and sign forms. Online mortgage lenders allow you to complete paperwork online at your convenience. When you do need to sign the forms, you do it in the presence of a notary that you schedule.

While online mortgage lenders simplify the paperwork, you will still need to keep in contact with your lender to ensure the funds are processed on time. A simple email or phone call made once a week should be enough to keep the process on track and inform you of any possible delays.

Home Loans for Bad Credit Borrowers

Just because you have negative items on your credit report doesn't mean you can't obtain a home mortgage loan. There are options for you. Bad credit is not the end of the world. It's true that getting a bad credit mortgage loan is not always the easiest or fastest mortgage loan out there, but you can still buy your own home even with bad credit.

Bad credit shouldn't stop you from getting a home loan. There are credit repair options. Most mortgage brokers will do everything they can to get your credit in good shape for your home loan. They work with you on finding the mortgage loan option that's right for you. You can get a home loan, even if you've had a bankruptcy or a foreclosure.

There are several bad credit mortgage loan options available for the credit challenged and even people with no credit at all, such as:

• Sub-Prime Mortgage Home Loans

• Stated Income Mortgages

• No Money Down Home Loans

• Jumbo Loans

• Adjustable Rate Mortgages

Step One: Know Your True Credit Score

Perhaps you've already been turned down for a mortgage because of a negative credit report or having no credit at all. Perhaps you've filed for bankruptcy. Whatever the case may be-You know your credit is bad.

But do you know how bad?

Are you sure your credit report is accurate? Eighty percent of credit reports have mistakes. At we help you find out if your credit is really as bad as you think it is. Here's what we can help you do:

• Get a copy of your credit report.

• Verify the items listed on your credit report.

• Take steps to repair any errors on your credit report.

• Take steps to remove errors on your credit report.

• Monitor your credit regularly.

Step Two: Consider Your Options

You really have two options, once you know what your credit score is. You can contact a bad credit mortgage lender and accept that for a while you must pay a higher interest rate than you would if your credit was perfect.

Or you can wait and try to fix your credit and bring up your credit score before you buy a home.

If your credit history is not that bad, you might want to take some time to bring up your score. To improve your credit score:

• Pay off as much debt as you can.

• Pay your bills regularly and on time.

• Don't apply for too much credit.

If you absolutely must get into a home now, or it looks like it would take too long to bring up your credit score significantly, contact a bad credit mortgage lender. Be prepared to pay a higher interest rate and more "points"-which are a percentage of the loan.

Step Three: Prepare Yourself with the Facts

Before you approach a bad credit mortgage lender, prepare.

Assess your financial situation. Do you have the income to add a mortgage to your debt load? Have you made as many lifestyle changes as possible to reduce your debt? Have you done all you can to bring up your credit score?

If the adverse credit items on your credit report occurred because of some reasons beyond your control, for instance, illness, job layoff, marital problems or other temporary setbacks, you must provide a written explanation of your circumstances to the bad mortgage loan officer. This can be provided with the loan application or at some other point in the loan process. If you have had sufficient time to regain financial stability since the problems occurred and to demonstrate prompt payment, the lender may offer some consideration on the rates.

Sunday, January 28, 2007

Taking your mortgage with you to your new home

Most mortgage agreements have a portability option that allows you to apply your current mortgage to a new home if you decide to sell. "Porting" your mortgage may be your best alternative if there's too much still owning on your mortgage for you to consider paying it off immediately, and if your existing mortgage rate is lower than the current rate.

Often, only fixed rate mortgages are portable. If your new home requires extra financing, you can usually borrow additional funds at the current rate - your new mortgage rate will be a blend of your mortgage's existing interest rate and the current interest rate. For example, if you have three years left on a five-year mortgage term, you may be able to borrow the extra money at the current three-year rate. The additional mortgage you just took out to finance your new home has the same expiry date as your original mortgage. When the time comes to renew them, you renew them as one mortgage.

Porting mortgages has become quite common due to the low interest rates of recent years, but choosing what's best for you always depends on your unique financial situation and how much risk you are willing to take. If you've taken to following the rise and fall of mortgage rates religiously in the past few years, you may feel confident in allowing your buyer to assume your current mortgage so that you can take out a new variable-rate or short-term open mortgage on your new home. If you can stand the headache of renegotiating your mortgage every six months, you'll probably end up saving money in the long run.

If you are not a risk-taker and can't be bothered to scour the financial section of the newspaper every morning for the latest trends in mortgage rates, it's worth the bit of extra money you may pay to port your fixed rate mortgage, just for the peace of mind.

If you're wondering about the benefits of porting your existing mortgage to a new home, you can check out the financial consequences online. Surf the Internet - find a online mortgage calculator and pretend you're going to port your existing mortgage and borrow a bit more at the current rate, and tell you what your payments will be. You can simply multiply your monthly payments by the number of months in the mortgage term to get the total amount that you will pay if you port your mortgage.

Use the mortgage calculator a second time to figure out the total amount your would pay on a new mortgage at whatever current interest rate happens to be. If the total amount payable for a new mortgage is less than you would pay by keeping your current mortgage with a new blended interest rate, then you stand to save if you pay off the current mortgage rather than porting it to your new home. Just be sure that the savings you will make with the new mortgage are greater than the penalty fee you'll be charged for paying off your current mortgage early.

Home Equity Loans Explained

Home equity loans are loans that are secured by the equity that you have built up in your home. (Equity is the difference between your home's market value and the amount you owe on it.)

A home equity loan will allow you to use some of your home's equity to:
  • Relieve an overwhelming debt burden. If you have trouble making the minimum payments on your bills every month, you can take out a home equity loan and consolidate your debts.
  • Buy a new car with a low interest, tax deductible loan. Why pay outrageous interest charges on a standard auto loan when you can pay for your car with a loan that has a lower interest rate and is tax deductible?
  • Make improvements to your home that will increase
    its value. Do you need to add on another bedroom or finish the basement? A home equity loan will enable you to add value to your home while making it more functional.
  • Finance your child's education (or your own!). Do you have a child who is ready to start college? Do you want to further your own education in order to qualify for a higher paying job or switch careers? A home equity loan can help you pay for it.
  • Start a business. Maybe you have a life-long dream of being your own boss. Do some research, decide what you want to do, and finance your new business with a tax deductible home equity loan!
  • Take advantage of a once-in-a-lifetime investment
    opportunity. Maybe you heard about a very profitable rental property that has just come on the market at a huge bargain, but you don't have money for the down payment. The solution? You guessed it: a home equity loan!
  • About a million other things (limited only by your
There are several advantages to taking out a home equity loan instead of a regular consumer loan, including:
  • Home equity loans are available at lower interest
    rates than consumer loans.
  • Home equity loans are easier to qualify for since
    the loan is backed by the equity in your home.
  • Under most circumstances, home equity loans
    are tax deductible.
Here are the disadvantages of home equity loans:
  • Home equity loans "use up" the equity that you
    have built up in your home which means it will
    take longer to pay off your home.
  • You can potentially end up losing your home in
    the event that you default on the home equity loan.
If you decide that a home equity loan is for you, shop around for the best interest rate and lowest closing costs. These factors often make the difference between a good home equity loan and a great home equity loan.

How To Qualify For A Home Loan

If you're like most Americans, you likely have
a strong desire to own your own home. Also,
like many Americans, you might be unsure if
you qualify for a home loan.

Qualifying for a home loan is the most common impediment to buying a house, but there are some things you can do to prepare and give yourself the best chance of getting into your dream home. Here are a few tips:
  1. Check your credit history. Visit your local credit bureau and get a copy of your file. Look it over and see if there are any errors or out-of-date negative entries. If so, file a dispute form and get them removed before applying for a home loan.

    Are there any charge-offs or past-due accounts? If so, contact the lenders and try to make a deal to have those entries brought current or removed entirely. Again, do this before applying for a home loan.
  2. Do you have several credit card accounts that are open (even if the balances are $0)? Close all but one account and wait for the closures to be reflected on your credit history. Only then should you apply for your home loan! Too much outstanding credit (or the potential to create it) is a huge red flag for mortgage lenders.
  3. Try to save up a down-payment of at least 20% of the amount you intend to borrow. The more you have available for the down-payment, the easier it will be to qualify for a home loan and get the most favorable terms.
  4. Be realistic when predicting the size of the home loan that you'll qualify for taking into consideration your income, credit status, and the amount of your down-payment. If you try to buy "too much" house, you'll likely end up being disappointed.

Getting the Best Home Mortgage

As with any financial transaction, when you obtain a mortgage for your home you will work with financial professionals, most of whom are very honest and diligent. But even the honest financial officer is probably looking at a considerable commission from your mortgage, and typically has a primary duty to his employer and not to you. And if you have the misfortune of working with somebody who is unethical, you can end up paying a lot more for your mortgage than you need to. Fortunately, there are steps you can take to help make sure that you are getting a good deal.

Before You Apply

  • Check your credit report. Make sure that it is accurate. Inaccurate entries in your credit history can significantly increase the cost and interest rate associated with your mortgage.

  • Know the terminology. You should also be aware of the types of mortgage you may be offered, and how those options fit with your financial plans. Are you willing to take the risk of having the interest rate go up, such that you are willing to apply for an adjustable rate mortgage (ARM), or do you want the security of having a fixed rate?

  • Know your financial needs. Know how much you need to borrow, and the maximum monthly payment you can afford to pay.

  • Get The Help You Need. If you feel confused, or don't know how to estimate your financial situation and mortgage needs, seek assistance from a loan counseling agency.

When You Apply

A home mortgage involves a very large amount of money - and you will be well-served if you take your time and do your homework before you commit to a particular lender.

  • Shop around. You can request mortgage quotes from numerous financial institutions in advance of paying any application fees. You will likely find variation not only in the interest rates quoted, but also in the closing costs for the loan.

  • Determine the closing costs. If the lender estimates closing costs, including points and fees, or fails to describe certain costs, ask for additional details - most will provide more information if they believe they may get your business, and those that won't probably don't deserve it.

  • Don't get pressured. If you are pressed to sign a loan application, to borrow more than you need or can afford, to immediately commit to a loan, or are urged that interest rates may immediately skyrocket, be suspicious of the lender. In most case, lenders who apply this type of pressure do not have your best interests at heart.

  • Don't sign anything you don't understand. If you need help from a lawyer or housing counselor, ask for a copy of the contract and have it reviewed. Don't sign a contract which contains blank spaces "to be completed later".

  • Don't make false representations on your mortgage application, even (perhaps especially) if the loan officer tells you that "it's no big deal". Report any lender which urges you to put false information on your loan application to the FTC.

  • Don't buy credit insurance you don't need. If you need or desire credit insurance, consider seeking price quotes from insurance providers other than your lender so you know if your lender.

Refinancing Your Home Mortgage

When most people refinance their homes, they do so with the intention of obtaining a lower interest rate or reducing their monthly payment. The refinancing process involves taking out a new home mortgage, and paying off the existing mortgage with the proceeds of the new loan. While sometimes it seems like an easy decision to refinance a home, you should take care to ensure that your remortgaging decision is truly in your financial best interest.

Initial Considerations

Before you refinance, you should consider what else you might do with the money you will be applying to closing costs. Similarly, if you will be increasing your monthly payments to pay off your mortgage more quickly, what else might you do with the money that will go toward those increased payments? Sometimes you will get a better return by putting that money into a retirement account, money market account, or mutual fund than by refinancing your house.

You should also check to see if you are paying private mortgage insurance (PMI), and if you have enough equity in your home to cancel that insurance. The cost of PMI coverage can be substantial.

You should also check to see if you will have to pay a "prepayment penalty" if you refinance your mortgage. If you must pay a penalty, the size of the penalty will affect your determination of whether it is financially wise to refinance.

Interest Rates

Perhaps the leading factor in most people's refinancing decisions is the prevailing interest rate. They understand that rates have dropped since they originally mortgaged their homes, and desire a lower interest rate and monthly payment.

Recall that mortgage closing costs and the change in your mortgage interest deduction must be factored into your refinancing decision. As a general rule, you will benefit from refinancing when interest rates have dropped two or more points since you obtained your original mortgage. But even if you are looking at a reduction of less than 2%, you may wish to explore the possibility of refinancing, particularly if you have built up equity in your home. You can easily shop around for the best rates, both online and by phone.

You may also wish to consider asking a lender to "lock in" an interest rate for a certain period, often forty-five to sixty days, in case interest rates rise. Any commitment to lock in the rate should be provided in writing.

Application Fees

If you pay an application fee when you apply for a loan or mortgage, find out up front if the fee is refundable if you are not approved for the loan or if you choose to use a different lender.

Closing Costs

In addition to the application fee, when you apply for a home mortgage, significant costs will be incurred before the loan is closed, often including an appraisal, title fee, title insurance, survey fee, points, recording and transfer fees, and attorney fees. You should press your lender to provide as much detail about these costs and fees as you can possibly obtain, in advance of committing to a mortgage.

Even if you are promised a "no cost" refinance, you should keep in mind that costs are involved. You will pay those costs through an increased interest rate or higher loan balance. There's nothing wrong with considering a "no cost" deal, but you need to look carefully at what you will be paying - it may be that, even with costs, another loan package is cheaper.

Charges for "Points"

Banks charge "points" when they issue loans to cover the cost of doing business. Generally speaking, the lower the interest rate for a loan the higher the number of "points" a bank will charge to issue the loan. Points are negotiable, and the number of points charged can vary between financial institutions. Borrowers are generally advised not to finance the points; and if you do intend to finance them you should consider how that will affect the financial benefits of refinancing.

Duration of Residence

To benefit from refinancing your mortgage, you should ordinarily anticipate staying within your home for at least three more years. If you intend to move before that time, the closing costs from refinancing are likely to subsume any savings from a lower interest rate.

Withdrawing Equity

If your home has appreciated since you bought it, when you refinance you may be tempted to get a larger mortgage and to pocket some of the equity in your home. You should check to see whether the use you have planned for the equity you withdraw is an "allowable expense" such that it qualifies for the mortgage interest deduction, and the significance of any change in your mortgage interest deduction.

Shorter Mortgage Term?

When you refinance your home, you may wish to explore the possibility of obtaining a shorter mortgage term. Shortening the term could mean that, even if your payments don't change significantly, your home is paid off in fifteen or twenty years instead of thirty.

Refinance or Renegotiate?

You should consider exploring the possibility of renegotiating your loan with your existing lender, instead of refinancing. Often the fees associated with a renegotiation will be significantly lower than those associated with refinancing, although the interest rates available are usually above what you would obtain if you refinance.

An Overview of Home Equity Loans in Texas


Home equity loans are a particular form of home mortgage which enable a homeowner to convert the equity in his home into cash by borrowing money secured by a lien on his homestead. The word "equity" means the difference between the fair market value of your home and the total of all the debts against it. For example, if you have an $80,000.00 home and still owe $30,000.00 on your mortgage, you have $50,000.00 in equity.

Unique Aspects of Texas Home Equity Loans

Because Texas laws have traditionally been designed to protect individuals and their families, home equity loans were not even possible in Texas until late 1997. Change comes slowly, however, so when Texas real estate law was finally amended to permit home equity loans, it included some of the strongest consumer protections in the nation. The law is both lengthy and complex, but some of the most significant provisions are:

  • The total of all mortgage debt (not just the home equity loan) cannot exceed 80% of the fair market value of the home. So, if you already have a $30,000.00 mortgage against your $80,000.00 home, the most you can borrow is $34,000.00 ([.80 x 80,000] - 30,000). If the mortgage on that same $80,000.00 home were $65,000.00, a home equity loan would not even be possible because the current mortgage already exceeds 80% of the fair market value.

  • Only one home equity loan may be made against a home at a time. While additional financing arrangements might be possible, a homeowner cannot obtain a second home equity loan until the first has been paid in full.

  • A borrower is only permitted one home equity loan per year, regardless of how quickly the loan is repaid, and a home equity loan may not be converted to another type of loan.

  • Land that is taxed as "agricultural" or "open space" may not be used to secure a home equity loan.

  • There are restrictions on who can make a home equity loan. For example, an unlicensed individual cannot make a home equity loan unless the individual is (1) providing seller-financing or (2) related to the borrower within the second degree.

  • Lenders are prohibited from charging fees and costs (other than interest) which exceed 3% of the principal amount of the loan. The law provides significant penalties for a lender who violates this rule and refuses to correct the error once it is brought to the lender's attention.

  • The lender may not require the borrower to apply the loan proceeds to repay a debt except debt secured by the homestead or debt owed to another lender. The borrower is otherwise free to use the funds for any lawful purpose.

  • The loan must be secured only by the home; the lender may not require that additional assets be mortgaged.

  • A home equity loan may be closed only at the permanent office of a lender, a title company, or an attorney's office.

  • The loan cannot close until 12 days after the borrower has made application for the loan and received a special notice of the borrower's rights.

  • Not later than the day prior to closing, the borrower must receive a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged. (This requirement may be waived if a bona fide emergency or another good cause exists and the lender obtains the written consent of the owner.)

  • After the loan closes, the borrower has three additional days to change his mind and cancel the transaction without any penalty or charge. The loan proceeds cannot be delivered to the borrower until the three day period has passed.

  • The lender's rights on default are severely limited in comparison to most other loans. For example, the lender is not permitted to conduct a private foreclosure; all home equity loan foreclosures must be ordered by a court. Moreover, the borrower has no personal liability, meaning that even though the borrower may lose the home in foreclosure the lender will have no right to sue the borrower for money.


Home equity loans can be a useful tool for freeing up funds that would otherwise be locked into a non-income-producing asset. However, they are not without their disadvantages. Before making the decision to apply for a home equity loan, consider the following:

  • For most families, their home is their most valuable asset. In Texas, a homestead is protected from the claims of creditors except in a very few instances. So, if you fall behind on credit card payments, or cause a serious automobile accident in which the damages exceed your insurance coverage, you might be sued but you will not lose your home. However, if you fall behind on payments on a home equity loan there is a very real risk that the lender will foreclose. Think carefully about whether you really need the money, and if so whether another form of credit might be more appropriate. Also, be careful not to borrow more than you need.

  • While interest rates on home equity loans tend to be lower than some other types of loans, you will still incur expenses in the form of interest and loan fees. You may also be responsible for closing expenses and document preparation fees. Be sure you know how much the loan will cost you. (See the links under the "Other Resources" heading below for help in calculating these costs.)

  • Remember that you can only have one home equity loan on your home at a time, you can only get one home equity loan per year, and a home equity loan cannot be converted to another type of loan. It is important to shop carefully for the best deal, because you may later find that it is impossible or prohibitively-costly to make other arrangements if you need more money or if you find a better interest rate.

  • Be aware of the time limits associated with making the loan, especially if you must have the funds by a particular date. One problem we frequently see is that borrowers fail to pick up their closing statement the day before the closing. Unfortunately when that happens, the closing must usually be delayed. Delays are not only inconvenient; they can also result in increased costs to the borrower if a fee is charged for re-drafting the loan documents or if the deadline passes on a favorable interest rate lock.

  • Read your loan documents carefully before closing to be sure they are correct and that you understand them. Never sign a loan document if you have questions about the meaning of its provisions or if it contains blanks. Texas real estate law can be quite complex, so you may wish to have a Texas real estate attorney review the documents to ensure that they are correctly drafted and to answer any questions you might have. In most cases such a consultation with an experienced Texas real estate lawyer should not require more than one or two hours of billable time (a nominal cost compared to the other expenses you may be paying), and may help you avoid some unpleasant surprises at or after closing.