My Credit Report Info » Mortgage

What to Look for in a Mortgage Broker

Uncle M — Mon, 21 Dec 2009 19:01:51 +0000

Locating a good mortgage broker who is resourceful enough to shop your loan to several competitive and reputable lenders is often the best way to go when buying a home or doing a refinance. A mortgage broker may be able to negotiate for a better loan, advise you of options you would not otherwise know about, or help you locate an attractive mortgage from a lender you might not have discovered while doing your own search.
But the key is to find an experienced, dependable, trustworthy broker who has all the necessary credentials. So if you are serious about getting the best possible mortgage or refinance, you might want to shop around for a mortgage broker before you start looking at houses or comparing banks and other lenders who offer refinance packages. Ask for names and referrals from those you know and trust – such as friends, family members, coworkers, or professionals like your attorney, real estate agent, or insurance broker. Once you have a list of potential mortgage brokers, set up appointments to interview them in person.
You want to make sure that you and the broker have a good rapport and can communicate comfortably and clearly, and you also want to ask questions to find out how the broker is paid, what they will charge you for their services, and what background, education, training, and professional credentials or licenses they hold. If you feel uneasy with a broker or they are not straightforward and quick to show you documents to verify their expertise, keep looking.
Also be sure to ask how many lenders there are in the mortgage broker’s current active network. A good broker should have several sources of affordable loans to suit your needs, because one of the main benefits of using a broker is to gain access to a wide variety of lenders and loan offers. Trust your intuition, then hire the best mortgage broker you can find and breathe a sigh of relief as you leave the hard part up to them to handle on your behalf.

Take Advantage of Real Estate Buyer Tax Perks ASAP

Uncle M — Wed, 02 Dec 2009 04:35:15 +0000

Just as homebuyers scurried to buy homes before the end of the year in order to qualify for a special $8,000 first-time home buyer tax credit, Congress decided to extend it a little bit longer. The program has been very successful at encouraging sales, and many housing industry observers credit it with helping the housing market rebound. Now first-time buyers have until the last day of April, 2010 to get purchases under signed contract in order to enjoy the big tax perk. Keep in mind that the IRS defines a “first-time” buyer as anyone who has not bought a house within the past three years. You can even meet this standard despite the fact that you’ve owned another property such as a rental cottage or beach house, as long as the house that has been your principle residence was not owned by you.

But what is really making headlines right now is not the 4-month extension on the first-time tax incentive, but a brand new $6,500 tax benefit that applies to people who already own their own home. The innovative credit applies to those who have owned a home for at least five consecutive years and have used it during that time as their primary residence. If they decide to sell in 2010 and buy another home, then they can pocket the extra $6,500 in tax benefits – which can help many buyers struggling to pay closing costs or cover their down payments.

Check with a tax planner for details, because a few exceptions do apply. But most of those only apply to taxpayers who make rather high incomes. Singles who earn more than $125,000, for example, or married couples with income that totals more than $225,000 are ineligible. There are also some stipulations regarding how long you live in the home after you buy it, and those were primarily added to the legislation to stop professional investors and real estate speculators from taking unfair advantage of this tax benefit.

Loan Modification: How it works and can benefit homeowners.

Uncle M — Fri, 24 Apr 2009 21:32:32 +0000

Loan modification is a term used to describe reworking the original terms of a mortgage loan to make it easier for the homeowner to make monthly payments. These days loan many Americans are turning to loan modification as last resort to help avoid foreclosure, and President Obama has asked lenders to do loan modifications for desperate homeowners whenever it is feasible.

Before loans can be modified – because a mortgage is a legal contract – the parties involved have to agree. This usually means that the lender must be willing to adjust the terms of the mortgage, and the homeowner must demonstrate great hardship in repaying the loan the way it is currently structured. By reworking the loan the lender hopes to continue getting monthly payments, which saves the lender money, and the homeowner hopes to get a more affordable mortgage that can be reasonably serviced without excessive debt and difficulty.

Ways that loans are modified include a variety of creative strategies or repayment plans. The lender may, for example, extend the length of the loan in order to make the average monthly payment smaller. Instead of a 30-year mortgage, for instance, the lender might make it a 40-year mortgage. Lenders will sometimes offer a lower interest rate, which can also lower payments. In extreme circumstances some banks and mortgage companies are even forgiving or wiping out a portion of the principal balance owed on the loan. By reducing what it is owed, the monthly payments go down to a level that can be more easily repaid by the homeowner. The lender sacrifices some profits but does not have to repossess the home, and home foreclosures often wipe out all of the potential profits that a lender had hoped to make.

When considering a loan modification, always seek professional mortgage counseling from a free, government-sponsored agency or a qualified attorney. Many scams involving promises of loan modification – and charging homeowners large amounts of money up-front for such services – are preying on homeowners. Before agreeing to any loan modification assistance always proceed with caution and use only reputable professionals with proven credentials.

Obama’s Now Loan Modification Program to Help Homeowners

Uncle M — Fri, 17 Apr 2009 18:43:55 +0000

The Obama Administration has been working nonstop – along with agencies like HUD and the FHA – to come up with proactive ways to address the nation’s foreclosure crisis and help homeowners keep their homes. One of the most promising initiatives to emerge is the new Making Home Affordable program, which allows eligible homeowners to get new mortgage terms through a process known as loan modification.

A loan modification is basically just an agreement negotiated between the mortgage lender and the homeowner to change the terms of the mortgage contract in specific ways that make it easier for the homeowner to make their monthly payments. A loan modification’s primary goal is to reduce monthly payments, helping to bring them more in line with the borrower’s income.

That can be accomplished in a number of ways, and the Making Home Affordable program also provides some cash incentives to banks and other lenders who do successful modifications so that foreclosures are avoided.

As a result of a loan modification like those Obama is encouraging, some lenders will agree to extend amortization or payback periods to stretch out the repayment of loans. That lowers the monthly installment payments. They may even cut the balance due on loans, which makes the whole loan smaller and less expensive. In other cases lenders may offer a lower interest rate than the one now attached to the mortgage, to ease the burden of payments and make them more manageable. If the program works as plans it could help hundreds of thousands of people keep their homes and avoid foreclosure.

New Fed Rules Established to Help Protect Consumers

Uncle M — Mon, 15 Sep 2008 17:00:45 +0000

The federal government recently unveiled new rules and regulations that are meant to strengthen oversight of the mortgage lending industry, protect consumers from fraud and predatory lending practices, and ensure that the catastrophic subprime mortgage crisis is never repeated.

Fed Chairman Ben Bernanke announced the new rules, saying they are “intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership.”
Besides offering broader protection for consumers, he explained, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market – which should help make loans more accessible and affordable.
Some of the major changes include the following:

Rules will make it harder for people who cannot demonstrate an ability to manage debt and repay loans to get mortgages.
Lenders will be prohibited from using certain types of misleading advertising, and will be held to a much higher standard in terms of disclosing mortgage costs and fees.
The use of prepayment penalties charged to borrowers who pay off their loans early will be significantly curtailed.
Mortgage lenders are prohibited from pressuring appraisers into artificially adjusting real estate values.
Lender will now provide written loan cost estimates within three days of accepting loan applications.

The new rules do not help homeowners who already face foreclosure, but that was not their intended purpose. They are instead meant to police the loan industry and prevent loose underwriting standards, unethical lending practices, and illegal activity in the mortgage broker industry. Consumer groups and mortgage industry organizations have praised the rules as a powerful step in the right direction, and the majority of the new regulations go into effect at the end of 2009.

Loan to Value (LTV)

Uncle M — Mon, 08 Sep 2008 17:00:40 +0000

Loan to Value or “LTV” is a term used by mortgage lenders to refer to the amount of money they are willing to loan to customers who put up real estate or other assets as collateral. LTV is a ratio or a percentage; in other words, of what a bank will loan compared with what a borrower’s property is worth.

If a home is worth $200,000, for example, and the LTV is 100 percent, the lender is willing to lend $200,000. If the LTV in this example were only 80 percent, the lender would agree to loan 80 percent of $200,000 – or $160,000.

Before the current mortgage crisis sent banks and homeowners scrambling to protect themselves from mortgage losses and plummeting real estate prices, it was not uncommon for LTVs to be as high as 97 to 100 percent. Last summer most of them fell to 90 percent, as banks began to anticipate the damage from the subprime mortgage mess. But lenders did not predict how widespread the damage would be, and now they are cutting LTVs even more to avoid lending money for property that might lose much of its current value.

Bank of America and Chase recently adjusted their LTV guidelines on many mortgage loans down to 80 percent, and other financial institutions are expected to do the same. That means that consumers wanting to take out a mortgage or refinance a home can expect to get less – and they may also be required to pay more. In this kind of tight-money environment, lenders typically raise loan fees and interest rates while required higher amounts of collateral.

So those planning to borrow in the coming months should anticipate that they will get no more than 80 percent of what their property is worth. As is normal, that valuation will be arrived at through a professional appraisal. But appraisal numbers are now much more conservative than those conducted before the housing crisis began, because appraisers are not sure how much more real estate prices might fall.

Tips for Surviving the Credit Crunch

Uncle M — Mon, 08 Sep 2008 16:41:54 +0000

Here are five expert tips on how to navigate the current credit crisis to ensure success when applying for a mortgage.

Plan Ahead
Forget the way business was done in the past. Expect to borrow less, pay a larger rate and higher closing costs, and have credit scores scrutinized more closely. Plan ahead and give yourself plenty of time to prepare for passing the loan application process with flying colors.
First Do Research
If you apply for a loan and get turned down it damages your credit score. Instead do your homework, talk to lenders about what they are willing to do for you, and don’t fill out an application until they give you a vote of confidence that your loan – in the amount they recommend – will succeed.
Tune Up Your Credit Score
Get copies of your credit history, challenge any errors and update any old info that is not included. Then take steps to beef-up credit and allow about three months for the new information to be incorporated into your credit history file. Then apply with stronger credit and greater chances of getting approved.
Start Saving
Lenders require larger down payments for home loans, so start saving as much cash as possible. If necessary, sell items like extra cars that you don’t really need. You can always buy them back after the loan goes through, but without adequate cash you’ll never get the mortgage in the first place.
Look for Mortgage Assistance
Many government-backed mortgage programs are available to help Americans including military veterans and low-income families. The FHA lets you borrow with a smaller than normal down payment, for instance, so ask lenders to tell you about all of available mortgage assistance programs in your area.

By planning and taking the steps to improve your chances of getting approved you will avoid wasting time and getting disappointing news from banks. Then you can focus on home shopping with confidence and take advantage of today’s super low real estate prices.

HELOC Loans

Uncle M — Mon, 01 Sep 2008 17:00:33 +0000

A HELOC or home equity line of credit is a kind of second mortgage that behaves much like a credit card. The line of credit is established based upon the value of your home, so the more equity you have in the property the more money you can borrow. You borrow what you want, when you want it, and pay interest on your outstanding balance. After repaying the balance your line of credit is reinstated so you can borrow it again in the same way. Usually HELOC loans carry not extra fees and they offer rates that are cheaper than those associated with credit cards.

The good news is that HELOC loans are a convenient and competitively priced way to tap the value of your home equity without selling the house. Just borrow against your equity with the line of credit by using a check, a withdrawal slip, or a card similar to an ATM card.

The downside of HELOC loans, however, is being experienced by many homeowners who took them out a few years ago when real estate values were much higher than they are now. Because home prices have fallen, so has equity, and now banks are cutting back on the lines of credit for HELOC loans. That leaves many homeowners without their former line of credit. Hundreds of thousands of credit lines have been either shrunk or completely revoked this year, as banks reevaluate home equity limits based on today’s deteriorating real estate values.

Another risk with HELOC loans is that the collateral for these loans is the borrower’s own home. Take out a HELOC loan and fail to repay it, and the bank can start foreclosure proceedings to sell your house and get their money back. Under the circumstances, it is recommended that only homeowners with exceptionally large amounts of equity use HELOC loans in today’s volatile market. When borrowing against a HELOC, limit the loans to manageable amounts and only use the funds to do things like home improvements that will actually add to your equity instead of diluting or diminishing it.

Installment Credit vs Revolving Credit.

Uncle M — Tue, 03 Jun 2008 21:28:09 +0000

There are two types of credit that you can apply for: Installment credit and Revolving Credit. In an installment credit you get a loan for pre-determined period of time at a pre-determined interest rate with pre-determined payments. A good example of an installment credit would be your home mortgage. When you apply for a mortgage the interest rate (which varies from 5% to well over 8%), the loan period (usually 15, 20 or 30 years) and the amount are pre-determined before you get the loan. And during the lifetime of the loan the interest rate, loan period and the loan payments do not change unless you refinance the loan.
On the other hand in a revolving credit the interest rate, the loan amount and payments usually vary every month. An example of a revolving credit would be your credit card. When you apply for a credit card you get a revolving credit with a maximum limit of credit and an interest anywhere between 10 and 28 percent. Every month you could borrow up to the maximum limit of credit on your credit card. Then at the end of the month you get an account statement and will have several options to pay. You could either pay the whole amount, or pay a minimum amount as specified on your account statement or pay any amount in between.
Here is where the revolving credit differs from installment credit. If you pay the whole amount on the revolving credit you loan is paid off and you will have no more payments unless you use your credit card in the future. Whereas if you only pay the minimum amount you are just paying the interest on the credit you used and your actual debt revolves to the next month. As you can see this is not really recommended as your debt keeps revolving month after month and it could take a lifetime to pay the original principal.
The other difference is that the credit card issuer can increase or decrease the credit limit at any time depending your credit report and monthly payment history. If you have been paying your bills on time then the credit card issuer might increase your credit limit allowing you to borrow more money. Likewise if you have been missing payment your credit limit might be cut down. Similarly the credit card issuer could also increase or decrease your interest rate on your credit card. The interest rate on revolving credit is usually much higher than an installment credit.
One of the biggest advantages and disadvantages of a revolving credit is the credit limit. If used responsibly it can be very beneficial as you have more buying power readily available without having to apply for a loan. Whereas many people find it hard to resist using up the entire credit limit and then apply for another credit card and do the same. Eventually they get buried in the credit card debt. So be smart and use any kind of credit responsibly.

Documentation requirements for a mortgage.

Uncle M — Fri, 07 Mar 2008 22:18:18 +0000

Full Doc, No Doc, Stated/Verified… Sometimes the documentation requirements for a loan can be very confusing. What these basically mean is the type of documents required by the lender to apply for a loan.

For example suppose you apply for a loan with Full Doc (which means full documentation) then you will need to state your income and your assets and the lender will verify both your income and your assets.
Likewise in the No Doc (which means no documentation) you will not have to disclose your income or your assets.
And in a Stated income/Verified Assets you state your income and your assets but only your assets are verified by the lender.
There is also a Stated income/Stated assets in which, as your might have guessed, only requires you to state your income and assets and they is not verified by the lender.

Now you may ask: if you could go with a No Doc loan then why go through the trouble of a Full Doc loan. The answer is credit and down payment. A Full Doc loan is generally less risker for a lender so the down payment requirement might be less and your credit report does not have to be great to qualify. On the other hand for a No Doc loan be prepared with a A+ credit report and at least a 20% down payment plus other fees to qualify for the loan.

Traditionally a Full Doc loan was the only way to get a loan. But this left many people out who couldn’t document their income and assets and they could not buy a home. For example some people who are self-employed may have trouble verifying their income so they may choose to go with a Stated Income/Verified Assets loan. This enables a lot more people to buy a home who would have been previously unable to apply for a loan.