How Long Your Mortgage Runs Determines How Much You Pay

Comments (20)


How Long Your Mortgage Runs Determines How Much You Pay

By: W. Troy Swezey

The first thing most of us think about when the time comes to take out a mortgage on a new home is the interest rate.

That's both perfectly natural and very sensible. The rate of interest we pay can make an immense difference - a difference amounting to tens of thousands of dollars - in what the actual cost of our house ultimately turns out to be.

Still, interest rates are far from the only thing worth thinking about where mortgages are concerned. Other important variables need to be considered too. One is the question of whether to take a fixed interest rate of choose from among the many kinds of variable-rate mortgages that have been created over the years to meet the differing needs of different buyers.

Another - and a very important one - is the rather basic question of how long you want your mortgage to run. Even with fixed-rate mortgages, a broad spectrum of time spans is commonly available. In most cases the extremes are 15 years on the short side, 30 years on the long.

Some years ago, when a famous scientist was asked to name the most powerful force in the universe, he answered "the power of compound interest." This reply suggests that he was knowledgeable not only about the laws of nature but the principles of finance - about what happens to even a modest sum of money when it continues to accumulate interest year after year after year.

Even at a modest rate of interest, money in a savings account can double within ten years or less. The amount actually paid for a house with a $100,000 mortgage can turn out to be several hundred thousand dollars if the mortgage runs for 30 years.

When you opt for a mortgage of only 15 or 20 yeas, on the other hand, you chop off much of the growth in your total obligation. But to do that without reducing the initial size of your mortgage, you have to make a bigger payment every month. As in most of life's major decisions, the stakes are high and the trade-offs require careful consideration. Above all, they require a careful examination of your resources, your aspirations, and your personal priorities.

Someone who's willing to make near-term lifestyle sacrifices for the sake of long-term gains probably will prefer a shorter mortgage. If your motto is "eat, drink and be merry," on the other hand, the idea of squeezing extra money out of your budget for the sake of a bigger house payment won't have much appeal.

If you're attracted by a shorter, faster mortgage and think you might be able to handle one, ask your real estate agent to show you just how much long-term savings such an approach can make possible. Chances are you'll be astonished by the size of the number.

Remember, though, that a 15-year or 20-year mortgage, by increasing your monthly obligations now and for years to come, can sharply reduce your flexibility.

One good approach is to take a 30-year mortgage but try to discipline yourself to make one extra monthly payment each year. If you can stick to such a regimen, ultimately it will yield the benefits of a 15-year mortgage. Meanwhile, you'll be less strapped if changing circumstances reduce your ability to make monthly payments.

What's really important is making yourself aware of how many different options you have and gathering detailed information about the ones that interest you most. A good real estate broker can be your key to all the information you could possibly need.

About The Author

W. Troy Swezey is the author of "HOW LONG YOUR MORTGAGE RUNS DETERMINES HOW MUCH YOU PAY." As a Realtor at Century 21 Paul & Associates, he has helped many individuals with their real estate needs. Visit his web site to download his free e-book, "REAL ESTATE SECRETS EXPOSED." http://www.TroyIsMyRealtor.com or mail to: TroyC21@usa.net

Comments

jessy 15.04.2011. 04:08

Where can I get the best mortgage rate with zero or low closing cost? I am a first time home buyer. I wonder how I can get the best mortgage rate? I am not thinking about buying points or anything. Instead I want to reduce my cost on getting the loan. Is there any websites listing different mortgage rate from different mortgage companies?

jessy

Admin 15.04.2011. 04:08

You may want to try zillow.com or lendingtree. They are based on the same idea that lenders will submit bids to compete for your business. However, be aware that lenders don't work for free and you are going to pay for a refinance whether you pay closing costs or whether the lender charges you a higher than market interest rate to get their compensation. There is really no such thing as a "no-cost" refinance.

The size of your loan will determine how much higher the interest rate has to be for the lender to pay your closing costs and still be compensated. For example, if you have a $200,000 loan amount and the closing costs on a standard refinance with a par interest rate for a loan that size are $4,000. Lets say the par rate is 5%. "par" just means that you don't pay extra points and that the lender doesn't make any compensation on the back. However, at 5.25% the lender might get paid 1 point when the loan sells on the secondary market. At 5.5% that lender might get 2 points in the secondary market. at 5.75% maybe 3 points. So to do a "no-cost" and still make 1 point compensation, the lender will offer you 5.75%, make 3 points and use 2 of those points to pay for your $4,000 in closing costs.

A "no cost" mortgage can make a lot of sense if you aren't planning on staying in the home long term. If you are planning on staying long term (maybe 5 years or more), you might save more money in the long run by paying some closing costs and getting a lower rate. Just my two cents as someone in the industry.

For more info, visit my website at www.MortgagesExplained.net

Admin

jedihush 02.03.2009. 07:03

How fast can I make my mortgage company foreclosure on my house? I havent missed a payment yet but I am planning on moving within 4 months.I will let the house go with March being my last payment.Is there anyway I can help my mortgage company expedite the foreclosure? This is probably a strange question but I would like to know if it is possible to get the house out of my name within 4 months.
I know it will affect my credit but I cant sell the house because it is worth way less then what I bought it for.

jedihush

Admin 02.03.2009. 07:03

You cannot expidite a foreclosure. FC is investor approved and has to go through the processes. Most Prime investor backed loans have to be in default anywhere from 4 to 5 months before the foreclosure proceedings start. During this time your credit still start showing 30, 60, 90 and 120 day late marks and the score will drop quite a bit. When the investor requests forclosure proceedings start you will now have the 30 to 120 day late marks, but Pre-FC codes as well. During this time you will get hit with late fees as well and when the house goes into foreclosure you will become responsible for the attorney fees and any/all court costs that the investor incures because of the foreclosure.

Once pre-foreclosure proceedings start the actual foreclosure will generally happen within 3 to 6 months later. Sometimes sooner, again investor approved and driven. When all is said and done (if you go this route) your credit will be negatively impacted 200 to 300 points. The other impact is that *if* you let the property be foreclosed on and it happens in 2009, in January 2010 you will receive a 1099 form for the loss the bank has taken. What this means is if the bank forecloses and there is a buyer who picks it up at the auction, whatever the difference owed to the bank is (i.e. they purchase the loan for less than your principle balance), you will have to claim the difference as an Income for 2009 and pay taxes on it. The bigger the loss to the bank (i.e. it doesn't sell), the more taxes you're going to end up having to pay. You don't just have the foreclosure take place and get to walk away and call it a day.

You do have alternate options to entertain if you can no longer afford the home and that you can try to do while you're in default before a foreclosure happens.

1) Call your servicer to try to get a loan modification. You'll need to explain your hardship, provide paystubs and bank statements, as well as your expenses. In todays world the process is taking about 120 days - but long term your interest rate might be lowered, fixed and you could end up being able to keep the house.

2) Put your house on the market with a Fair Market Value listening. Your realtor could look up the listings in your area and provide that figure. You may be able to Short Sale the property meaning that the investor would agree to let you sell the property for less than it's principle balance - you would end up with a 'Settlement' on your credit and you would still have to pay taxes on the banks loss, however the negative impact to your credit would be far less.

3) Put your house on the market and if you do not get any offers for 90+ Days, contact your servicer and request a 'Deed In Lieu' on the house. Again, you'll have to prove your hardship, send in the listing agreement, pay stubs and bank statements. The investor approved 'Deed In Lieu' doesn't happen very often, but it does happen.

For a lot of the investor approved help that's out there you want to make sure that the house is occupied. As the payment goes delinquent the investors will send people to it to make sure it's still occupied. If it's determined that it's not, the locks can be changed. The banks are going to protect their collateral. If you have an FHA backed loan you will not be able to get assistance if the property is vacant.

Make sure you explore and exhaust all of your options before making the decision to let the property go to foreclosure. Call your servicer and have them explain the possible options and then do what is best for you long term. Sometimes it may feel like cutting your losses and running might be the best, however a year or two from now you may wish to buy another house, car, etc.. and find out that the foreclosure has longer lasting affects and is harder to overcome than doing a workout, Short Sale or Deed in Lieu would have been.

Good Luck.

Admin

Darren H 19.10.2009. 22:56

How does running a property investment business work? How does running a property investment business work.
Do you start off buying a few properties and rent them out.
Do you start by paying them off with a mortgage, so you can buy several properties at a time and pay each property off in certain amounts each time.
Do you normally set up up a company.

Darren H

Admin 19.10.2009. 22:56

A well-thought-out business plan is essential when applying for a loan to buy rental income property.

Optimism is good, but when it comes to buying a rental property, it?s better to be realistic. The promise of what investors call ?unearned income? is enticing, but it?s important to be aware of how much of your tenant?s rent check will be eaten up by overhead.

That?s why every potential buyer of a rental property needs a business plan. When you look for financing, a well-thought-out plan will improve your standing in the eyes of potential lenders.

First, determine your initial outlay, or what it will cost to acquire the property and get it ready for tenants. This amount, minus whatever down payment you have, is the amount you will need to borrow. It includes:

* the purchase price of the property
* any renovations and improvements, including permits
* a home inspection and/or appraisal
* the real estate agent?s and lawyer?s fee

Then you?ll need to estimate your monthly expenses, or what it will cost to maintain the property:

* mortgage and interest payments
* property taxes
* insurance
* utilities (not including those expenses you?ll charge tenants)
* administrative costs (office supplies, transportation, etc.)
* management fee (if you?re hiring someone else to look after the property)
* maintenance and upkeep
* classified advertising

This total will tell you how much rental income you?ll need to make the property profitable. This is fairly simple if you?re just renting out one apartment, or even a whole house. If you have several units to rent, your market research may take some time. You?ll have to compare your figures with rents for similar properties in your neighborhood to see if you will be competitive. Your city may also have regulations that limit how much you?re allowed to charge.

Once you?re confident that your rental income will exceed your operating costs, you?ll want to consider the long-term outlook, or how the numbers will change over the life of your investment. Consider factors such as:

* inflation
* the appreciation or depreciation of the property
* interest rates on your loan

Of course, these are difficult to predict accurately. As long as you understand your city?s rent control regulations, you should be able to forecast how much your rental income will rise over the years.

There are some common pitfalls in rental property business plans. Perhaps the most common is underestimating the amount of money you?ll spend on maintenance and upkeep. Your monthly estimate should budget for the major repairs that will inevitably come your way. Remember, too, that tenants don?t always pay on time. Think about how your cash flow will be affected by a late check or two -- will you need a line of credit to sustain you, and can you afford the interest charges that accompany it?

A spreadsheet can give you a rough tally of these figures. Once you?re ready to look for financing, you may want to purchase books or software with business plan templates to make your document look more professional, and to make sure you haven?t left anything out.

Admin

Rockinrobin 09.12.2006. 01:43

I am getting ready to refinance and I heard that I can take some money out to pay off debt How does this work? In other words, If my loan is 250,000 and I want to refinance and lets say my house appraises for 300,000. Does that mean I have 50,000 I can use to pay off debt? Am I understanding this correctly?
Thanks.

Rockinrobin

Admin 09.12.2006. 01:43

Basically what all the others said were accurate and true. You can get a 100% loan with the proper credit score and credit rating.

Before you mortgage your most important investment to the max, find out if it is necessary. I must say that if you are paying off credit cards this is probably the correct thing to do as the interest you pay on your mortgage is normally tax deductable.
Check with your cpa or tax preparer.

Add all the debts you want to pay off according to the balance of each debt. This will give you an idea of how much money you really need. Once you have added the debts up and found out the true amount of debt you want to pay off. Add the same debts only this time add up the monthly payments you are making on each debt.

Take the monthly balance you have added up and the balance on your mortgage this will give you some what of an idea about what loan amount you will be seeking. If, in addition to paying off the debts you want some cash in your hand add this amount to the debts and mortgage amount. You mgiht not need the entire amount of the $50,000. Just because the equity is there does not necessarily mean that you have to use it up. If paying off all your debt is beneficial by all means do so. If not leave the equity in your property, it is like money in the bank.

Take the monthly mortgage you pay each month as well as the monthly payments you are making on the debts you want to pay off this will give you some idea as to what you are paying presently each month.

Now you should contact a mortgage broker about securing a loan with the amount you have determined that you need. See if this person can run a credit report as well as give you an idea about the value of your property. Tell him what you want to pay off and if you want cash in your hand.

Once he has ran a cedit check he can tell you the type of loan program you are qualified for to include if you are able to get a 100% loan on your property.

Now there is another thing to consider. You know the loan amount you had in mind, now you have to find out the cost this loan will cost you. Again check with the mortagage broker, he will issue you a document called a HUD-1 or Good Faith Estimate as to the cost, debts you will be paying off to include the mortgage and the amount of money you will be getting in your hand if you requested any.

Now find the monthly payments for your new mortgage,find the piece of paper that you added your monthly payments up to include your monthy mortgage. Are you saving enough that this loan make sense? If you are saving in excess of $300 or more it might behoove you to accept the loan.

Once you have decided to take the loan your mortgaage broker will then require you to prove your income, with pay stubs and w-2, other documents will be needed so be prepared. It might seem as if it is a long drawn out procedure, but it will come to an end. The one important thing to remember is that even though you are paying off your debt, please continue to pay your debts as well as the mortgage. If you have a questions about paying consult your escrow closing officer or your mortgage broker.

It does you no good to pay off these high interest credit cards and other debts if you are gonna run them back up and not take this opportunity to save a portion of the money that you are paying off. Let's say for the sake of a good argument that you are saving a total of $400.00 each month. I think you should take at least half of that savings and put it into some type of savings account, retirement account or some intrustment that will be beneficial to you later in life.

If you don't take the measures to do this immediately and have it deducted from your check each month, in about 3 years you will be doing the refinance dance again. That is up to you and you have to make this decision, I can only give you my opinion, but I have seen it time and again,my same clients continue to do the same thing over each time, paying off debt followed by running it up again, thus the refinance dance.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Admin

Harry Osborn 20.03.2009. 11:41

Can I file bankruptcy to avoid forclosure and end my mortgage? As a last last result is it possible? I can no longer pay for my mortgage. I have been trying to sell my home and I will next try a deed in lieu , should it fail I will have less options. i want to know all teh options besides foreclosure. And please dont tell me to stay in my home. I need real answers from realtors or people who have been in my shoes.

Harry Osborn

Admin 20.03.2009. 11:41

Harry...you can contact a local bankruptcy attorney to find out what your options are, most will see you free the first time. You have a choice in a chapter 13 filing and keep the home while running payments thru the plan in order to keep the home. The trustees pay your secured debts first the un secured last. A bankruptcy attorney will look at your income, assets, debts and taxes to determine what you qualify for. You can review more bankruptcy information at their offical site @ www.usbankruptcy.gov Excellent site which will tell you the differences between the chapters and how they work and what is needed in each. Good Luck!

Admin

Jon 19.05.2013. 04:51

What is the most economic way to buy a home in NJ? I am looking to buy a home in NJ. I have about 100k liquid to use on a down payment. I am either looking to buy a multi family for under 250k and rent out the one unit.

Or buy a small 2 bedroom 1 bath condo for under 75k and pay it straight no mortgage.

Which will cost me the least amount of money out of pocket in the long run? I am looking in neighborhoods around Princeton NJ...East Windsor, Plainsboro, Kingston, Hamilton etc...

About me: I am a 23 y/o single male with no children (and want to keep it that way for at least 3 more years), The girlfriend will most likely move in with me shortly after the purchase...I make around 50k a year. I have some experience in home repair but not that much.

Jon

Admin 19.05.2013. 04:51

Your ultimate goals would determine the type unit you would eventually purchase.

If you are looking for long term wealth then you would lean toward the investment property or multifamily place where tenants would assist in the purchase of the property. This is a difficult job as there are normally continued tenant and property problems with being a landlord.

Tome a condo would not be high on the list to purchase. The value of condo's do not appreciate as a house would. There is the condo associations as well as CC&R, by-laws and rules of the condo. If you decide to rent the unit and purchase another place, you might encounter problems. If there are more than 10% of the condo presently rented when you decide to rent you would not be able to rent your condo. This is a rule set up by HUD to keep a minimum of 90% of the condo with the owners residing there and not turning the condo complex into a rental complex.

You might consider a FHA mortgage loan, This would require you to apply for and borrow a sufficient amount to purchase your potential multifamily property. The interest rate and terms would be the same as if you purchased a house for you to stay in as long as you reside in one of the units. the down payment for a FHA mortgage loan is 3.5%.

By borrowing the funds to pay for your property there are a few benefits. You are able to get your points and fees and most of your closing cost returned to you when you file your income tax. The borrowed money is free to you as you are also able to currently deduct any interest you paid on the borrowed money.

Your funds would remain in your account continuing to earn interest. Your net worth would increase as what you currently have in your bank account and other financial instruments plus the property would increase your net worth, by at least $250,000 if you purchase the property you hope to purchase. Of course your mortgage payment would be considered a liability.

In the situation you would want to purchase your property you would be considered equity reich but cash poor and your net worth would be what you purchased the house for and the remaining funds in your sabings account.

You would need to contact a mortgage lender that is authorized to do FHA mortgage loans to see what amount of mortgage you would be approved for.

There are several internet mortgage calculators available for you use to throw a few number around so you are able to make an intelligent decision about you current financial situation as well as to determine if paying all cash for a property or obtaining a mortgage loan would benefit you financially.

I hope this has been of some benefit to you, good luck.

"FIGHT ON"

Admin

bettyboop 14.12.2006. 04:55

A good company to work for during the summer? I am a college student studying to become a nurse. Therefore, I can't afford to sacrifice my precious time to work and make money during the school year. I do not have classes during the summer and wish to get a good paying job to save up and pay my loans faster. I know this is a personal question but I don't come from a family who are college-bred. I'm actually the first one to go to college in my immediate family. Do you think being 45,000 in debt in school loans after graduation (BA in nursing w/ RN degree) is a little steep. I do have a job lined up for me right after graduation, which is nice.

bettyboop

Admin 14.12.2006. 04:55

Look for a large corporation that you'd like to work for after graduation, then get on with them as temporary f/t summer relief, doing anything that peripherally relates to your end career. For example, work as a porter in a hospital, or in the community public health department on a street outreach program.

The advantages are that you get a look at the employer in advance before graduating, they may have corporate bursaries for staff education and, in the case of a unionized workplace, you may be able to start the seniority clock running, which pays off big time later.

You can also look around for a community that is starving for medical personnel (i.e. rural Canada) and cut a deal with them to work there after you graduate for a specific number of years, in exchange for their support of your tuition/expenses now.

Don't sweat the student loan. People pay off $48k for an expensive car in 6 years and have nothing left to show for it.

Go see a financial advisor soon. After graduating, one strategy is to:
-Determine what is the largest monthly payment you can offord to make to pay off the loan in the shortest amount of time.
-Then stretch out the payments for as long as possible, which reduces the monthly payment. (Don't worry about the interest, you'll see)
-Then make payments into a monthly retirement savings plan, such that the student loan payment plus the RRSP payment equal the amount that you determined was your maximum affordable amount per month.
-If you run into financial trouble, you simply back off the RRSP payment for a short time, while you get reorganized.
-After you finish off the student loan, you are sitting debt-free, with the RRSP as assets to support buying a house and you are a professional in a well-paying job.
-Now you do the same split payment thing, with a stretched out mortgage and ongoing payments into your RRSP. Time the mortgage payments to be done at the time you plan to retire.

The end result is that you will never miss the money, because it was never in the day-to-day budget anyway. And when you retire, at age 50 - 55, you will be sitting on a WAD of cash and a PAID OFF house, with a fat purring cat and a big garden......:>)

Also check out Harv Eker's Millionaire Mind Seminar.

Admin

Cindy 06.01.2009. 01:57

Can a person under these circumstances buy a home and how? A single person with a good job but not long on the job, with a bankruptcy and bad credit rating (things that happened due to a divorce).

How much would I need down for a $174,000 home?
"Carla"....You need to watch it lady, my 10 year old son is reading this.

Cindy

Admin 06.01.2009. 01:57

A lot depends on how long the bankruptcy has been. If you filed for bankruptcy over 1-2 year ago it might affect your interest rate making it a little higher. You will be asked to write a letter of explanation as to why you were in bankruptcy, by the mortgage broker that you use to get a mortgage loan through.

About your job, even though you might not have been on the job very long is the job in the same career field or a promotion in the same career field?

Most of the experts on this forum will tell you that you should place 20% down on property. I am not of that mind. I think that you should place the least amount down on property as possible.

If you decide to buy a property at a price of $174,000 then the following down payments are listed for your consideration

#1 3% down=$5,220

#2 5% down=$8,700

#3 10% down= $17,400

#4 20% down= $34,800

Your down payment will depend on your credit score and what mortgage loan program you are qualified for.

In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, which you can find one in your local telephone book.

Make sure this mortgage broker or mortgage banker is able to do government loans such as FHA and VA loans if you qualify for one.

He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.

The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.

When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.

#1 One month of pay stubs for each person that will be on the mortgage.

#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.

#3 Two years of federal income tax along with the W-2 that match.

Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.

Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.

Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.

If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.

You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.

Make sure your mortgage broker explain all your options so you may make an intelligent decision.

What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.

So select the best option for you and your financial situation.

You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.

Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign.

Your mortgage broker will now order an appraisal to show proof of the property value.

The mortgage broker might ask for additional information or documentation, don't get all up tight this is normal, just supply the information or find the documents needed.

After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.

Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.

I hope this has been of some use to you, good luck

"FIGHT ON"

Admin

REETA 12.07.2012. 13:47

How long do I have to wait to apply for mortgage loan being 1099 for 7 months. I am guaranteed 2000/month.? I am working with a company since January as sales rep and will receive a 1099. I am guaranteed 2000/month plus commission. Can I apply for mortgage loan (along with husband) or do I have to wait before my income will also be considered.

REETA

Admin 12.07.2012. 13:47

The question is do you have proof that you were employed prior to your current employment? If you have third party proof that you were employed and is in the same career field then you would not have a problem about being pre-approved for a mortgage loan.

Buying a house is a step by step process, this is the first step you should take in order to purchase a house. The rest of the steps will fall in place, no matter the type of property you are purchasing.

In order to find out the type of loan programs you are qualified for you will have to fill out a loan application, with a mortgage broker, you can find one in your local telephone book.

Make sure this mortgage broker or mortgage banker is able to do government loans such as USDA, FHA and VA loans if you qualify for one. With a VA mortgage loan you are not required to have a down payment, this will save you on closing cost.

He will fill out this application, which takes awhile so grab your favorite beverage and sit down. Once you have completed the application, he will run your credit report which will have your credit scores. These credit scores will determine your interest rate.

The amount of your monthly debt payments you are required to pay as per your credit report and the amount of mortgage you can take on based on your income will determine the amount of house you will be able to purchase.

When you speak with the mortgage broker you will need the following documents to complete the loan application, there will be others, but this will get you started.

#1 One month of pay stubs for each person that will be on the mortgage.

#2 Six months bank statements from each bank in which you bank as well as statements from any 401K from you place of employment.

#3 Two years of federal income tax along with the W-2 that match.

Once he has all that he need to do he can then issue you a pre-approval letter so you can purchase a home. In this pre-approval letter will be the amount of house you are qualified to purchased.

Once he gives you this pre-approval you may now find a real estate agent to find yourself a home or he might have a referral.

Now make sure before you get your pre-approval you and your mortgage broker go over all your options as to the mortgage programs you qualify for, the interest rate, monthly payments.

If you are getting a FHA, fixed rate, two loans to eliminate PMI like an 80/20 or one loan, if you are qualified for and approved for a 100% loan.

You should select the loan that best suit your financial condition at the time. That could be an adjustable rate loan. It could be a fixed rate loan for 5 or 10 years and then adjust. Some adjustable rate mortgages only adjust once.

Make sure your mortgage broker explain all your options so you may make an intelligent decision.

What might be good for one person might not be good for you, in other words just because your friends and all your real estate buddies are telling you about the great fixed rate they got, your financial situation might call for something else.

So select the best option for you and your financial situation.

You should also get a Good Faith Estimate (GFE) which will indicate the cost you will have to pay for getting this loan. It will also indicate the amount of your down payment.

Once you have found a home the real estate agent will then prepare a contract for you and the seller to sign. Your mortgage broker will now order an appraisal to show proof of the property value.

The mortgage broker might ask for additional information or documentation, don't get all up tight this is normal, just supply the information or find the documents needed.

After the appraisal has been completed you will be called by your mortgage broker to sign your loan docs so you can take possession of your new home.

Before signing any loan docs make sure they say exactly what you and your mortgage broker went over when you decided on what mortgage program was best for you.

I hope this has been of some benefit to you, good luck

"FIGHT ON"

Admin

Marie 21.05.2008. 01:13

Will the abundance of recent foreclosures lower the credit standards? It is my opinion that because so many people are defaulting on their mortgages, they are probably defaulting on other loans in order to try to keep their homes.

If a high percentage of Americans have bad credit, then will the financial industry have to lower the standards for credit in order to continue making loans/money????
I worked in the mortgage industry until recently and am aware that lending practices are becoming stricted because of the abundance of foreclosures. But eventually these companies are going to feel the effects of these recent changes and will have to offer subprime mortgages or lower the standards if they want to stay in business.

Marie

Admin 21.05.2008. 01:13

In the short term, obviously not. Credit is drying up for nearly every type of borrower, not just the ones with bad credit. Loans are even harder to get for small and large businesses, with the money markets being tighter now than a year ago.

But in the long run, you may be on to something. Banks may not just hand out money to people with bad credit to buy whatever home they want, which was one reason so many deadbeats took out loans they never intended to pay back. Credit scores, though, may become less of a deciding factor in purchasing a house in the future.

Obviously, credit scores determined whether borrowers would get a lower or higher interest rate, but neither subprime nor prime borrowers are having an easy time keeping up with ARM payments. And no matter how much they make and how good their credit is, people do not like the feeling of paying more for a house than it is worth.

Since one consequence of the fallout in the housing market will be lowered credit scores for large numbers of people, lenders may begin focusing on the borrowers' financial positions, instead of just pulling a credit score. That means down payments, stable income and job history, and some extra cash in the bank may be more important in the next few years than having a great credit score.

A lot of people won't have great credit scores to show, and having a foreclosure/bankruptcy in the previous few years is not going to help at all. But if they've saved up some money and can make an investment in their next home purchase, banks may be willing to overlook the credit situation.

So we may be moving from a wide-ranging credit scoring system to group potential borrowers to a more case-by-case basis of looking carefully at financial positions instead. With so many facing foreclosure, repossession, bankruptcy, or charged-off credit cards, a more adaptable system seems to be needed.

Hope that helps. Interesting question.
ForeclosureFish

Admin

Write a comment

* = required field

:

:

:

:


* Yes No