Mortgage

There is not a single sphere in our life that does without mentioning or making references to crisis nowadays. Mortgage and housing costs are probably the spheres which are associated with the economic crisis most of all. Among millions of recommendations and anti-crisis solutions, the advice to save money sounds obvious. Below are several ways how you can cut the amount of money you spend each month on your home:

There are several RE to saving on your housing costs - refinance, relocate, reassess, research, reduce, and resize.

- Refinance. Get a new mortgage at a lower interest rate.

- Relocate. Consider moving to an area where housing is more affordable. You may be able to save thousands of dollars without compromising the size or comfort of your home.

- Reassess. In case your home has declined in value since your last property tax assessment, consider saving on your taxes by challenging the assessor’s latest valuation of your property.

- Research. Shop around and compare rates, you can find out that it is possible to save a lot of money and still get the same amount of coverage. If you insure your home and car with the same company, ask for a multiple-policy discount.

- Reduce. You can save on your housing costs by practicing the smart use of utilities. Consider introducing energy-efficient appliances, as well as weatherproofing your home, installing water conservation devices, turning down the setting on your hot water heater, turn off lights and all electronic devices when they are not in use etc.

- Resize, or rather Downsize. Consider moving to a less costly residence. A smaller home usually means big savings on utilities, maintenance and repairs.

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This is the most important question prospective homebuyers ask themselves when trying to decide how much of their income will go to monthly mortgage payments. According to mortgage experts, the total amount you pay toward your mortgage should not exceed 28 percent of your gross income.

Determine your total income, including your regular salary, bonuses, regular income from dividends and interest, and assistance or support payments. In order to determine your maximum mortgage amount, you can use debt-to-income ratios, i.e. the percentage of your monthly gross income which is used to pay your monthly debts. Your debt-to-income ratio shouldn’t be higher than 36 percent.

A borrower’s housing costs consume 33% of their monthly income. Adding their monthly consumer debt to the housing costs, we should receive no more than 38% of their monthly income to meet the obligations. This common guideline — 33/38 — may vary according to loan program. In other words, assuming that you make $5000 a month, your maximum monthly housing cost should be about $1650, and including your consumer debt, your monthly housing and credit expenses should not exceed $1900.

When lenders are trying to determine whether to lend you money, they look at this ratio. Logically, to be able to get the loans or credit you require you need a good balance between debt and income.

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It is not only the rates and terms that are important when you approach a lender for a mortgage on a new home. It’s vital to make sure you don’t accept a loan with prepayment penalties. At least, you should be aware of its meanings and consequences for your particular situation. A prepayment penalty is basically a provision of your mortgage contract, stating that if you pay off the loan entirely, you will have to pay a penalty. This penalty may come in different sizes and forms.

In essence, prepayment penalty is a method investors use to protect their investment. These penalties guarantee a minimum rate of return, and make the investment more valuable to the lender. There are a “hard” and “soft” prepayment penalty forms. A “hard pre-payment” means that you will have to pay a penalty in case you pay off the loan for any reason during the specified period, while a “soft pre-payment” implies that the penalty is only enforced if you pay off the loan through a refinance.

Always carefully examine the prepayment rider in your policy before you sign anything. You should be aware of the true nature of the mortgage prepayment penalty not to be financially trapped later on. It will be wise to have a neutral third party such as an escrow officer explain everything concerning the prepayment penalties to you.

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A good mortgage broker is what it takes to have a positive mortgage experience, regardless of whether this is your first mortgage, second mortgage, you opt for refinancing, or you are in a real estate investing business. Mortgage brokers bring together lenders and borrowers. They normally work with dozens of lenders to be able to find the best financing option for the home purchase. Their job is to find and evaluate home buyers, analyze each perspective home buyer’s credit situation and determine which lender fits best for that particular situation. It’s great to have a professional who is able to find a loan for practically any credit situation.

The first step in finding a good mortgage broker would be to ask your friends and your own real estate agent for references. Get a list of mortgage brokers in your area. Then call recommended brokers and find out how many lending institutions they work with, as well as what types of institutions or individuals they work with. A great advantage of dealing with a good mortgage broker is that he/she is likely to help you get a special deal or enroll into an alternative loan program that best suits your needs.

It is important to learn how mortgage brokers are compensated. Your goal is to find the best terms available. So don’t be too quick to disclose to a broker the interest rate you will accept.
Use your common sense when choosing a mortgage broker. Remember that the broker’s reputation speaks for itself. Do your own research on mortgage fraud in order not to fall victim to it. The mortgage industry today requires a lot more preparation, caution and knowledge than years ago.

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Refinancing a mortgage at a lower interest rate is not always the right decision, even if the conditions are as favorable as they are now. In a number of cases it may be more reasonable to stick with your current mortgage.

It is important to understand that a refinance doesn’t pay off the debt, but rather restructures it at a lower interest rate and a different loan term. The goals of refinancing are reducing the interest expense, extending the loan back out to 30 years at a lower monthly payment, debt consolidation etc. For refinancing to make sense, you should be planning to be in the house for awhile. Think of how many months of lower payments it will take to recoup the closing costs of the new mortgage.

If you don’t plan to stay in the house for long, staying in your current mortgage is a wiser decision. As you know, there are cash-out refinancing and standard “plain vanilla” refinancing options, each with its pros and cons. When making a decision about refinancing, make no mistake about fees and closing costs which tend to add up quickly. You many need an extra $10,000 to cover the fees that are involved in the refinancing of a current mortgage.

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The Options ARM offers 4 payment options: Minimum Monthly Payment, Interest-Only Payment, Fully Amortizing 30-Year Payment and Fully Amortizing 15-Year Payment. It allows borrowers to make a low monthly minimum payment for 5 years and then the loan is recast which causes mortgage payment to increase.

Now billions of Option ARMs are due for recast in 2009 and 2010. What does it mean in the current situation of the subprime crisis? It means another, even more serious crisis may strike. The great fall in the US housing market is going to make the matters worse.

When the low rates on Option ARM products expire, homeowners will find themselves owing much more than their homes are worth. It is likely to trigger a big wave of foreclosures across the country. Experts believe payments may go from $1,000 a month to $1,800 a month.

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Mortgage market opportunities are unique now. Good planning and financial advice can pave the way to a lower mortgage rate and payment for the luckiest of us. But apparently, not everyone has an opportunity to rush and buy homes or refinance, even though the situation is very favorable at the moment. Record low prices don’t mean we all can purchase a dream home right away.

People who have bad credit will experience great difficulties getting a mortgage in today’s market. However, if you understand credit and can take measures to improve it, you still may qualify. Remember that raising a credit score 20 points may be that very difference between qualifying for a mortgage and not qualifying. Yes, but how many of us are disciplined enough to practice saving, cutting expenses, spending less, paying off debt and making sacrifices for an extended period of time?

If you thought of a jumbo loan (over the limit of $417,000), it is going to be a problem currently too. Jumbo loans come at bigger interest rate than conventional loans. Most expensive homes are still inaccessible regardless of historically low rates and new opportunities. Jumbo loans don’t drop down to match those great deals smaller mortgages now can offer.

Then there are people whose homes have lost value, and they tend to owe more on their mortgage than their property is worth. They also belong to the group who cannot take advantage of historically low mortgage rates. They cannot refinance because they lack equity. It is possible to get more equity if they stay in their homes and pay down their mortgages. Patience and smart financial decisions will eventually get a great mortgage rate and lower payment for this group of homeowners as well.

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If you have put up with the thought that there will always be this huge gap between your dream home and what you can actually afford to buy, you shouldn’t have. A financial crisis is the key news at present but it also turns out that for some lucky ones it’s the key to having their dream come true. We witness the historic fall in housing prices, as well as lowest interest rates on fixed-rate mortgages. House hunters, now’s your chance!

Now that home prices have fallen dramatically, as much as 30% in some parts of the country, you can afford homes in better areas than you used to consider before. Mortgage rates are the lowest they’ve been in decades at present. The rates on 30-year fixed mortgage rate dropped below 5% and experts believe it is not the limit. This state of things have lead to a record refinancing activity as homeowners blessed with good credit and equity in their homes strive to lock in as soon as possible. Mortgages for home purchases have also increased and experts predict a huge rise in mortgage applications quite soon.

Simple comparison of home mortgage prices in different areas shows, that there appear a lot more options for potential home buyers than it used to be before crisis. Only a couple of examples: Riverside, California, a four-bedroom bungalow is for sale now for $179,900. It was sold for $259,425 in June, 2008. A duplex in Atlanta is now selling for only $50,000, while it was sold for $292,500 in 2006.

olya Uncategorized, mortgage credit, crisis, fixed-rate mortgage, house, mortgage, mortgage rates, refinance