When should you go for a mortgage? Check out yourself

Have you taken out credit cards, personal loans or an auto loan? If you have high interest credit cards, consider paying them down and avoid using more than 10% of your cards' limit at any given time. However, if you are debt-free, you can possibly go for a bigger mortgage depending upon other factors. You may be saving for your retirement by investing into employer sponsored plans like 401k/403b as well as the IRAs. You may like to save for your child's education (Coverdell education Savings and 529 Plan) as well. So, decide whether you're comfortable with managing a mortgage as well as savings plan.

However, if you have too much of credit card debt, pay it off and then start saving for future. Otherwise, managing credit cards, savings and then a mortgage may be quite difficult!

If you're looking for mortgage in a market where borrowing is costly and difficult, then having poor credit will cost you a lot. In such markets, a borrower with a score of 620 is no longer considered creditworthy! At least you should have a score of 680 to qualify for better rates and terms.

Although there are FHA and VA programs for those having poor credit, yet, if you want to get the best program and avoid mortgage problems in future, then wait till you repair your credit and then apply for a loan.

Often lenders take the initiative and work with borrowers in improving their credit scores prior to offering the loan. However, if your score is between 640 and 680, consider putting down 10-15% of purchase price so that some of the best programs are available to you.

As for the credit history, most lenders look for 3-5 tradelines (mortgage, second mortgage, credit cards, auto loan, student loan, store card, gas card, secured/unsecured installment loan etc) in good standing for the past 2 years.

Most lenders will require you to have cash reserves/savings equal to at least 6 months of mortgage payments (PITI) apart from what you'll pay for closing costs and down payment.

However, not all programs (such as the FHA loans) require this but it's better to have some cash reserves so that in case there's an emergency you don't miss a payment and bring down your credit score.

In order to take on additional debt, you'd have to calculate how much of your income (include all sources of income) is being spent on current debts such as credit cards, personal loan, auto loan etc. This is given by the debt-to-income ratio or DTI.

The DTI = (total monthly debt payment/gross monthly income)
So, the % of income put into paying off debts = DTI * 100

Check out yourself the DTI using Debt-to-income Ratio calculator.

The higher the DTI, the lower are your chances of getting a mortgage because you pose a higher risk to lenders if you're already having a lot of debts to pay for.

If it's a declining market with home prices going down, you may like to wait till prices get better. This is because lenders may reduce the loan amount as investors won't provide enough funds.

Moreover, if you cannot pay off the mortgage and decide to sell the home, you won't get enough proceeds because the home value will turn out to be lower than what you owe. Thus, in a declining market, you can't rely on home sales to pay down your mortgage. Rather you'd have to choose options which will have a negative impact on your credit.

However, if you're planning to occupy the house for a long time and your finances are in good shape, you may go for a home that's losing value now as you have the time to wait till prices get higher.

The lending industry has been changing with time to keep pace with inflation and economy. With market changes and scenarios like the credit crunch (due to sub-prime mortgage crisis in 2007), lenders have come up with stricter lending guidelines in order to reduce the rising rate of foreclosures.

Due to market changes, certain programs are simply not available. For example, due to the rising concern over foreclosures (in 2007-2008 beginning) and borrowers' inability to pay off loans, lenders have almost stopped offering 100% financing or 80/20 loans.

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Mortgage Points - What are the types and how do you benefit?

Hi carlark,

Welcome to this forum.

Points are also known as discount points. These are some kind of fees that the lenders charge at closing. If the borrower pays these points, he may be offered lower interest rates for the entire loan period.

Eugene has given you some very good information regarding points and I agree with him that the buyer should look the net amount that they need to pay. Points are some kinds of baits to attract the buyers.

There is an article regarding Discount points. You can check it out- http://www.mortgagefit.com/discount-point.html

Feel free to ask if you have any further questions.

Thanks,
Larry

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Refinance a mortgage at the right time and for right reasons

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With mortgage refinancing, you can replace your original mortgage with a new one with better terms and conditions but the new mortgage should be within your affordable limit. The same property that you used as collateral to secure the original mortgage is used to secure the new loan also. The new loan proceeds are utilized to pay off the existing mortgage. In case there is any remaining money after paying down the original mortgage, that amount can be used to meet other financial obligations.

Example: Suppose each of the two borrowers A and B took out mortgage loan worth of $500,000. Again, say after 5 years, both A and B paid down $250,000. So, for both these borrowers, remaining unpaid mortgage amount is $250,000.

Borrower A then took out another loan worth of $250,000, so as to repay the remaining balance on the existing mortgage. This depicts a case of simple refinance.

Borrower B then took out another loan worth of $350,000. Out of this new loan amount, B used $250,000 to pay down the original mortgage. B could use the remaining $100,000 to meet other financial obligations. This describes a case of cash out refinance.

The first scenario is a simple refinance while the second is that of a "cash-out refinance".

You may not always be eligible for refinancing or the situation may not always be conducive for refinancing. You have to time your move correctly so as to reap its benefits. You need to check out these crucial things carefully before applying for mortgage refinancing - If you have built up equity:
You may be eligible for refinancing when you have built up equity of at least 10% in your home. However, for mortgages owned by Fannie Mae, the equity requirement is 5%. It is possible to get the refinance approval even with less than 5% equity, but in that case you may have to pay a certain sum of money to compensate for the deficiency in equity.
If the refinance rate is sufficiently low:
If the current mortgage rate is sufficiently lower than the rate on the original mortgage, then it may be wise to opt for refinancing. Here, you need to follow the 2% Rule. As per the 2% Rule, refinancing is beneficial for you in case the refinance rate is 2% lower than the rate on the original loan. Here, the savings accrued from low rate outweigh the costs of the new loan after a certain period of time, which is called the break-even period. To get benefits of refinance, you have to stay in the house at least till the break-even period.
If you have removed negative items and paid off debts:
Before plunging into refinancing, obtain your credit report from the credit bureaus and review it carefully. If you find some negative items such as collections or late payments, dispute those items immediately and get those items removed from your report. Prior to refinancing, pay down as much debts as possible. All these will work in your favor in getting the refinance approval.
If you have no late payments in past 1 year:
If you have history of late payments in the past 1 year, then your refinance appeal may be rejected. So, before refinancing, make sure you don't have any late payments in the past 1 year.
Despite the fact that refinance has several benefits, it is not always a good idea to go for mortgage refinancing. There are some cases when your refinance appeal is rejected by the lender or it may not fetch the desired returns. Here are some cases when refinancing is not a good idea at all-If the property value has declined sharply:
If the value of your property has declined appreciably, the remaining balance on your original loan may be higher than the refinance loan amount. In other words, with the new loan proceeds, you won't be able to pay down the original mortgage loan.
If you have already used up your equity:
Your equity is the key to get approved for refinancing. If you have already used up your equity by taking out a home equity loan (HEL) or a home equity line of credit (HELOC), then going for refinancing would not be a good idea.
If you have only a few years left on the existing loan:
It does not make good sense to go for refinancing if you have only a few years left on your existing loan. It is not rational to refinance the loan which you have almost paid off. If you have almost paid down a 30-year fixed rate mortgage, then it is unwise to opt for refinancing. After all, refinancing is just like taking out a new loan and all the costs associated with taking out a fresh loan are applicable here too.

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Types of mortgage loans - Compare and choose the best option

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function rate_cur_show(){document.getElementById('rate_present').style.display="block";document.getElementById('rate_do').style.display="none";}function rate_show(){document.getElementById('rate_do').style.display="block";document.getElementById('rate_present').style.display="none";}function selstar(val){for(var x=1;x 0){ $('.tabs').css( "Display", "none" ); }*/ // screenwidth = 1024; var url = window.location.href; if(screenwidth The mortgage industry offers a variety of loan programs suitable for a wide range of borrowers. There are loans that require high payments but there are also programs specially developed to provide homeownership opportunities to low-income families. These mortgages have special features and one really needs to get a brief idea of their pros and cons before he applies for it.

This section provides you with an explanation of mortgage types and their features. Apart from highlighting the types of mortgage loans, this section also mentions who all are suitable for the different types of mortgages. The purpose is to help you explore the features of various types of mortgage loans so that you can compare and choose the one that's best for you.

Fixed rate mortgage
(40, 30, 15, 10 years) Fixed rate of interest and hence fixed Monthly payments throughout the loan term. Borrowers who are planning to occupy the property for at least 10 years. Those who don't prefer higher payments.
Interest rate and the monthly payment remain the same for 10 years. From the 11th year, the rate is adjusted every year. This will change the payments each year for the rest of the loan term.Intend to occupy the property for more than 10 years. Like to make stable payments initially but can afford higher payments later on. Plan to leave the property within 10 years. Want to continue with the loan even if there are changes in the plan.
Interest rate and monthly payments remain fixed for the first 7 years. From the 8th year, interest rates are adjusted every year. The payments are thus changed every year till the loan period is over. Plan to stay in the property for more than 7 years. Prefer stable payments initially but can keep up with higher payments later on. Plan to vacate the house after 7 years. Want to carry out with the loan in case the plan changes.
Fixed rate and monthly payments for first 7 years. On the 8th year, the interest rate is adjusted according to prevailing market rates. The resulting payments will remain constant for the remaining loan period.Plan to occupy the property for more than 7 years. Those who can afford just 1 payment adjustment. Those who plan to move out within 7 years. Those who want to continue with the loan in case there is any change in the plan.
Interest rate and monthly payment remain the same for the first 5 years of the loan period. The rate is adjusted on the 6th year to reflect the prevailing rate. The resulting payment remains constant throughout the rest of the loan term.Borrowers intending to stay in the property for more than 5 years. Those who can bear with one payment adjustment Borrowers who plan to move within 5 years. Those who want the loan to remain in force in case of any change in the plans.

For the first 5 years, the interest rate and monthly payment remain constant. But from the 6th year, the rates adjust after every 5 years and 1 year respectively.Those who can put up at the property for more than 5 years. Borrowers who like stability in monthly payments initially although there may be increase in payments later on. Those who may leave the house within 5 years. Borrowers who want to continue with the loan in case plans change.
The interest rate and monthly payments remain fixed for the first 3 years. From the 4th year, the rates are adjusted in every 3 years and 1 year respectively.Borrowers who plan to stay in the property for than 3 years. Those who can accept initial payment stability and any changes later on. Borrowers willing to abandon the property in less than 3 years. Those who want the loan to remain in force in case of any change in the plan.
The interest rate is adjusted every year as a result of which the monthly payments also vary each year for the entire loan term.Borrowers who want to take advantage of low rates. Those who can bear additional costs due to yearly payment changes. Borrowers who cannot qualify for high rate loan programs.
Interest rate and monthly payments remain unchanged for the first 5 years. After 5 years, the borrower must refinance the loan (which is largely due) at the prevailing rates.Borrowers who plan to occupy the residence for more than 5 years. Those who can refinance their previous loans at the prevailing market rates.
Those who intend to vacate the property within 5 years. Those who like stability in payments.
Interest rate and monthly payments remain fixed for 7 years. At the end of 7 years, the borrower should refinance into a new loan at the prevailing market rates.Borrowers who want to live in the property for a time period exceeding 7 years. Those who can refinance at the available market rates. Those who are planning to move out of the property within 7 years. Borrowers who prefer payment stability.
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posted on 2005-12-08 20:23:58     Post subject: rewant to remortgage the property in both mine and partners name and then sign the property over to partner     Post subject: RE:Hi frank,

It seems that you want to take a loan in order to remortgage your property. But you haven't provided us with all the details regarding your loan request, your credit score, and the state where you reside.

Our Community comprises of a group of lenders offering different types of mortgage loans for borrowers having various income and credit profiles. So if you can give us some more details, then I can send your query to our loan department. They shall consult the lenders and then contact you as soon as possible. So please sign up with us with the details, so that we can proceed further.

Regards,
Jessica.

    Post subject: Mobile home purchaseMy wife and I want to purchase a Mobile Home in CA. We don't have the greatest credit (each of us is around 590) but we have a good combined income around $95,000 annually. Could we still qualify for any of the types of mortgage loans?     Post subject: types of mortgage loans for mobile homeHi Guest,

Welcome to the forum.

Your credit score is not too good but your combined annual income is very good. so I think you can go for FHA loans as these are not a score driven program.

Check out the article at http://www.mortgagefit.com/mobile-homeloan.html and get an idea about the various types of mortgage loans available for purchasing mobile home.

Feel free to ask if you have any further questions.

Best of luck,
Larry

    Post subject: bk affects your chances to get any of the types of mortgagesHave a recent foreclosure and bankruptcy and want to know how this affects the ability to purchase a home with the help of different types of mortgages.     Post subject: foreclosure affects getting various types of mortgage loansHi lilcash,

Welcome to the forum.

How would you face the foreclosure and bankruptcy together? Can you please explain your situation a bit more?

BTW it will have a huge negative effect on your credit report. It will drop your credit score by 250 to 300 points and will remain on your credit report for 10 years. So you may not get approved for any program out of the different types of mortgages in coming 3 or 4 years. From now on pay all the bills and payments on time and try to improve your credit score.

Feel free to ask if you have any further questions.

Best of luck,
Larry

    Post subject: improve credit & qualify for any types of mortgagesmy husband and I both have bad credit, we are renting a home and have to purchase it by 2009, everything on our credit is collections and charge offs, what is the best way to achieve this. we have a combined income of 110,000. advise on how to settle and clear our credit and get our scores up so that we're able to choose the best out of the types of mortgage loans.     Post subject: no down payment - what types of mortgage loans are suitable?what types of mortgage loans are suitable if you have land but no down payment-land is estimated at $30,000 + want to put man. home at approx cost of $90,000. on land     Post subject: good explanation mortgage typesGood deal Jessica! It's in plain english and very informative. Thanks for investing some of your time to make things a little easier for the rest of us!
_________________
Scott McKay
FreeOnlineCreditGuide.com     Post subject: closing datemy husband has this guy that is refinancing on our home and we are getting some cash put in our pocket. We can't figure out what is taking so long, to find a processor and lender. We have been waiting since Sept. 2008. We had been told for 4 weeks now, that we will close next week (repeat). We are getting very frustrated. Any suggestions about this situation.     Post subject: CRT,

One of two things is happening, either you have a mortgage person who doesn't know what they are doing, or your loan pkg is a challenging one.

If your scores are below 580, you have open collections, or recent judgments, have an unstable work history, or late pymts on credit over the past 2 years...then it is probably a credit issue. If this is not the case, then it is the mortgage person.

Kim
_________________
(770) 886-3140

    Post subject: using bank account as collateralHello: Is it possible to use a bank account or bonds as collateral in a loan?
Could you send the reply to me email? "profjdyme@gmail.com"
Thank you,
Prof. J Dyme

[Link deactivated as per forum rules. Thanks]

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9 Refinance Mistakes and how to avoid them

Hi Shana P!

Welcome to forums!

Keeping in mind the current economic crisis, rates are really low. You can refinance your current mortgage into a fixed rate one during this time. This will also help you in saving some money. It my opinion it is a good option for you.

Well, you never know whether the rates will fall further or not. I don't think you should wait for further lowering of the rates. In my opinion if you get good offer now, you should go for it.

Feel free to ask if you have further queries.

Sussane

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