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Posts Tagged ‘mortgage’
FHA Loans Set Record
The Federal Housing Administration guaranteed 186,000 mortgages in June, a record number in its 75-year history.
FHA loans are popular because they are one of the few sources of low-down-payment mortgages. In the last year, they have accounted for about 46 percent of all mortgage applications.
Along with increasing numbers of FHA activity comes a rising number of delinquent loans, with the level of FHA mortgages in some stage of foreclosure reaching 7.4 percent in May.
Source: The Wall Street Journal, Nick Timiraos (07/20/2009)
No-Doc Loans Could Return
Bank attitudes toward risky lending is making it very difficult for the self-employed, even those with high incomes, to secure mortgages.
No-doc loans are particularly hard to get, locking out people whose incomes are derived from investments or who are able to tax-shelter significant dollars.
The California Mortgage Bankers Association spokesman Dustin Hobbs says the industry understands that banning most alternative financing isn’t the long-term answer.
“It’s a reaction to the current environment,” he says. “There’s such a lack of appetite for risk right now in general that any product viewed as having any sort of risk at all has a tough hill to climb.”
Chris George, president of CMG Mortgage, predicts that no-docs and other nontraditional loans will be back within the next six months as lenders gain confidence. “As with injuries, as with your credit, as with the economy, time heals all wounds,” he says.
Source: The San Francisco Chronicle, James Temple (07/09/2009)
Views: 40Foreclosures Continue to Flood Market
The U.S. housing market is being flooded with foreclosed homes held by trusts managing pools of securitized mortgages.
The trusts sold six times as many properties as banks during the six months ending March 31. The average property sold for 69 percent of the original loan amount, according to data compiled primarily in the Atlanta area by Data Intelligence Corp., a real-estate analytics firm.
The dump isn’t over yet with thousands of properties still awaiting sale.
“While the banks are trying frantically to get loans off their books, they face the problem of large shadow inventories of housing being dumped on the market, which would depress prices further,” says Anthony Sanders, real-estate finance professor at George Mason University in Fairfax, Va.
Karen Weaver, global head of securitization research at Deutsche Bank AG, says the steepest losses involve subprime mortgages in which lenders generally are recovering just 26 percent of the original loan amount.
From a home shopper’s standpoint, there are bargains galore in many areas. Tim Hamill, an associate with RE/MAX Greater Atlanta, who is handling sales for an asset-management firm on behalf of a trust, says his mandate is to do what it takes to sell in 30 days.
Source: The Wall Street Journal, Carrick Mollenkamp (07/09/09)
Views: 21Mortgage Terms You Should Know
Getting a mortgage is hard enough without having to worry about what everything means. Here are ten of the most common terms used in mortgage discussions, along with clear explanations of what they are, and how they affect your home buying experience.
Amortization
Lenders don’t typically spread out your interest payments evenly over the course of your mortgage. In most cases, you are paying a higher amount of your interest during the first few years, and a smaller amount toward your principal. As you pay off more of your mortgage, this begins to even out, and then, finally, your payments go mostly towards your principal, and only a very small amount will go towards the last remaining portion of the interest you owe.
Closing
Closing on a home is the day that every new homebuyer looks forward to. It is the day that the last bit of paperwork is signed, the last of the fees are paid, and the home is officially theirs. The seller gets their money at the same time. This is the final step of a home buying experience, where the title for the home is officially transferred to the new owner. Closing is also sometimes referred to as the settlement.
Credit Score
This is the magic number, or numbers, when you are looking for a mortgage. Your credit score is determined the following way:
- 30% — Payment history.
- 30% — Current debt amounts, and the ratio of available credit versus debt.
- 40% — Number of recent inquiries for your credit score, length of credit history, and types of credit.
This is a rough guide, and each credit bureau calculates your score a little differently
Down Payment
In order to buy a home, you need a down payment. The absolute minimum is 3.5% of the total cost of the home. The recommended amount is at least 20%. For a $120,000 home, this is $24,000, which is a lot, but a higher down payment can save you thousands of dollars in interest and private mortgage insurance (see below).
Interest
Banks don’t lend money for free. They are a business, and they want to make money. The interest you pay on a home is for the money that you have borrowed from your lender, and can range from 3%, if you are very lucky, to over 10%. A lower interest rate requires a great credit score and a decent down payment.
Interest rates can be either fixed (they never change, unless you refinance) or variable. Variable interest rates can change, going either up or down, during the course of a mortgage. If they go down, you pay less. If they go up, you pay more.
Origination Fee
The lender doesn’t prepare a loan for free. An origination fee (origination is the term used to describe the printing, putting together, and signing of any loan documents) is usually charged at closing. The origination fee may be paid by either the buyer or seller, or, alternatively, split between the two. It is usually calculated on the point system. A point is 1% of the principal, and is one of the most common amounts requested.
Pre-Approval
After completing a credit check, and having you fill out paperwork for a mortgage, some lenders will pre-approve home buyers for a certain amount of credit. This is convenient, because it allows the buyer to move quickly on a home as soon as it becomes available, instead of trying to get approved after an ideal home is found.
Principal
This is the amount you have actually borrowed from the lender. It is the total cost of the home minus your down payment. For the $120,000 home, with the $24,000 down payment, your principal is $96,000. This money will be paid back over the course of your mortgage.
Private Mortgage Insurance
If you cannot put at least 20% down on a home, as of July, 2009, you will have to have private mortgage insurance. This usually runs an additional 3%, or more, of your loan total, and protects the lender in case you default on your mortgage. This can cost new homeowners anywhere from a couple hundred to over a thousand dollars a year.
Term
Term refers to the length of your mortgage. Normal term lengths are 15 years, 20 years, and 30 years, although these are not the only options. The amount of your monthly mortgage payment is determined, in part, by the term length of your mortgage itself.
Knowing the meaning of these ten terms will make applying for a mortgage much easier. If you would like a more in-depth glossary, check out the one available from the US Department of Housing and Urban Development.
Views: 47Check Your Credit Score Before Asking for a Loan
Your credit score can have a drastic effect on your ability to get a good rate on a mortgage. Most people realize this.
What you might not know is how important it is to know your credit score before even approaching a bank for a loan. Knowing your credit score before you start trying to buy a home is essential. For one, it takes away the chance of a nasty surprise when you get to the bank and find out that your credit is not as good as you thought. On the other hand, if you have really great credit, it is good to know that going in, as well. It gives you an edge in the process if you know your credit score; you can request the best terms possible for your loan, and you will very likely get them.
Knowing your credit score also makes it easier for you to shop around for the best rates. This is especially true if you have poor credit. Many lenders have an online estimate service for mortgages and other loans. Use these tools and compare the results. Cross any lenders off your list of potentials if they only offer consistently high rates. By knowing your credit score, you can narrow down the number of banks you need to visit without having to leave your home or even pick up the phone.
How much of a difference does your credit score make? Well, your credit score determines the interest rate for your loan, amongst other things. A credit score of 650, which is about average in the US, and 720, which is considered to be great credit, can make as much of a 1.5% difference in the interest. For a home that sold for $200,000, that is worth a couple hundred dollars a month in payments, or two to three thousand dollars a year.
The best time to check your credit before buying a home is not right before you start applying for loans; you should check as far in advance as possible, especially if you know that your credit score is low. It can take several years to rebuild credit. Checking your credit earlier means that you have more time to pay off any old debts and work on improving your credit rating before you start shopping for a loan.
Checking your credit is easy, and you can get all three credit reports free once a year. Be sure to check the reports over for any inaccurate entries, as they may be a sign of identity theft, and then begin paying down debts. Getting your credit score in the best shape as is possible, before approaching a bank for a mortgage, can save you thousands of dollars; isn’t that worth the time to check it early?
Are you ready to take the first step towards getting a mortgage for a new home? These are the three credit bureaus that lenders check. Follow the links to check your scores:
Views: 123Tax Benefits of Owning a Home
You have recently bought a home and you are all excited about it. Everything is new and exciting. There are new rooms to decorate just how you have always wanted, a new backyard and front yard to decorate and new people to meet. The house may even be closer to work or closer to the schools you want your kids to go to. You have realized these benefits to having your own home, but may wonder if there are other benefits as well. Well owning your own home also comes with tax benefits and here is a list of some of them and why they may be important to you and your family.
Contact your real estate agent about tax benefits
The best first step in finding out about tax breaks you may be entitled to, is to ask your real estate agent. They are in the business of selling homes and it is their job to know all the financial benefits that come along with owning a home. So if you are unsure where to start, ask them first.
Loan discounts and other fees
Most loans and other fees you have to pay especially if you buy your home on any day that is not the first of the month, these fees may be tax deducible.
Mortgage interest on loans
In most cases the interest you pay on a loan to help you buy the home is a tax break within the first year or shortly after. You may even be able to get a tax break on additional loans.
Tax Breaks on the Sale
If you have owned and lived in your home for at least two out of five years, you may be eligible for tax breaks on the sale of your home and this is more if you are married. Plus, you can apply for these tax benefits of every two years for the rest of your life.
These are some of the main tax benefits you can get from owning your own home, but it is important to ask your real estate agent about any more you may be entitled to. So not only do you get to enjoy the space and physical benefits of your new home, but you may be able to get some tax breaks as well. Now that home is really looking like home sweet home.
Views: 51Fed Keeps Rates Near Zero, Highlights Positive Economic Signs
U.S. Federal Reserve policy makers on Wednesday held rates near zero while highlighting fresh signs of economic stability. “Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing,” said the Fed statement. “Conditions in financial markets have generally improved in recent months.”
Meanwhile, policy makers reiterated plans to purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. As previously announced, they plan to buy up to $300 billion of Treasurys by autumn.
Source: Wall Street Journal
Views: 25A Brief Overview of Mortgage Loans
Even when the economy the way it is lately, it still seems like the best type to buy a home. Mortgage rates are lowering or banks are offering help to buyers if they buy a home within a certain time, and more. So, you’ve decided to buy a home in this “buyer’s market” but you are not sure what mortgage loan would be best for you. Well, this offers a brief overview of the different types to help you out.
Fixed-Rate
This loans can be offered anywhere from 10-50 year periods and are paid at same time as set out in the loan. This loan can be paid off sooner if the person decides to make larger payments.
FHA Loans
These loans are insured or backed by the government and ideal for first time buyers because the down payments are lower.
VA Loans
These loans are offered to Veterans and have other own set of rules and requirements depending on the loan or the time that the person served.
Interest-Only Loans
These can be tricky because for certain periods of time and usually for short periods of time, there is an option to only pay the interest on the loan.
Adjustable Rate Loans
These can have all sorts of rules and requirements and may change monthly, semi-annually, annually or be fixed for a short time.
Equity Mortgage Loans
These loans come after the first loan and can be taken out to receive cash. They can be fixed, annually, or semi-annually.
These are some of the most common types of mortgage loans and a brief understanding of what it means. This will help you to understand what kind of loan you may want or qualify for before buying that home in this “buyer’s market”.
Views: 71