Gsmortgages

Three Steps to Getting in the Right Financial Shape to

Three Steps to Getting in the Right Financial Shape to Buy or Refinance a House

As a loan officer, I talk to people day in and day out and no matter how diverse my clients are I always end up asking the same question: Whats your credit like? The more savvy clients i.e. the ones who have bought or refinanced a home before, know exactly how good their credit is and know that every loan officer they talk to is salivating over the chance to do a loan for someone with a 720+ credit score. For everybody else, that question prompts me to deliver my mini-speech on credit. I dont mindI enjoy educating people and hope that I am the one loan officer they talk to who is willing to take the time to explain the complicated nuances of credit. With that in mind, I set out to create an article setting out those basic lessons for people who are buying their first home or those who are doing a refinance for the first time. In my opinion, there are three important things a consumer can do before applying for a loan, in order to get their finances up to speed. It can take up to six months for your credit report to be updated by the credit reporting companies, so start now and youll be ready for the future.

1.Check your credit report. Under the Fair and Accurate Credit Transactions Act, consumers can request and obtain a free credit report once every 12 months from each of the three nationwide consumer credit reporting companies (Equifax, Experian, and TransUnion). You can go to https:www.annualcreditreport.comcraindex.jsp to request a free copy of your credit report. This is the only site authorized by the three major credit bureaus for the purpose of obtaining a free copy of your credit report. You can request the reports via e-mail, telephone, or mail. While the report you receive from the site will not provide you with a credit score, it will give you a complete copy of your credit historythats all you need for now. Take some time to review each entry. This is also a good time to make sure you are not a victim of identity theft. Do you have any late payments or delinquencies? Are there any errors? Is there any unfavorable public record information? Are there collections disputes? Decide whether to resolve or dispute every negative item on your credit report. Even small items such as a past due account with a utility company can show up and adversely affect your credit so take care of it now.

2.If you carry a balance on your credit cards, start paying them off. We all know that were supposed to do this but many Americans keep putting it off. Heres the deal: when you apply for a home loan, the loan underwriter will look at your ability to repay your total debt and a large annual salary usually does look pretty good. However, the underwriter will also look at the current debt that you carry on revolving accounts and how much you pay for that each month. Oftentimes, they will even calculate it at 3% of the balance rather than your monthly minimum, which really makes a difference when calculating the ratio of your monthly obligations to your salary. For those of you who are paid well, dont fall into the trap of thinking that a hefty salary is enough. I recently had a client who made over 70,000 per year. He resisted paying down the balances on his credit cards because he thought his salary was enough to qualify him for a good rate on his loan. He was wrong and we had to put him into an alternative documentation program with a less than favorable interest rate. In short, start making a serious effort to pay off your credit cards.

3.Start saving to pay for closing costs. Closing costs are the costs associated with the closing of the loan e.g. title costs, loan fees, discount fees, inspection fees, appraisals, etc. If you are refinancing your current home, you can finance the cost of closing into the loan amount. However, when you purchase a home, you will be expected to bring these fees, which can range from 3000 to 7000, into closing with you. There are loan programs that allow you to finance the closing costs of your loan, but be prepared to pay a premium for that convenience. If youre relying on the seller to pay closing costs, keep in mind that what the seller pays in closing costs is considered to be a rebate on the price of the house. If the house doesnt appraise within the range, the seller cant pay your closing costs. For instance, say you find a 200,000 home and the seller is paying 5000 in closing costs. What the seller is actually getting for the house is 195,000 i.e. the 200,000 sales price less the 5000 the seller gave back to you in the way of closing costs. An appraisal is a written estimate of a propertys current market value based on recent sales information for similar properties, the condition of the property, and the neighborhoods impact on future property value. A lender will lend a pound amount based on the appraisal. Therefore, if this hypothetical house appraises at 200,000, all is good. BUT if the house appraises at only 195,000, then you can count on only getting a loan for up to 195,000 so youll have to bring the 5000 difference between the 200,000 asking price and the 195,000 appraisal price in with you anyway. In that case, why have the seller pay closing costs at all? In short, one way or another, you will pay for closing costs, so just start saving for it now.

While these steps are not exclusive, they will put you on the right track to qualifying for the best mortgage possible. The months before buying your first house are an important time to be frugal and avoid any negative impacts on your credit report.

About the Author: Cassandra Forbess is a loan officer who specializes in mortgage planning at Mt. Financial Services in Portland, Oregon. She can be reached for more questions at cforbess@mtfinancialservices.com .

The Two Basic Types Of UK Mortgage

In the United Kingdom there are two main mortgages that people choose between when purchasing their home. Other options are available but for the large majority of people, it is one of either the fixed-rate mortgage or the adjustable-rate mortgage which is best suited to their requirements.

The fixed-rate mortgage is the most simple of mortgages and the one which most people see as the traditional way to purchase your home. This involves the mortgage provider lending you the money you need to buy your home and, using their interest rate, calculating how much interest the loan will accrue over the period for which the mortgage has been borrowed. This is usually either 15 or 30 years. The sum of the interest is added on to the amount being borrowed and the monthly repayments are simply the result of this total divided by the number of months over which the mortgage will be repaid. This ensures that the monthly amount stays the same for the life of the mortgage.

The adjustable-rate mortgage is slightly different. The interest to be paid on the amount of the loan that you borrow changes dependent on interest rate changes in the country. The first year of the mortgage is usually offered with a teaser rate of interest. This is generally slightly lower than the market interest rate. After this point the interest reverts to the standard level for that time. However, you do have a cap at which point the interest will not get any higher. This is usually five points higher than your teaser interest rate so if your teaser was 4% your cap would be 9%. The important thing to consider if you are thinking about opting for the adjustable-rate mortgage is that you may have to pay the capped level of interest for the life of the loan. That is the worst case scenario but it is certainly worth calculating whether you could afford this level of monthly repayment just in case you may have to in the future.

The Shocking Truth About Your Mortgage!

What your banker wont tell you

This summer could be a foul season for many consumers followed by tumultuous times for the remaining years. The quadruple jinx of rising interest rates, higher credit card minimum payments, erratic fuel costs, and depressed home values could be the calamity for many families already living on the threshold of bankruptcy.

Americans who recently broke into overvalued home equity, at historically low interest rates, are now seeing a sign of things to come. In some cases, consumers may find themselves upside down, owing more than their home is worth. In other cases, low interest rate credit cards now mandate APRs at least four percentage points higher than two years ago. Plus, issuers have been forced by regulators to double minimum payments on some cardholders who are paying high interest rates. But the real blistering is fuel prices which could now soar any day to any price. Paying 4 per gallon for gas, higher utilities, a 30%+ APR for credit cards, and clinging to a 100%+ home equity line of credit may push more Americans into foreclosure and ultimately bankruptcy.

Dont kid yourself on your current home situation. If you are upside down in your home, there is a clause in your contract with the lending institution that states that they can call the loan in at anytime. That means quite simply that they can force you to pay enough to settle yourself into an equity position or foreclose on the home. Why would the banks do that?

Look at it this way. Banks are in the business to make money, its as simple as that. In addition, while you are mailing off your mortgage payment to Chase Manhattan, it may actually be forwarded to The Bank Of Beijing! Thats correct. China now holds over 40% of American home mortgages.

There is a concrete reason that credit card minimums have doubled. The credit card industry will attempt to fill your head with propaganda such as: they are attempting to help consumers get out of debt quicker. What they are really pulling off is this: when you cant make the minimum payment and contact them, they are now trained to look at your credit file and determine how much (if any) equity you might have in your home. They then offer you a consolidation loan with their bank. Should you decide to take them up on their generous offer of a consolidation loan, they then own you. Should you default on your credit card, they can take the house! Beware of wolfs in sheeps clothing.

Another clandestine offer is consumer credit counseling. Every ad and commercial you will see for this service pitches themselves as a non-profit organization that was established naturally to help you get out of debt quicker, thus avoiding bankruptcy. What you dont know is that the non-profit consumer credit counseling industry if fueled and funded by the credit card industry. They report to the credit card industry! They also will not make your monthly payments on time, thus ruining your credit history anyway. I have seen this time and time again, over and over.

This brings me to ARMs. In short, they are adjustable rate mortgages. Never in American history have we seen so many people with no credit files approved for home loans. Many of these people were innocently following the American dream and quite naturally, the American dream is to purchase as much house as you can afford for the longest amount of time. Based on this fact, many people that could not afford that dream house under conventional financing were able to afford it by incorporating an ARM loan.

In the long run, this will come back to bite them hard. When they signed an ARM, they were betting that the interest rates would not rise during the next 30 years! When the rate does rise and their mortgage rises accordingly, we will start seeing the effects of this in the way of mass foreclosures. As of this writing, we are already at an all-time high for foreclosures starting with Indianapolis in first place, Atlanta in second place and Dallas-Ft. Worth in third place. As rates continue to rise and jobs continue to be outsourced, we will see a plague of foreclosures that I predict will surpass the 1980s.

The Role of Mortgage Broker

A mortgage broker is a well-trained professional representing those who seek home mortgages and provides them an ideal solution. He is thorough with the entire mortgage processes. Hence, he will give the clients the best mortgage solution. A mortgage broker is considered as financial matchmaker between the borrower and the lender. Mortgage brokers are very knowledgeable professionals, as they have contacts with many lenders. They find the best interest rate for the borrowers to suit their needs by taking quotes from various lenders and picking the right one for their clients. Federal laws, state laws and licensing boards, regulate all most all the mortgage brokers. The mortgage brokers charge a nominal fee for the services he renders to the customers. Even though the borrower spends money on a mortgage broker, he still saves a lot of money due to the advice got from the mortgage broker. Mortgage brokers have access to lot of mortgage services and products at wholesale prices and they in turn market these services and products to their customers.

Need for using a commercial mortgage broker:

By engaging a mortgage broker, the customer gets his value for money spent on him. They provide the customers with excellent financing options according to their needs and objectives.

Locating a mortgage lender is not an easy task. By engaging a mortgage broker, this process is simplified as he has contacts with many lenders offering various financial options to the home loan seekers. With the help of a mortgage broker, the customer has all chances of getting loan options for an unbelievable amount.

When working along with a mortgage broker, the borrowers loan application has the possibility of being submitted to various lenders, this in turn increases the chances of the loan getting funded and also gives the mortgage broker the power to bargain in getting the best deal.

Since each and every kind of property has its own advantages and disadvantages, hiring a mortgage broker who is specialized in that particular loan type, will definitely be an advantage to the borrower. Also it saves a lot of time to the borrower in locating the right kind of the lender offering the best deal.

Advantages of hiring a mortgage broker:

The mortgage brokers have extensive knowledge about the mortgage market. They can find the borrower the best financial solution from the available options. They have access to more number of lenders and sometimes might even help the borrower to get mortgage from a mainstream bank itself. Since, mortgage involves lot of paperwork; it is taken care by the mortgage brokers. They reduce the time spent on searching for options by the borrower. They also can negotiate well with the lender and get the best possible interest rate to the borrower.

Disadvantages of hiring mortgage brokers:

Some kind of unscrupulous brokers might be there who show bias towards the lenders and make the borrower pay higher fees and commissions instead of providing an appropriate product or service to him. Some brokers may be void of training and knowledge about the mortgage industry but may make the customers believe that they are good knowledgeable people. Not all the brokers may have good contacts with the lenders. Some mortgage brokers might also charge heavy fees to their customers.

The Pros and Cons of Adjustable Rate Mortgage

An adjustable rate mortgage, commonly referred to as an ARM, is a mortgage where the interest rate on the mortgage changes periodically, on a schedule, according to an index. The most common indexes used to determine the interest rates are:
One-year constant maturity treasury securities (CMT)
Cost of Funds Index (COFI)
London Interbank Offered Rate (LIBOR)
A lending institution’s own costs of funds.

The mortgage payment that you pay will thusly change, either up or down, to ensure a steady margin for the lending institution.

For many people who are looking at mortgages, the adjustable rate mortgage can seem like a great idea, however there are many pros and cons to an adjustable rate mortgage – items that need to be weighed over the short and long term to decide whether an adjustable rate mortgage is right for you or not.

The Pros of an Adjustable Rate Mortgage