Easy to Mortgage

If you’re shopping for a home loan, you can save thousands of dollars by being aware of predatory lending practices, in which you’re charged too much for your loan or are forced to buy services you don’t really need. You can protect yourself by learning to recognize the signs of predatory lending. The Center for Responsible Lending lists seven specific warning signs that consumers should be aware of when applying for a mortgage.

The first warning sign is excessive points and loan origination fees. Since these fees are often financed as part of the loan, it’s easy to hide them. Competitive lenders typically charge 1% or less of the loan amount, but predatory lenders often charge 5% or more, which can add up to thousands of dollars over the course of a home mortgage.

The second sign is a high prepayment penalty. Mortgages don’t have to contain a penalty for paying off a loan early. In fact, only about 2% of loans from competitive lenders include such a penalty. However, some 80% of predatory lenders build them into their loans. Since nonprime borrowers are often motivated to refinance their homes with lower loans once their credit improves, a stiff prepayment penalty–sometimes as much as six months of interest–can generate a substantial windfall when the loan is refinanced.

Another warning sign is if a broker gets a kickback from a lender, in which a real estate broker delivers borrowers to a lender at a higher interest rate than the normally accepted rate. The lender then kicks back a “yield spread premium,” paying the difference back to the broker. This can add thousands to your overall mortgage premiums.

Loan flipping is the fourth sign, in which the borrower is required to refinance the loan, often several times, over the course of the mortgage. The fees can be hefty, and are purely meant to add to the lender’s bottom line. They can also reduce equity and increase monthly payments.

Another warning sign is when you’re told that buying extra services, such as credit life insurance, is mandatory for loan approval. These products are often unnecessary, and can also add thousands of dollars to your overall mortgage payments.

The sixth sign to watch for is mandatory arbitration, in which you’re told that any future dispute over the loan will need to be settled through arbitration, and not through the court. This can severely limit your rights, and sometimes you can be required to appear personally in the lender’s home offices, which could be thousands of miles away.

The final warning sign is if you find yourself being steered toward a less desirable type of mortgage, even if it appears as if you could qualify for a more favorable loan. Fannie Mae estimates than nearly half of nonprime borrowers could have qualified for better loans.

To avoid being a victim of predatory loan practices, learn to recognize the seven warning signs.

Copyright 2006 Jeanette J. Fisher

The first time you buy a home, you may break into a cold sweat when you go to sign the loan documents and realize you are committing to paying back hundreds of thousands of pounds.

Mortgage Debt Has Advantages Tax Advantages

Although having a mortgage is not what any homeowner wants, no one wants to be in debt, there are certain advantages of having a mortgage. First of all, not only does it allow a person to own a home of their own, but it always carries tax advantages. A mortgage is one of the biggest write-offs available.

Everyone looks for ways to save on their taxes. After all, only two things are certain in life, death and taxes, and the less the taxes are the better. A mortgage, although this means you are in debt and are paying interest, allows people to use the interest paid on their mortgage as a tax write-off. Simply put, it can save a homeowner with a mortgage thousands of pounds in taxes.

This works by first calculating the amount paid in mortgage interest over the year. Once you have this number, you can use it on your 1040 income tax form as a deduction. Thats right, every pound paid in interest on the mortgage is a deduction and can lower your gross income. By lowering the gross income, not only does it mean you can reach a lower tax bracket and pay a smaller tax rate, but youll also have a considerably smaller tax amount due in the first place based on that lower gross income.

As can be seen, the tax benefits of a mortgage are one of the benefits of having a mortgage in the first place. Although simply owning a home in the first place is the biggest plus, the tax benefits are a nice addition to that. They are an incentive that many people reluctant to look into a home and mortgages should consider. After all, you will be happy down the line when you have built up a healthy amount of equity.

Mortgage is a legal tool that pledges a real estate property as repayment in order to obtain a loan. Even though a person does not have enough funds to buy a property outright in cash, he can do so through mortgage. Mortgage provides the guarantee that the loan will be paid back on time. How so? Should the borrower fail to pay for the loan, the lender may recover the amount of loan by foreclosure and sale of the mortgaged property.

A note, specifying the financial terms of a loan agreement is one part of the mortgage lending process. The second part, the mortgage paper describes the legal specifics of the property and further promises the property as guarantee for the repayment of the loan.

Mortgage lenders are usually banks, credit union or other financing institutions. These lenders mostly require the borrower to put up a certain amount of cash as down payment for the purchase. If the borrower aims to buy a 200,000-pound-home, he has to pay first the required down payment of 10,000 from his own funds then apply for a mortgage loan in the amount of 190,000 to cover the difference.

Lending firms are quite strict on granting mortgage loans. Lenders require information details of the borrower and use it to assess the borrowers ability and readiness to pay the loan. Needless to say, the borrower should disclose to the lender, personal as well as business facts, from whom he is securing the mortgage loan.

Before a mortgage loan is granted, the property put up as guarantee will be appraised for its estimated market value by a professional appraiser. The lender wants to make sure that the value of the property is equally worth as the loan in case the borrower defaults on the loan and lender has to foreclose said property.

Mortgage loan is granted after all the requirements are satisfied. The mortgage loan agreement will spell out the current interest rates and loan repayment terms like amount and frequency, etcetera.

The mortgage loan interest rate and number of years will determine the amount of monthly payments. Duration of mortgage ranges from the shortest, 1 year up to 25 years or possibly more.

There are other conditions the borrower has to comply when he accepts the mortgage loan. First, he must sign a promissory note that he is obliged to repay the mortgage debt. Second, borrower also has to have fire and other hazards insurance on the property, as well as pay the property tax. Failure on the part of the borrower to fulfill these obligations constitutes a default on the mortgage loan and will mean foreclosure on the property by the lender.

The actual mortgage loan fund release will happen at the end. The borrower will receive the money intended for the house purchase from the lender and sign the mortgage documents. The mortgage loan definitely will have other costs to be borne by the borrower. These costs or charges are usually processing fee, charges for credit reports, appraisal fee and other service fees relative to the application for the mortgage loan.

Mortgage payments schemes will largely depend on the interest rate and payment period. Interest payment is the first part and principal payment is the second part of the mortgage payment.

In a mortgage payment, interest is the cost for using the money of the lender while principal is the amount the borrower still owes the lender. The process of repayment of mortgage is call amortization.

The details of mortgage repayment will be thoroughly discussed by the lender with the borrower during the transaction so that both parties will comprehend the full scope of the agreement. Monthly payment schedule of the mortgage loan will be provided to the borrower and becomes part of the mortgage documents.

At the end of the mortgage loan transaction, both parties emerge happier – the lender, for having served a satisfied customer; the borrower, who has just bought his dream project.

A mortgage is a kind of an agreement made to pay the money, which was loaned, to a person by keeping the house as collateral. Mortgage is a promise made to pay the debts by putting it in writing basically. Mortgages have terms and interest rates which are either adjustable or fixed.

Mortgage terms:

Mortgages are designed in such a way that they can be paid in installments for a certain period. The time frame which allows the person to pay back his mortgage is called the term. The term may be 10 or 15 or even 30 years. The length of the term determines the amount of money to be paid, which is actually spread in installments.

Mortgage interest rate:

The interest rate depends on the percentage to be paid on the mortgage loan amount. The interest rates vary according to the credit score of the person. If the credit score of the person is very high, the interest rate and the amount of monthly installments are lower. If the credit score is lower then the interest rates and the monthly installment amount are higher. Hence a good credit score will help getting lower interest rates to the debtor.

Types of mortgages:

Mortgages – Adjustable rate of interest

Under this type of mortgages, the interest rate changes from period to period according to the fluctuations of the market. The degree of change of mortgage interest rate is directly associated with the index to which it is tied. Since index will differ as they may be tied to a foreign bank rate of interest in certain cases, it is good to ask to which index the adjustable rate of interest is tied to. Usually they are fixed for a period of 1-5 years and then become adjustable.

Mortgages fixed rate:

The interest rate of the loan amount is fixed in the case of fixed rate mortgage till the end of the term regardless of the market fluctuations. The debtor will never have to pay more than the fixed interest rate at any cost. The only means by which a fixed rate mortgage can change is through Refinancing.

Refinancing:

It is a process of changing the existing mortgage terms of agreement. The debtor can go for refinancing when the interest rates are lower so that he can save money qualifying for the lower rate of interest. The length of the term can also be adjusted to be either long or short using refinance option. Care needs to be taken when going for refinancing of mortgages as it entails for new closing costs. Fees and closing costs are involved in this method.

Appraisal:

The crucial part of mortgage is the appraisal. Before going for a loan from a bank, the value of the house must be assessed properly. An appraiser can determine how much the house is worth actually by inspecting the features of the house and by comparing it with the neighborhood houses. If any addition or embellishment is made to the house, it can raise the value of the house, but may require to appraise the new value of the document.

Around 3.85 million home owners believe that a non existent state benefit will enable them to keep up with mortgage repayments in the event of losing their income.

Almost one in ten home owners wrongly believe that the government will pay their mortgage if they are unable to do so for reasons such as redundancy or illness, according to new research.

However, the government will not help anyone with mortgage payments for the first nine months of unemployment and after that, unemployment assistance is only offered to a select group of people who have mortgages of less than 100,000.

A further seven per cent of those surveyed by Lincoln Financial Group were not sure whether government assistance is available, and were seemingly unaware that the last Conservative government scrapped state aid in 1995.

Ian Noble, head of strategic partnerships at Lincoln Financial Group, said that the figures were a warning that million of Britons are enjoying a false sense of financial security, believing that the government will provide financial assistance if and when required.

“That is not the case unfortunately. The government is not going to pay for your mortgage if you lose your job, and assuming that it will place people in real danger is a large risk as it suggests they have no other mortgage protection plan in place,” said Mr. Noble.

Indicative of this perhaps is the news that mortgage repossessions are still continuing to rise dramatically, with repossession orders in England and Wales in the first three months of 2006 witnessing a 57 per cent rise.

Adfero Ltd

When it comes to mortgage leads, your ultimate goal is to make money. Mortgage lead companies can provide you with a lead. The rest is up to you.

For starters, finding the right lead company is key. Be sure to do your research and find a mortgage lead company that sells good quality leads. Not the type of leads that are recycled, or bought from third party companies and resold over and over again.

When calling a prospect on one of your mortgage leads, you may at some point be confronted with the challenge of an objection from your customer. This in no way is a reason to abandon the lead.

Some of the challenges you may be confronted with, are as follows.

I am no longer interested.

If the prospect hits you with this line, chances are they got cold feet. This is understandable due to the fact that purchasing or refinancing a home is a very large financial undertaking.

Say something like this.

Oh, Im sorry to hear that. After reviewing your on-line application, I was able to fit you into a really nice program based on the information you provided.

Nine times out of ten, this will catch their ear.

Another challenge you may come across is that they are working with someone else.

This could be true if you are purchasing your leads non exclusively. Most lead companies will sell their leads four to five times.

If you are confronted with this challenge, say something along these lines.

Oh, Im very sorry to hear that, I have a really great program Im sure you would be interested in. If you have just one moment, I would be happy to go over it with you.

This approach will normally get them thinking and want to hear more. Make sure they understand the importance of shopping around in this industry.

If neither one of these approaches works with the challenges you are faced with by your customer, then send them an e-mail. Most lead providers do provide the address on the lead.

You may also want to mail them out some brochures about the products and services you have to offer.

Remember, you work hard for your money, so work your leads. Dont give up after the first objection, and your closure ratio will be sure to go up.

The mortgage industry is a highly competitive one, so it wouldnt hurt you to shop around before you decide on which company and which program you would like to go with.

There are two ways you can go about shopping around for a home mortgage lender.

The first way would be to do the shopping yourself. Before you begin your shopping however, it is important that you take the time to educate yourself with the language of the mortgage industry. This way you will be capable of talking the talk.

On the other hand, if you dont want to do the shopping yourself, you may want to consider finding a broker to do the shopping for you.

A broker is not a lender. A brokers job is to assess your situation, than find a lender for you. The brokers have access to hundreds of wholesale lenders across the country. What the broker does is make a few of these wholesale lenders that he believes might be a good fit for you aware of your scenario, than the lenders will compete for your business.

Allowing for up to four lending companies to compete for your business is not such a bad idea. This way you will be able to compare rates and pricing, than base your decision on what is the most reasonable and ideal situation for your needs.

A broker can prove to be a wise choice if your credit is poor, or if your situation is unique.

One aspect of the brokers job is to educate and council their client through the mortgage process from beginning to end. So if you believe your mortgage situation to be a difficult one, you may want to give a mortgage broker some serious consideration.

The majority of mortgage brokers are paid on commission, so getting youre your mortgage to the closing table is just as important to them as it is to you.

Many people purchasing homes are surprised to learn how quickly interest rates can change. This brings up the subject of locking in the interest rate on your loan.

Locking In The Interest Rate On Your Mortgage

Contrary to popular opinion, interest rates for mortgage loans are not set by the Federal Reserve Bank. This assumption, however, is understandable given the uproar one tends to see in the media every time the Chairman of the Federal Reserve makes any mention whatsoever about raising or lower rates. Of course, you should understand he is discussing the rate that will be charged by banks to borrow from other banks. Interest rates on mortgages, on the other hand, are set by the bond markets among other indicators.

Since bond markets move every business day, the mortgage rates move in a corresponding matter. Even a tiny change can impact how much or little money a lender will recover given an assumed payback of a 30-year loan. To protect yourself from these fluctuations, you must understand how to lock in the interest rate on your loan.

A mortgage cannot be finalized until the interest rate is locked. If you dont address the issue with the lender, the rate can move up or down every day from application to the actual funding of the loan. This can literally be two or three months if you are getting pre-approved before making an offer on a home. This kind of volatility is dangerous, particularly if you are pushing the limits of your cash flow in buying a home. If rates increase half a percent while you are shopping, you may be unable to make the monthly payments when you finally buy the property of your dreams!

Locking in a loan is all about points and the length of the lock. These issues are negotiable with the lender, to wit, there is no legally required standard. To lock in a rate, you often must agree to pay a percentage of points. The longer you want to lock in the rate, the more you pay. For a 30 day period, you can expect to pay a quarter to a half of a point. For a longer period, expect to pay half to a full point. A point is one percent of the total loan. If a lender tries to charge you more, take your loan elsewhere or get a mortgage broker involved.

Fluctuating interest rates are dangerous since they can impact your month payments. Locking in your rate gives you a definitive figure to work with when buying your dream home.

The first time that many of us will think about life assurance is when buying our first home. Many mortgage lenders insist that life cover is taken out when offering a mortgage, to ensure the loan will be repaid if the borrower dies. Even if this is not the case, it is prudent to do so if you have a partner or family who will suffer from losing your income to help make monthly mortgage repayments should you die.

Sainsburys Bank this year warned that there are up to 4.2 million people that do not have life assurance with their mortgage. This equates to an estimated 217 billion worth of mortgages not protected by life cover.

There are different types of life cover. Cost depends on many things such as amount covered, term, age, smoker or non-smoker and general health. Monthly premiums can vary in price dependent on provider, so shopping around is a good idea. However, when comparing prices you should consider the fact that the amount could actually increase after youve completed the application details.

Term life assurance is the most common type of life assurance used in conjunction with a mortgage. Term assurance pays out a lump sum should the life assured die within a certain amount of time. If this does not happen, the policy pays nothing.

Decreasing term life assurance is typically the cheapest form of cover. The amount assured decreases in line with outstanding mortgage repayment liabilities. This suits a capital and interest mortgage where the outstanding capital is repaid by the end of the mortgage term.

With level term life assurance the amount that is paid out on death remains the same. This is suitable for an interest only mortgage where the amount of outstanding capital owed does not decrease over the period of the mortgage.

Critical illness cover is a common additional benefit that can be added to a life assurance policy. The sum assured is payable on the conclusive diagnosis of a critical illness, such as:

Cancer
Heart attack
Multiple sclerosis
Stroke.
It is wise to check what exactly is covered if taking out this option, as this can vary greatly between different providers.

Life after Bankruptcy – How to Restore Your Credit after a Bankruptcy and obtain a mortgage

It is unfortunate that many bankruptcy attorneys do not give their clients more direction with regard to restoring themselves after their bankruptcy. There are some simple steps that anyone who files a bankruptcy needs to take in order to restore themselves financially.

Using these steps below, you can restore your credit and prepare yourself to become a home owner.

1. Get a copy of your credit report. Many times (most times) the credit accounts that are absolved with your bankruptcy are not removed from your credit report immediately.

2. Have derogatory credit items removed from your credit report. For the items charged off in your bankruptcy, you will need to send a copy (not the original) of your bankruptcy discharge papers to all 3 of the credit bureaus asking them to remove these inaccuracies.

3. Pay all of your bills on time. Bankruptcy is a means to financial recovery. It is intended to allow you to start over financially. After your bankruptcy, you need to make sure that all of your bills are paid on time. If you are having trouble with an upcoming bill, DO NOT IGNORE IT. This is where most people go wrong. Call your creditors before they call you and let them know what your challenges are. If you cant get a reasonable rep on the line, ask for a supervisor, but again, do this as early as possible, not the day the bill is due or after it is late. If you are having trouble with your bills, you may need to solicit some help.

4. Have a strong documented rental history. This is pretty critical, as it is most likely the largest monthly expense that you have. Underwriters (the people that actually sign off on your loan’s approval) will look very hard at how you have paid your rent as they are going to replace it with a mortgage payment of equal or greater size. It is very important to be able to document your rent payment history very specifically. If you rent from an apartment community, then all the bank will have to do is request a Verification of Rent (a.k.a. VOR).

If you have a private landlord, then the BEST way to document this is with cancelled checks for the last 12 months rent. Banks can do VORs for private landlords, but rarely do because they feel that a landlord may have a relationship with the borrower and say what the bank wants to hear to help them get a loan.

If you pay with cash or money orders, please stop doing this immediately and start paying with checks. Simply put, this is hurting you because by filing a bankruptcy you have already shown some financial instability. Paying your rent with cash or money order shows further financial instability and will not give you the positive rent history that the underwriter is looking for to give them the confidence in approving your loan.

5. Apply for a secured credit card A secured credit card allows you to make a deposit into an account to secure a credit card and then borrow against it to establish a new positive payment history. As time progresses, the bank may increase your credit line to an amount greater than your deposit, and then eventually return your deposit to you. (They will also often pay you interest on your deposit.)

6. Prepare non traditional trade references These are accounts that you pay on such as cell phones, car insurance, and store accounts which can be used to document a positive payment history, but would not be traditionally reported to a credit bureau. Ideally, if you can provide 3 of these accounts with a 12-month payment history, this will help us in convincing the bank that you are a good credit risk. The best way to document this is with a letter from the company stating that you have had a positive payment history with them for the past 12 months. Alternatively, you can provide 12 months of cancelled checks showing 12 months of timely payments.

7. Resist the urge (or encouragement) to buy a car. Some may tell you that this is the best way to rebuild your credit. The problem is that your interest rate will be so high, that your payments will make your debt ratios higher than normal, making it harder to qualify for a mortgage. Do you remember the figure of 45-50% of your monthly income that the bank will allow you to use towards your debts? This will quickly be absorbed by a car payment. Only buy a car if a) you NEED (not want) a car, and b) you have the income to cover the car payment, any of your current debts, and your proposed new car payment. We have seen SEVERAL people that have cars rather than homes because they went out and bought a car that they could not sell and their debt ratios were too high to qualify for a mortgage. It would be a shame to have a nice car (that depreciates daily), as opposed to a more humble car along with a mortgage on a home that gives you a tax break, and increases in value over time.

I hope this is helpful and helps get you on your way to finding the home of your dreams.