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    • How the Mortgage Landscape Has Changed

      Date: 2010.07.18 | Category: Mortgage | Response: 0

      There used to be an almost dizzying variety of mortgage options out there. But that was then. This is now. And anyone who wants to buy a home these days needs to be prepared for a shrinking number of choices. Lenders are pulling back-to the basics. But it’s not all bad news. A homebuyer who has proof of income, cash reserves, or good credit should sill be able to find a home mortgage loan. But you have to be ready and willing to do some shopping around first-comparing and negotiating-just like you would if you were looking for a new car. Speak to several lenders. And it’s also a good idea to contact several mortgage brokers, too. They act as liaisons between lenders and consumers.

      It’s never been more important to be an informed homebuyer. Learn the basics of what it takes to get a mortgage. Start by finding out if the lender requires a down payment, how much it is, and if you can afford it. Because of the current economics of housing, most house hunters must have the money for a down payment. That’s because the no-down-payment loans that were available during the boom years are now almost non-existent. Many lenders now insist on a minimum of five percent down-more is even better.

      You’ll also want to check to see if you’ll be required to buy Private Mortgage Insurance (PMI)-which will be added on to your monthly mortgage payment. Many lenders insist on this, because if protects them against loss by borrowers who fail to pay. As a rule of thumb, expect PMI if a loan exceeds eighty percent of a home’s value. To avoid the added expense of PMI, some borrowers get a “piggy-back” mortgage-which is essentially taking out two loans. The first loan covers eighty percent of the cost of the home. The second is a home-equity line of credit that covers most-if not all-of the balance. However, be aware that these piggy-back loans are few and far between these days; many lenders see them as a risk they’d rather not take. That’s because if a homeowner loses the house, the proceeds from the sale would go to paying off the first mortgage-and there’s usually very little left from that to cover the second mortgage.

      Now, what about those low-or-no-documentation loans that were so popular awhile back? Well, they’re basically extinct. Why? Because the single-most important thing to lenders these days is a borrower’s credit score. The lenders are relying more heavily than ever on that score to assess a borrower’s ability to repay a mortgage on time. Borrowers that look risky will not get those lower-interest loans with good terms. In fact, they’re not likely to get a mortgage at all. Loans available to people with credit scores of, say, 660 just a few months ago are no longer out there.

      But even if you have a good credit score, you need to be aware that you need to use it wisely. For instance, weigh your choices carefully if you’re thinking about taking out a loan for more than 417,000. This is known as a “jumbo loan”-and mortgages that exceed this make lenders very wary; they are perceived to be much riskier than “conforming” loans.

      So what’s a potential homebuyer supposed to do? If you credit score is on the low side, get serious about improving it before you start looking for a mortgage. It will definitely increase the number and types of mortgage options available, as well as the rates and terms of those mortgages. If your credit score is high, then keep it that way-don’t push for the maximum mortgage you can get. Be conservative.

      With careful tending, the mortgage landscape in your little corner of the world will start looking considerably more lush, healthy, and beautiful.

    • How do I deduct points on 30 year mortgage?

      Date: 2010.07.04 | Category: Mortgage | Response: 0

      In certain cases, the amount of interest that an individual pays up front on their home loan or other form of mortgage is known as ‘points’ in relation to the mortgage. Since the interest of a mortgage is tax deductible up to a certain amount each year, individuals need to be aware of their points and how they can go about deducting points on their taxes in relation to their mortgage. Since this process of paying interest up front typically lowers the monthly amount of an individual’s mortgage payment, it is a popular format for paying of mortgages.

      Unfortunately, for many people this process provides a more complicated tax deduction process when the individuals are not sure how to properly perform the deductions. While many people would initially believe that they would need to divide their total number of points by the thirty years, or amount of years for their mortgage which in this case is thirty (30), of the mortgage in order to deduct their points on their taxes, this is not the case and individuals need to make sure that they are aware of the actual practices and processes that need to occur in these instances.

      Many individuals choose to perform their taxes and their deductions with the straight-line method, which is one of the available methods to individuals who are filing their taxes. Again, the number would not be divided by the number of years of their mortgage, in this example 30 years, which is the initial instinct of many people who are filing their taxes. Instead, the individual would need to divide the number of points on the loan by the number of individual payments that are going to be made over the entire term of the loan. The individual is then responsible for deducting the number of points for a single year on their taxes, specifically the individualized tax year of focus and interest.

      In these instances, the individual would need to divide their points by the number of total years for which the individual would need to pay their mortgage, giving the individual a specific value. This would let the individual know how many points they affect in a single year. Then the number needs to be divided by the number of payments per year in order to determine how many points are affected each month. This is important during beginning or ending years when the individual may not pay an entire year of interest and points on their mortgage.

      Amounts and points will change if and when individuals are able to pay off their loan prematurely, or if they should choose to refinance their loan with another company or financial establishment. In these instances, the total number of remaining points would be deducted in that specific year. Some cases are able to include all of the remaining points on the Form 1098, but not all are able to do so. For individuals who are not able to deduct all remaining points from Form 1098, need to be entered on Form 1040. On this specific form, individuals need to create an itemized list for their itemized deductions, to include the points necessary.

    • Home Equity Loans The Best 2nd Mortgage for Financing Home

      Date: 2010.05.23 | Category: Mortgage | Response: 0

      Home Equity Loans The Best 2nd Mortgage for Financing Home Improvements

      Tired of looking at those avocado green kitchen appliances? The wood paneling and shag in your family room? The worn fiberglass tub enclosure in the guest bath? Home improvement is sweeping the country. Approximately half of fixer-uppers are do-it-yourself, while the other half is contractor driven.

      So how do you decide when to move or stay around, when a home remodel is a good idea or not?

      The American Homeowner Foundation estimates the total cost of moving to be at least 10 percent of your home’s current value. In other words, if you can make things right with your home for less than 10 percent of what you could sell it for, it makes sense to stay put and fix it up.

      Theres a couple of ways for you to start the transformation of your home. If you have enough equity built up for the total cost of the project, a traditional home equity loan might work for you. Benefits of home equity loans often include a better interest rate. You might even lower your mortgage payment while increasing the value of your home.

      For the do-it-yourselfer working toward several small projects, a home equity line of credit allows flexibility. The lender basically sets up a line of credit based upon the equity in your home. The, issues you checks or a credit card to draw from the account as you need the cash.

      Simply make sure refinancing your home makes financial sense says Lori Vella a senior banking executive. “Improving your home is almost always a smart investment, especially in this rate environment. Just make sure you’ll be in the home long enough to recoup the cost of refinancing,” says Vella.

      A 2004 survey by Remodeling Magazine compares construction costs to likely return on investment (ROI) at resale. RM sent surveys to 20,000 appraisers, sales agents, and brokers. Those industry insiders generating 356 responses (a 1.78% response rate).

      The RM survey shows minor kitchen remodels do the best, returning 92.9 percent of your investment, followed closely by new siding at 92.8 percent. The survey also lists bathrooms, attic bedrooms, deck additions and family or sun room add-ons as lucrative investments. Most of those remodels returned 80% to 90% for the home owners.

      A home remodel is one of the best ways to improve the value of your home. Financially speaking, a home-equity loan could allow you to lower your mortgage payment, lower your interest rate, and when the remodel is said and done add thousands of pounds to your net worth.

      Dont forget to check with your local utility company if you want to improve the energy efficiency of your home. Most offer an energy efficient mortgage program.

      If purchasing a fixer-upper is what you looking to do. HUD has a 203(k) program designed to finance both the purchase of the home and the remodel costs in one easy mortgage. Most mortgage lenders offer access to the HUD 203(k) program.

    • Guide To Refinancing Your Mortgage

      Date: 2010.05.09 | Category: Mortgage | Response: 0

      Refinancing your mortgage can mean great savings for you and your family. Replacing your existing mortgage with a lower interest loan, changing the term of your loan, or even consolidating all your debts into this new loan could save you money, both monthly and over the life of the loan.

      The rule of thumb is when interest rates are 1.5 to 2% lower than you are currently paying on your mortgage, it’s time to consider refinancing.

      Would Refinancing Be Worth It?

      Refinancing can be worthwhile, but it does not make financial sense for everyone. There are a number of items to consider, such as how long you plan to stay in the house. Most sources say that it takes at least 3 years to fully realize the savings from a lower interest rate, given the costs of the refinancing.

      Refinancing can be a good idea for homeowners who:

      * Have an adjustable-rate mortgage (ARM) and want a fixed-rate loan to have the certainty of knowing exactly what the mortgage payment will be for the life of the loan.
      * Want to build up equity more quickly by converting to a loan with a shorter term.
      * Want to draw on the equity built up in their house to get cash for a major purchase or for their children’s education.

      What Are the Costs of Refinancing?

      Costs can vary significantly from area to area and from lender to lender, so the following are estimates only. Your actual closing costs may be higher or lower than the ranges indicated below.

      Application Fee 75 – 300. This charge imposed by your lender covers the initial costs of processing your loan request and checking your credit report.

      Appraisal Fee 150 – 400. This fee pays for an appraisal, which is a defensible estimate of the value of the property.

      Survey Costs 125 – 300.

      Homeowner’s Hazard Insurance 300 – 600.

      Lender’s Attorney’s Review Fees 75 – 200. The lender will usually charge you for fees paid to the lawyer or company that conducts the closing for the lender.

      Title Search and Title Insurance 450 – 600. This charge will cover the cost of examining the public record to confirm ownership of the real estate, and the cost of an insurance policy.

      Home Inspection Fees 175 – 350.

      Loan Origination Fees 1% of loan. The origination fee is charged for the lender’s work in evaluating and preparing your mortgage loan.

      Mortgage Insurance 0.5% – 1.0%. Depending on the type of loan you have and other factors, another major expense you might face is the fee for private mortgage insurance.

      Points 1% – 3%. Points are prepaid finance charges imposed by the lender at closing to increase the lender’s yield beyond the stated interest rate on the mortgage note. One point equals 1% of the loan amount.

      Prepayment Penalty. A prepayment penalty on your present mortgage could be the greatest deterrent to refinancing. The mortgage documents for your existing loan will state if there is such a penalty. In some loans, you may be charged interest for the full month in which you prepay your loan. In the future, always make sure there is NO prepayment penalty.

      In Conclusion

      A homeowner should plan on paying an average of 3 – 6 % of the outstanding principal in refinancing costs, plus any prepayment penalties and the costs of paying off any second mortgages that may exist.

      Whether or not that is a wise decision is purely a numbers matter.

    • Fixed Rate Mortgage vs. Adjustable Rate Mortgage

      Date: 2010.01.24 | Category: Mortgage | Response: 0

      The most basic distinction between types of mortgages that are available when you’re looking to finance the purchase of a new home is how the interest rate is determined. Essentially, there are two types of mortgages – fixed rate mortgage and an adjustable rate mortgage. If you choose a fixed rate mortgage, the rate of interest that you are paying on your mortgage remains the same throughout the life of the loan no matter what general interest rates are doing. In an adjustable rate mortgage, the interest rate is periodically adjusted according to an index that rises and falls with the economic times. There are advantages and disadvantages to either, and no easy answer to ‘which is better, a fixed rate mortgage or an adjustable rate mortgage?The main advantage to a fixed rate mortgage is stability. Since the interest rate remains the same over the entire course of the loan, your monthly payment is predictable. You can count on your monthly mortgage payment to be the same amount each month. On the minus side, because the lending institution gives up the chance to raise interest rates if the general interest rates rise, the interest on a fixed rate mortgage is likely to be higher than that of an adjustable rate mortgage.A fixed rate mortgage loan makes the most sense for those that are going to settle into their home for many years. While the initial payments may be larger than with an adjustable rate mortgage, stretching the payments over a longer period of time can minimize the effect on your budget.An adjustable rate is one that is adjusted periodically to take into account the rise or fall of standard interest rates. Generally, the adjustable term is annual – in other words, once a year the lending company has the right to adjust the interest rate on your mortgage in accordance with a chosen index. While adjustable rate mortgages make the most sense in a situation where interest rates are dropping, though it’s dangerous to count on a continued drop in interest rates.Lenders often offer adjustable rate mortgages with a very low first year ‘teaser’ interest rate. After the first year, though, the interest rate on your mortgage can increase by leaps and bounds. Even so, there are limits to how much an adjustable rate can actually adjust. This is dependent on the index chosen and the terms of the loan to which you agree. You may accept a loan with a 2.3% one year adjustable rate, for instance, that becomes a 4.1% adjustable rate mortgage on the first adjustment period.Finally, there’s a new kind of loan in town. A hybrid between adjustable rate mortgages and fixed rate mortgages, they’re known as ‘delayed adjustable’ mortgages. Essentially, you lock in a fixed rate of interest for a number of years – say 3 or 7 or 10. At the end of that period, the loan becomes a 1 year adjustable rate mortgage according to terms set out in the agreement you sign with the mortgage or financial institution.