Tag Archive: Understanding


Understanding Your Home Financing Options

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December 25, 2010

Understanding Your Home Financing Options

Traditional and alternative lenders offer many mortgage products, and each one is suitable for different borrowers with their own individual financial circumstances. Depending on your needs, there will be a loan type that is most appropriate for your requirements, such as:

Assumable mortgages Private mortgages Bridge financing Interest-only mortgages

Assumable Mortgages: Partnerships between Buyers and Sellers

An assumable mortgage is a relatively rare type of loan, because it requires the cooperation of both the homebuyer and the seller. When homeowners sell their homes, they can transfer their existing mortgage to the new buyer, as long as the buyer qualifies for the mortgage through regular channels, and the lending institution that holds the loan approves the transfer. Assumable mortgages are great options at times when interest rates are on the rise, or if the mortgage has a lower fixed rate than the current market rates.

Private Mortgages: Financing Available for All Borrowers

Private mortgages are an excellent alternative for buyers who have been turned down by banks and traditional lending institutions because of poor credit ratings or a lack of credit history. A private mortgage is a loan product that comes from a non-institutional investor that is not affiliated with the banks or organized lenders. Oftentimes, private mortgages are arranged with the help of independent brokers, and can come in many forms, including:

Mortgage refinancing First and second mortgages Lines of credit Bad credit financing

Bridging a Financing Time Gap

The idea behind bridge financing is to allow borrowers to bridge the financial gap between buying and selling properties. This type of financing can become necessary when there is a space between the closing dates for the home that was purchased and the one being sold, because you are still responsible for the mortgage payments on both properties.

While bridge financing often has higher interest rates and other charges associated with it, it will ensure you have enough funding to finance both properties at the same time, so your goals as a homeowner will not be interrupted.

Interest-Only Mortgages

Interest-only mortgages are available in the form of first and second mortgages, as well as lines of credit, which are the most common incarnation of interest-only loans. When you have an interest-only loan, the monthly payments only pay the interest that accrues on the loan, and do not pay down the loan principal.

Because the monthly payments are lower, this type of loan is very suitable for borrowers who are:

On a tight budget Self-employed On a fixed income or pension Commission-based workers Seasonal employees

At times when borrowers have more disposable income, they often take advantage of the extra money to pay down some of the principal.

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Understanding Alternative Home Financing

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December 3, 2010

Understanding Alternative Home Financing

If you are going to apply for a mortgage loan, it is important that you submit important requirements. You should also have a good credit score. Credit score represents the risk of lending you an amount. If your score is good, lenders will not think twice in lending you the money. This is contrary to what happens if you have low credit scores. However, those with bad credits are not the only ones who are having difficulty in applying for a mortgage loan. Those who are self-employed and who earn on commission are dealing with the same problems. This is where the alternative home financing comes in. This caters to the needs of those who have special needs in terms of availing a loan.

Normally, alternative home financing would aid those with bad credits to acquire a loan. As mentioned earlier, credit scores are very important for lenders as this gives them the idea of how risky it is to lend money to a person. If he has a bad credit, then it suggests that he might have difficulty settling his dues. If your scores are low, you will surely have difficulty being approved.

Their loan application may not be approved right away but they can still avail one. However, they cannot expect to have the same treatment as to those with good credits. The arrangement and terms for alternative home financing are very different. They may be asked to give additional requirements and the loan that will be granted to them is not the exact amount that they wish to borrow.

Among the things they can expect is the fact that the down payment required from them is higher. This is because the lenders would want to protect their investments as well. If the down payment is higher and the borrower is not able to settle his obligations, the loss will be lesser, the same with the interest rate. The interest rate is determined by what the market suggests. After determining the rate, the lender will raise it to a certain percentage he deems suited for the applicant.

The question is how you choose the best alternative home financing. Experts suggest that you trust a mortgage broker to help you with this. The broker can assist you with many things. Do not think about incurring additional expense as having a broker will help you save a lot. In addition, there are several cases wherein lenders pay brokers directly. If you wish to find a good arrangement, asking the aid of a broker will surely help.

Among the things, that the broker can assist you with is the loan application process. If you are having a hard time completing the requirements, he can assist you with that as well. He will also help you face problems regarding charged-offs and late payments.

If you decide to get a broker, see to it that he is up for the job. Before you do business with one, check out his background. How many clients have he served? Make sure that he is qualified as well. If you find the right broker, you will definitely find the right financing for you.

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Understanding Your Current Personal Finance Situation

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October 12, 2010

Understanding Your Current Personal Finance Situation

It is important: understanding your current personal finance situation is something that every person needs to do. By understanding what is going on with your personal finances you will be able to better control them. This can be one of the best ways to avoid money problems and debt.


Getting started is the hardest part. It can seem almost impossible to figure out where to begin when tackling finance issues. The best place to start is to simply look at expenses and income.


As the staples of a good budget, something every person should have, expenses and income are the main financial issues a person needs to understand. To begin you should gather all the relevant information. You may want to get bills, pay stubs and anything else that could help you list out your expenses and income.


The first thing to do is to track your daily expenses. This includes eating out, shopping and gasoline. You want to include these on your expenses list. You may need to gather receipts or actually keep a log for a week to be able to come up with an accurate account of your daily expenses.


Write out a list of expenses and then write out your list of income. At this point you should concern yourself with ensuring everything is listed. If your expenses or income vary then try to get a good average. You should have expenses separated into daily expenses and monthly expenses so you can see where your money is really going. Plus this will help when you go to budget your money.


Now you can begin to look at your debt. You should make out a list of your creditors. Your list should include the creditors contact information, the balance of your debt and the interest rate.


Now you should look at your personal finance accounts. This includes things like checking, savings and stocks. You want to list them all, including their current value or balance.


After going through your expenses, income, debt and personal finance accounts you should have a fairly good idea of where your personal finance matters stand. This should be a great platform for you to build upon to get your personal finances in good order. From this information you should be able to create a budget, get debt under control and best manage your personal finance accounts. You should be able to get the big picture about your personal finance situation and to understand it completely.

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Understanding Reverse Mortgages

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August 19, 2010

Understanding Reverse Mortgages

Seniors today often live with a great deal of financial uncertainty. The retirement they imagined may not be consistent with the reality they face.

Incomes are flat or declining, living and medical expenses are higher than ever and few income boosting alternatives exist.  Even those who have heard about Reverse Mortgages may be unsure about how they work or what questions to ask. As they search for information, they often turn to their financial institution for guidance and information. By becoming familiar with the product, you can be an even more valuable resource to your clients providing them with income supplementing alternatives to drawing down assets.  

 

What is a Reverse Mortgage?

 

A Reverse Mortgage is a special type of loan that allows a homeowner to convert a portion of the equity in their home into cash they can access. The funds are not taxable to the homeowner and typically don’t interfere with eligibility for Social Security or Medicare benefits. (However, in the federal Supplemental Security Income program, beneficiaries must keep their liquid resources under certain limits.) The customer retains title to the home as well as right to any appreciation in home value when the loan terminates after it is paid off. The loan remains in force until the last titleholder dies, permanently leaves the home or sells the property; the borrower can’t be forced to sell or move by the lender. The loan may be repaid at any time. But unlike a traditional home equity loan or second mortgage, no monthly payments are required. Instead of putting further pressure on an already stretched budget, a Reverse Mortgage can free a senior homeowner of monthly debt obligations.

 

Most Reverse Mortgages today are Home Equity Conversion Mortgages (HECMs) and are FHA-insured and guaranteed. Because HECMs are subject to FHA lending limits, proprietary products have also been developed to help homeowners with properties in excess of the FHA lending limits.  

 

Who qualifies for a Reverse Mortgage?

 

All titleholders must be 62 or older and own a home with some equity. There are no income or credit qualifications. Existing mortgages or liens must be paid off, but are often paid with proceeds from the Reverse. The homeowner must also remain current on insurance and property taxes, but these can also be paid with proceeds from the Reverse.

 

How can a borrower use the money?

 

The funds can be used for any purpose from making ends meet to living retirement dreams.  The top reasons for funds used given typically by borrowers are:

 

Paying off debts, primarily mortgage and credit cards

Home repairs and remodeling

Living expenses

Travel

Health care or long-term care

Easing the financial burden on children

Education

Hobbies

Escalating property taxes

 

The amount available depends on the borrower’s age, the value of the home, interest rates and local FHA lending limits. Older borrowers can receive a higher percentage of their equity than younger borrowers. Funds can be received in a lump sum, a monthly payment or a line of credit.

 

What are the costs?

 

As with most any loan product, there are origination fees and closing costs, but they can be paid from the proceeds of the Reverse Mortgage. HECM loans also have a charge for the FHA’s Mortgage Insurance Premium (MIP). There are usually no out-of-pocket costs to the borrower.

 

What consumer protections are in place?

 

Reverse Mortgages are non-recourse consumer loans – the loan payoff can never exceed the value of the home. To get a Reverse Mortgage, the customer must attend a mandatory counseling session and review their financial situation with a trained, professional Reverse Mortgage counselor. Many of the counselors are certified by the AARP. The counselor ensures that they understand the transaction, the costs and their other alternatives.

 

If you have questions regarding Reverse Mortgages or how they may provide life-changing benefits to your clients, contact MLS Reverse Mortgage at 1-888-888-4834 or www.mlsreversemortgage.com.

 

Fixed Rate Reverse Mortgage

 

MLS Reverse Mortgage

 

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Understanding Jumbo Mortgages

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August 7, 2010

Understanding Jumbo Mortgages

A jumbo mortgages is a home loan that exceeds the limits set by Fannie

Mae and Freddie Mac.

How are jumbo loans different?

What differentiates jumbo mortgage loans is the loan amount. At present, loan amounts that are higher than 7,000 are usually deemed jumbo mortgages. This determination is made by comparing industry standards for average housing loans as governed by the two biggest secondary mortgage lenders, Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac set industry standards for ‘conforming loans’; Home loans beyond those maximums are regarded as jumbo mortgages. These two agencies cap the dollar figure for loans that they will buy (that’s where the 7,000 figure comes from). Larger loan amounts are funded by other investors such as banks and insurance companies. Note that the dollar figure set to qualify jumbo mortgages differs by locale, so the limit is higher in Hawaii and Alaska (and in some other states). In the majority of the U.S., jumbo mortgages are those larger than 7K.

Available Terms – 15 Year Fixed, 30 Year Fixed, or Variable 30 Year

Jumbo Mortgage

The terms for jumbo mortgages vary similarly to other types of housing loans. Buyers can choose between variable rates, like 3/1 or 5/1 ARMs, for a 15-30 year jumbo mortgage, or a 15 or 30 year fixed jumbo mortgagerate.

Whether a 15 or 30 year fixed jumbo mortgage or an adjustable rate is best for you will depend on your plans and situation.

A 30 year fixed jumbo mortgage is better for those whole plan to own the home for a very long time. With this type of mortgage, the rate will not go up but it will never go down, either – it stays the same for the life of the loan. This is good because the payment is predictable, and cannot rise sharply if interest rates do. On the downside, the 30 year fixed jumbo mortgage rate is higher since lenders know they can never charge more than the original rate.

The lowest jumbo mortgage rate is usually an adjustable 30 year jumbo mortgage rate. Lenders understand their potential to benefit from increases in rates over time, so they are willing to lend at a lower rate in the beginning. Although, the lower rate won’t last. A variable 30 year jumbo mortgage rate will be fixed for 3 to 5 years, and then will adjust annually according to an index. Even small increases could mean significantly larger monthly mortgage payments.

Going with an adjustable 30 year jumbo mortgage rate works well when a buyer plans to move within the 3 to 5 year fixed period. For a buyer more concerned with smaller initial payments, or who will likely refinance in the near future, the variable 30 year jumbo mortgage rate is better than the 30 year fixed jumbo mortgage. Why pay the higher fixed rate when the buyer knows this isn’t their long-term plan?

All jumbo mortgage products – 15 year, variable 30 year, or the 30 year fixed jumbo mortgage – have their benefits. A trustworthy mortgage lender with experience financing jumbo mortgages is a buyer’s best resource for determining which product is right for them.

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