Mortgage Q A

What is a Mortgage Broker?

Mortgage broker is a mediator between the borrower/homeowner or the bank or the lender. The broker work directly with borrower or the bank or the lender and help borrowers in getting qualified for purchased mortgage or for refinancing. 

Mortgage Broker Work Process?

Mortgage broker basically works through collecting important information about the borrower which is required for taking up mortgage. These include - proof regarding borrowers income, assets, credit score, documents related to his/her employment etc, to access borrower’s ability to pay back the finance. Once the information and the documents required is received by the broker, it is time to determine what will work best in case of borrower. Of course, borrower can do this on his/her own, mortgage broker is there just for help. The broker can help in suggesting the appropriate loan amount, loan-to-value, and determining which loan type would be ideal for the borrower. Once everything is worked out, the broker will submit borrowers loan request to the lender or the bank to gain approval. During the entire loan process, the broker usually tries to stay in connect with both borrower and lender to see if everything proceeds smoothly. 

Mortgage brokers are regulated on both the federal and state level, and follows large number of rules to conduct their business. Just like any other financial servicing company, Mortgage Brokers charge a certain amount of fees for their services though it may vary. Along with that, they also get compensated from the lenders they connected with you. If the broker has not charged you that means they are being compensated by lenders and are earning for you in the form of higher interest rate. However, the borrower has this option to choose to pay in the start or at the end of the Mortgage process. Talking about the              

How are Mortgage Rates Determined?

Are you looking for mortgage loan on lowest interest rates? But how will be your mortgage rates gets determined? The mortgage rates are difficult to determine even for the most smartest and the knowledgeable mortgage shoppers. However, the same can be easily determined by the lenders. The lender usually follow following major factors in order to determine the interest rates for providing borrowers the mortgage loan on a specifies interest rate. 

Credit Score - Lenders believe in predicting your credit score in order to determine how reliable you will be in repaying the loan. Your score is calculated from your credit repost which includes all your loans, credit cards and your payment history on each one of them. In general, “ the higher the credit score the lower will be your interest rate”. Borrowers should try to get the sense of their credit score range before they start their mortgage shopping. 

Home Location - Your location plays an important role for lenders in order to decide for the interest rate on your mortgage. For people in rural areas, you need to put in your state to consider the interest rates on your mortgage.

Home Price and Loan Amount - It would be advised to determine your home price in order to get the idea of how much loan amount you would requires as in case where you don’t have an idea for the amount required.

Down Payment - As per the rule “ The higher the down payment the lower will be the interest rate”. With this the lender basically assumes lower level of risk, having more stake in property. So, if you can put 20 percent or more as your down payment just do it as the same will get you a lower interest rate.  

Loan Term - It is the term in which you decides to repay the loan amount. The shorter the term of your loan, the lower will be the interest rates and lower overall costs, but higher monthly payments.

Interest Rate Type - There are two types of interest rate one is fixed and another adjustable. Fixed interest rates remains fixed even if there is fluctuation in the market. Adjustable rates on the other hand remains fixed during the initial period after which they go up or down based on the market.

Loan Type - There are a various different types of loans conventional, FHA, and VA loans. Rates varies depending on what loan type you prefer.

What is an Underwater Mortgage?

With the increasing investment made in property, the property rates too piled up. People started making money on real estate, so they piled on and the demand shoots up even more, causing a lot of rise on the property prices. However this raises the cost of housing, more than the actual market price. 

The situation is people invested a lot on property with shoots rates that crashes down and come to its extremely low as the same unsustainable for the long term. 

Underwater mortgage situation occurs when homeowner purchases a house with high value and then when the market rate shifts leading to downfall on property, the same home will not be worth the amount of the mortgage, and the mortgage becomes underwater. Also, the situation arises when homeowner refinance a mortgage. When homeowner gains equity in his home, the lender may allow the homeowner to borrow additional money from the same equity amount. If a homeowner has a significant amount of equity, the mortgage should stay properly balanced. And if not then homeowner would like to refinance the same that may cause the mortgage to go underwater.

Are Mortgage Points Worth it?

Mortgage point is one of the common term we come across while buying home or looking for a considerable lender to borrow home loans. However have you ever though about what is the relevance of these mortgage point or is it worth to go for these Mortgage points? 

Let us explore about these mortgage points a bit first!

Mortgage point is basically one percent of the total loan value and can also be called as discount or the interest point. Like if you have taken a loan of $400000 then the same will have an interest point or the mortgage point of $4000. Opting for mortgage point usually depends upon the amount of loan you have applied for and the interest rate you have qualified for from your lender. 

Sometimes, if the interest rate is on the higher side and the only option you are left with is to turn down the loan, it is better that you seek it with mortgage points and reduce the interest rate. Though the only disadvantage is you need to pay more on your down payment here. Thus, opting for mortgage points is favorable for those who are left with less funds after paying their down payment. In such cases, what is best is to make the higher payment or find a home where you can get with a lower loan amount to keep payments in a range you can afford.

Is it worth?

Well, in case of mortgage loans, if you think making monthly payments is affordable to you then you don’t need to worry about points, as the same would mean you have made smart choice. However, if you think you cannot afford making payment for the loan without bringing down the points than it just mean that you should probably be on wrong note and that it would be better to look for some other home to buy. Other than that, if you find that making monthly payment is slightly over you budget and that bringing down the points make it manageable for your then again it means that you have made the good choice. 

So, now you can easily decide on whether or not to opt for mortgage point on your home loan.

Should I lock or Float My Mortgage Rate?

One of the most crucial question for borrowers while taking up mortgage is whether to Lock or Float with mortgage Rate? Well, there is always a risk involved with interest rate as the same is prone to bring in variation as the market fluctuates. However, when you op to lock the interest rate the risk get transferred from borrower to the lender of the mortgage. Here even if the interest rate rises the borrower still gets the locked low rate. Basically, locking the interest rate eliminates the risk of ending up with higher interest rates for borrower. Whereas, on the other hand, if the borrower opts to float with the interest rate then the rise in interest rate will benefit the lender and the drop will get advantages to the borrower. The advantage with the floating interest rate is that when the rate is dropping continuously between now and the time you close your mortgage, you can still get the lower rate. Even though there is a risk involved, borrowers opt to float hoping for the the rates to get better. 

For mortgage rate are jumping every now and the users are finding it hard to commit on any of the interest rate for they never know what will turn out to be working in their favor. Still if one has to make a decision, floating rate seems to be making an obvious choice, for the rate may rise or fall, you are going to pay the lowest of them all. But there are also times when a simple lock in rates also work.  

Also, the theorists concluded the best practice is to lock in with the interest rates if it falls and break out when it rises.therefore the best practice is to get the combination of both lock in and the floating mortgage interest rates.

Should I Rent or Buy Home?

For an adult it is important to have his/her own Home for it is one of the major goals to achieve in anyone’s life. One has not achieved all the goals in life until he/she get the place of their own. However, buying a Home is not viable for everyone. And so there is an option get home on rent. Though there are equal pros and cons associated with each one of them. The leading pros and cons associated with the same are as follows -

Owing or Borrowing - Have you have always been imagined to have your own home or are you comfortable living living in someone else’s property? Having your own property permits you of making improvements as per your choice. However, having a house on rent would restrict your for the same and you need to seek permission of your landlord for any chances or additions you want to make to the property to add living comfort for yourself. 

Though there is an advantage of having home on rent that it gives you the flexibility to move once your minimum tenancy period expires. 

Other than that, there are various other factors associated while you choose to live your life on your own. Pros and cons to look forward on having your on home or getting it on rent are follows -

  • Buy a home will require you to make monthly payments for the loan and the interest levied. The same might cause burden for it will take a long to get off with your Home loan. On the other hand, paying off your rent is easier. In case, you find yourself no longer be able to pay the required amount you can move to the place that your find is pocket friendly.   
  • You might find it unaffordable to buy a home in your desired location, however renting there might be within your price range.
  • Though paying rent would not get you anything on your investment. Probably this why money spend on renting is usually said to be the dead money. However, you should not limit yourself due to the same reason and if renting suits your more. 
How to pay off the Mortgage early?

Unlike some who are capable of buying home in Lump sum, most  home buyers these days are dependent of mortgages to buy their dream house. However, taking up a home loan is definitely one major debt which anyone would want to pay off as soon as possible. that you are looking to payoff as soon as possible. Like everyone, we hope your goal is also to pay off that last installment to get over with the burden of making monthly payments in behalf of the mortgage you must have taken to buy your own home. This is why we bring you some easy ways to paying off your mortgage early. 

Refinance a Lower Interest Rate - One of the best ways for paying off your mortgage amount earlier is through refinancing it for a lower interest rate. Making payment with lower interest rate will ultimately lower the monthly installment for the loan amount and you can thus be paying off your loan faster.

Refinance to Shorten Your Loan Time Frame - If you have taken up a loan for say some 30 years at an interest which your find is affordable to your pocket but wants a way to pay off your loan as early as possible then refinancing can help you shorten the loan time frame. Consider to lower the same loan with 15 year time frame with even lower rate interest paying almost 80% more on your installment and getting over with the same earlier. 

Bi-Weekly Payment - You can get over with your loan amount through making half of your monthly payment every two weeks. The same would help you save more than 6 years on your loan and without a doubt will get you save a tens of thousands on the entire life of your loan. Though the only thing to remember with this is that the same will increase the burden on f making more payment every months and so just make sure that have enough funds in your bank account. 

Round Up Your Monthly Payment - Another great option to save on your time and get over with your loan faster is through making the round up payments. It means if you have agreed for making payments of some $969.32 then rounding up the figure $1000 would decrease the term and you will pay it like 2.5 years faster thus that would definitely make you pay back your loan faster and earlier.

What documents are needed for a home loan?

Before you get the required mortgage loan to buy your house lenders require some important documents from you. These would basically include the documents predicting your financial life, assets income, debts and more. For these documents provide the clear view on your financial position which is required to be filled in by the the same with the

Top 10 Mortgage Mistakes to Avoid

Applying for the Mortgage is definitely one of the most important obligation in the entire home purchase process. Though there are some mistakes that are often committed by borrowers while opting for the same. Top 10 mortgage mistakes include -

Hastening - It is better to learn about mortgage and its related terms and conditions before you opt for it. Though there are not much home loan option available but you should definitely make it a point to understanding the types of mortgage and its related pros and cons to avoid any discords or failures in future. 

Waiting for Very Long - Waiting for very long time in order to process when the rate drop to its very low will make you sit for a while. For you never know how long the market will take to respond you way. Therefore, it is advised that that whenever you find yourself financially secured and stable, it is the right time to buy your own home. 

Not Checking Your Credit Score - Do not wait for the lender to come and ask for your credit score report. Do it yourself, even before you start with your mortgage acquiring process. Mistake and bad credit is the part and parcel of life but then it is your duty to correct them and not let it hamper your credit score. 

Not Looking Out for Your Options - Today, there are various interesting loan options available you both online and offline. Banks, mortgage brokers, credit unions, mortgage lenders, or any other local, state and federal mortgage programs all makes it the viable options for you. Therefore, make sure you delve into the option that will turn out to be very fruitful in your case. There are various independent agents, counselors and advisers rendered by U.S government who can help you make the right decision. 

Not Thinking About You Total Possible Cost - Your annual percentage rate mostly includes the interest and the additional costs or the prepaid finance charges you finance. However, if you dig further you will find various other costs and fees involved like commissions, closing costs and other fees that might not be financed via mortgage. Then there is the cost of home ownership expense that further includes homeowners insurance, home ownership fees, annual property taxes, maintenance and repair, and having renovations done. Thus, make sure that you evaluate the entire cost and fees involved with it.

Not Taking Initiative - One needs to get pre-qualified to be credited as a serious buyer. For the same there is a great way. The same will level a playing filed between investors and the bidders and provide you more strength to negotiate with the lenders and realize pre shopping boundaries. 

Failing to Lock Down a Rate - Even if you get pre-qualified for the mortgage, there are chances that the increasing rate will get you out and make it all unattainable for you. Thus, the best thing to do is to lock the rate the moment your loan application is approved.

Buying Beyond the Limits - One should keep a budget as the same will help you keep the track about  how much money you have and how much you are already allocating to other expenses. it is important as it will help you know that what you can afford to pay for a home.

Dishonesty - It is very important to stay honest in providing all your financial details and the documents. At any stage if the lender will find out you providing false details or misleading in any form then he will take away all his mortgage and your credit will suffer. You can also be asked to pay fine, sent to prison or both. 

Losing Courage - Though buying a house is quite a difficult task but can definitely work it out through keeping an aggressive mindset. Therefore, make sure to stood up and know about when to give up and when to push.

Tips for The First Time Home Buyers

While buying own home can be exciting for the first timers, the process involve for the same is equally nerve wrecking. The home purchase process first requires you to apply for the house mortgage. The point here is a lender will not easily grant you the mortgage. It requires you to submit all the important information related to your financial position, your assets and savings in order to prove that you are capable of paying back the loan amount. Apart from that, there are more tips for the first time home buyers. These includes-

Check You Credit Score - Before you take up any loan, it is very important to discover what is your credit score in order interpret your own borrowing strength. The same will actually help you know if you really qualifies to apply for the loan amount.  

Evaluate Your Assets and Liabilities - Next it comes to evaluating your total assets and liabilities in order to stay updated with your financial status and to determine your borrowing scope. This ones is also a good idea to know what you have and what is coming in. Or on safer side the same will also help you know if you are going off your limits in any way. 

Organize Documents - When applying for a mortgage, home buyers are asked to submit some of the important documents that will help lender to stay updated with your financial position. In most of the cases these documents include 2 recent pay stubs, previous 2 years' W-2s, tax returns and the past 2 months of bank statements, all the pages, even the blank ones. If you know about all these documents then it would probably be very easy for you to understand about it. 

Get Qualified - Usually, the first timers have this knowledge that what they actually qualifies for. Or it is the first thing that any lender would do i.e determine how much do you qualifies for, before providing you the required amount as mortgage. By calculating debt-to-income ratio and factoring in a down payment, you can  have a good idea of what you can afford, both upfront and monthly.

Figure Out Your Down Payment - Gathering required amount together for your down payment can be difficult. So, it is important that figure out the amount that you are required to pay as the down payment on your mortgage, as every investment process is different and has its own policies. The one you are counting on can ask you to submit more amount as the down payment than the other lending firms. Therefore, it is important that you should first figure on your down payment.

How to reduce Closing Costs on your Mortgage?

You probably have heard about the closing costs? Well, yes it is fees charged by the lender for mortgage services. Closing cost can be charged as much as 5% of your home’s purchase point. However, it is not as fixed as stone and so there are chances that it can be changed or negotiated. If you are looking for reducing closing cost on your mortgage then here are some tips that will help you contemplate over it in a better manner. 

Get Quotes from Different Lenders - Sealing the deal with the first lender you met is not specifically a good idea in case your are applying for a mortgage. There is always a chance that you can get better deal with other lenders and so it is advised to get quotes from all the different lenders in your area or around so you would be able to make a better decision. 

Compare Costs - Once your collect the quotes from all the lender, it is time to compare them. Comparing them will help you find the better deal and make a better decision. Make sure you compare apples with apples including all the different fees and costs involved. Your best bet is to ask for the GFE form, or Good Faith Estimate, which lists each individual fee.  

Ask About Fees Line by Line - The next step is to get lender by your side and make him exchange and explain all the details regarding the type of fees and costs involved. See if nothing is charged twice or if something extra or any third party charges etc. You can always check for courier fee, legal fees, title insurance, rate lock fees etc at this step.

Delay Your Closing - Pre-paid daily insurance charges can be minimized if the closing is done at the end of the month.  So it would be better to plan your closing at the time when you will have to pay less.

Ask For Discount - you can always ask lender top offer best rates or discounts on the closing costs. If lender A is providing your better closing rates your can also lender B to offer you rates better than lender A.

Short Sale Vs Foreclosure, what’s the credit score impact?

If you are planning on to purchase a house on foreclosure or on short sale then you definitely are going to get the required market bargain on the property that you might have dreamt of but is it the right way to buy a property? Are there any risks involved with that or what will be its impact on your credit score? Lets us explore the answers to the above questions.

Getting started with the difference between foreclosure home or the one available on short sale. A foreclosure home is the one which belongs to the entity that holds the mortgage (bank in most cases) and is really for the sale as soon as the legal foreclosure procedure is complete. Whereas, a short sale is a deal which is made before the home goes for foreclosure when both lender and the borrower agree to the kind of sale preferred on the default mortgage. The deal basically involves more parties. Both foreclosure and shorty sale deals involves risks but are worth it if the buyer is informed in advance and is prepared to take it to the end. 

If you are thinking about what is to seek for when it comes to buying a house on foreclosure or the short sale then short sale is definitely seen as a great alternative to foreclosure for it mitigates the additional fees and costs for both creditor and a borrower. The negative impact on credit score is definitely smaller in case of short sale, however it does involve a lot of paperwork for all the parties connected with the deal.

How Long After Foreclosure Can I Purchase a Home?

If you have recently experienced a foreclosure and are wondering when you can you purchase a new home then you have definitely reached the right place. Well, experiencing a foreclosure is no more a negative stigma that it use to be. Though banks use to consider it as the sign of irresponsibility. However, seeing to the property crises in 2008/2009 it was concluded that it is not always the person who walks away from the foreclosure as there were many cases found at the time cases where even the most responsible people have got to experience the foreclose on their credit score. Today, there are many lenders who are ready to overlook the fact that were foreclosed on your previous property and refinance you again. Thus, try and give your best short for if you want to buy your home. 

To buy your home after foreclosure you need to wait for three years and the time starts from the day when foreclosure was completed and not when the bank sent the notice to leave the home. For you already have the tag of being foreclosed once, you can expect high rates and fees, and maybe an unstable mortgage investor. But there is no need to rush in, be patient and wait until you can qualify for conventional mortgage financing.

Buying home after being foreclosed once would definitely increase the down payment amount for you. You can atleast expect it to be 10% , which is enough to wipe out all your savings you might have done to buy your home. But is really important for investors to ensure that your have enough savings that you will not have to face another financial problem anytime soon.  

Another major thing to check for before you apply for your home loan the second time after foreclosure is that you should not haver any errors on your credit repost other than the once faced foreclosure for this is the only way that you can ensure your lender that you are the possible borrower. If you have any debts mentioned in your report then clear them all first before applying for the mortgage.