Archive for the ‘Mortgage Loans’ Category

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Ways To Avoid A Mortgage Penalty To Switch Mortgages

Saturday, June 26th, 2010

Ok you want to change mortgage providers, but you don’t want to get hit with that nasty penalty that your prior bank is going to charge you to leave? You want to how to avoid mortgage penalty. Not a problem. There is another option.

A couple of weeks ago I was searching to switch my mortgage. I wanted to do this because I want to take advantage of lower rates somewhere else, as well as access the value in my house, and other products were more flexible at doing this than my current bank’s mortgage.

I was speaking with a friend of mine last week who wanted to do the same maneuver (not Smith Maneuver), but was faced with the same issue I had: a HUGE fee for switching in the middle of the mortgage term. We are looking at thousands. Ouch. We need to Switch mortgages without penalty.

Thus, we set out to learn how to avoid the fee when switching mortgages during a term.

I simply told the people I was dealing with at the new mortgage company that it wasn’t worth my while to pay nearly $5,000 to switch mortgages. It was much better to wait until the term was expired.

Then they told me that the Home Equity Line of Credit could simply be set up in a “second” position. I did not know the new mortgage company would do that, but they do. This way, I would take advantage of the flexibility and lower rates, but avoid the penalty for the first mortgage. Brilliant!

Then as I was speaking with my friend that I knew that I wasn’t the only one with this problem, so I thought I would help you too.

Next thing you can start doing once the second mortgage is aligned, is just write a check from one mortgage to the other mortgage. Most first mortgages allow you to pre-pay a certain amount or percentage each year. Effectively, you simply start transferring one mortgage to the other in pieces. Effectively though, this avoids the fee.

The kicker is though that there may be a minimum for applying for the new mortgage in the second position. When I finally went with my bank, the limit was $40,000. Now I hear that they’ve raised it to $75,000. I’m not certain what your Bank’s minimum is, but it would be worth giving them a call to find out.

Lastly, make certain you collect rewards when you decide which company you want your mortgage with.

There is no reason to pay a mortgage penalty. Just get creative and you will avoid penalties.

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Credit Scores Rising May Be A Giant Kick In The Pants For Texans

Tuesday, June 22nd, 2010

I read today where another one of our mortgage lenders raised their minimum credit score; in this case to 630 for an FHA loan. Two more investors we work with raised their minimum credit score requirement above 620 in the past week. While this continuous rise in minimum scores is not unexpected as credit continues to tighten and FHA restructures its policies, it does make you want to take pause and evaluate the impact of this trend on our local markets. What does this mean for borrowers in Texas and the real estate professionals that serve them?

According to the three major credit bureaus, the average credit score in Texas is 651, which is the lowest of any state in the nation. To put this into perspective, there are eight states where the average score is 700 or above. What this means to real estate professionals is that, as minimum credit score requirements increase, proportionally more buyers fall out of eligibility in the state of Texas than in other states.

Now, before we go crying foul and talking about how we are being disenfranchised, we must also remember that our housing market has been one of the strongest in the nation over the past few years – even as markets like Florida, Nevada, Michigan and California have been hit hard. As a result, borrowing costs in those states are higher than they are in Texas. In the end, just as with investing, the higher the risk, the higher the return.

Nevertheless, I think we can all agree that it is ultimately a buyer’s responsibility to pay their bills and maintain their credit rating. Getting a home purely because you want one is no longer sufficient. However, we do need to peel back the onion to get at the root cause of this major credit score discrepancy. Many low score borrowers in Texas and, not coincidentally in Arizona and New Mexico (also among the lowest average score states) are not irresponsible, but merely have “thin” credit. This is largely the result of a large Latin American and Asian immigrant population who are new to the credit-centric culture of the U.S. and may not have had sufficient time to build a solid credit history. The good news is that it is far easier to build credit than it is to repair a generation’s worth of poor money management.

As real estate professionals in Texas, we must be aware of the added importance of investigating a prospect’s credit history before wasting both their time and yours. It would be far better for them to embark on a credit building program now, thereby building your pipeline for December, than it is to cart an unqualified prospect around for a couple of weekends and drop them like a cinder block when they don’t qualify.

Credit will continue to tighten, so it is even more important today to stay in touch with your mortgage lender and find out what will fly and what won’t. That deal that closed in April may just not close in July.

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Mortgage: What If You Can’t Pay Your Mortgage?

Sunday, June 20th, 2010

What if you can’t pay your mortgage?

In the last few years, the real estate market has been in turmoil. People who purchased their homes at extremely high prices and got a fixed rate mortgage have found themselves in a very financially stressful position. Many of them have lost their jobs and have been unable to find other employment. In the end, with no money coming, people are having a difficult time paying their mortgages. Ultimately, untimely payment or no payment at all will result in home foreclosure. But does this always have to be the case? Are there ways to avoid foreclosure when you cannot afford to make your monthly payments for reasons beyond your immediate control?

Fortunately, there are. Your situation is not a good one, but there are still a few steps you can take to hopefully save your home and credit.

1.) Communicate with your lender. We cannot stress the importance of this. Give your lender a call right away and let them know what your situation is. Some lenders will actually help you get on an alternative payment plan. Empathy is high during these difficult economic times. You might be pleasantly surprised with the deals that can be worked out.

2.) If you have an adjustable rate, try to get an interest rate freeze. Once again, in order to do this, you will need to speak with your lender. Not everybody qualifies for an interest rate freeze. The work is done on case-by-case basis. Nevertheless, it is worth consulting one.

3.) If the above two plans fail, it is time to get serious about selling your home before it forecloses. There are many reasons why you would want to do this, and one of them is because you do not want to have a foreclosure on your record. They are extremely damaging to your credit. Contact a realtor as soon as possible about getting your home on the market and selling it quickly.

4.) You may also need to contact a credit counselor who can speak with your lender. These days, lenders are getting more phone calls about potential mortgage defaults than they can handle. A credit counselor will be able to get in contact with them and plead your case so you can focus on other things like finding a new job. But be careful, there are many scam-artist credit counselors out there. Make sure yours is accredited.

Being near foreclosure on a home is everyone’s worst nightmare. It can have some serious consequences for you if you do not see it coming and fail to prepare yourself. Communication is key. It could be the difference between owning a home in the next few years or continuing to rent. If you find yourself in this unfortunate situation, contact everyone you can about it and try to take all possible steps to fix it. When a foreclosure happens, it makes us face the bleak reality of not being able to find a loan for a new home. Don’t let this happen to you. Be as proactive as you can.

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Owner Will Carry And How It Impacts A Depressed Home Marketplace

Monday, June 14th, 2010

Owner will carry financing is one part of the real estate business that benefits more than the home buyer and the individual house seller. Notes kept by sellers are prospective customers for investors that buy seller financed home mortgages. For a lot of people out of the real estate market, this little observed marketplace is huge business for many. In order to understand how this industry works, we have to understand both sides of the industry of owner will carry financing.

In a downward economy such as we are going through at present, credit freezes up and established institutions within the mortgage industry allow very few new credit lines unless the candidate has above average credit. For those people with less-than ideal credit, obtaining a loan thorough customary channels is non-existent. Fortunately for these people, there is a substantial quantity of houses on the market with sellers ready to sell.

Some of these sellers are ready to present what is called owner carry financing which means they will perform as the financial organization. Rather than having to pay a finance business each month the purchaser will pay his monthly bill to the seller. When financial times are good and financial institutions are offering credit, seller financing is at a low. More people can get a loan thorough traditional means.

The seller will hold the note until the note is paid or he sells the note to someone else, in this case a mortgage note investor. Note investors are people that concentrate on buying and selling money transactions. Notes come in many distinctive styles. Just about any transaction where a contract is signed and a payment plan is the manner of repayment, can be bought and sold.

Owner will carry notes are the most widely characterized with the cash note industry since they are real estate established. The market is designed simply enough since sellers lots of times hope to free up the money they have tied up in the mortgage note they are holding on the purchaser. The seller might require the capital for any amount of causes. He could want to make added investments with higher returns. Emergency conditions could have come up that call for him to liquidate his asset. Children may perhaps need to go to school. The motives are endless.

Whatever the case may be, there are lots of investors ready to acquire these owner will carry notes. These investors buy these transactions predominantly for investment reasons increasing their portfolios. Conversely, profit streams are the major purpose. By buying just a few notes the investor can produce a significant monthly income stream that will persist until the contracts are fulfilled or sold to another party.

In come cases, these cash flow notes are defaulted on at which time the investor forecloses on the buyer, keeps all the cash he has collected on past payments then sells the house to another buyer. Seller financing aids many people involved in a real estate transaction. Consumers that can’t get a mortgage through traditional means, private sellers as well as those investors within the cash notes industry.

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Several Tips For Altering Your Mortgage

Monday, June 14th, 2010

First things first. Though changing mortgages looks like you might save a fortune by getting a lower interest rate, this is not always the case. Yes, the rate you are moving to may be significantly cheaper. But there are lots of hidden costs involved and the net result of these costs can be that the change costs you a lot over you would save.

These costs are applied by both your present and your new bank. As for instance, your existing bank will maybe charge you a variety of exit fees, deed release fees and other assorted charges. Similarly, your new bank might want to charge you arrangement fees, probably even legal fees.

These fees can amount to thousands, either out of your pocket or added onto the mortgage. If you add them to the mortgage then you are increasing the borrowing and, therefore, the interest charged. If you pay them out of your pocket then this is cash that might have been earning you interest, or it may be better used to only pay off a few of your mortgage and reduce the payments that way.

So my first tip, and the most important one, is to do the maths of changing mortgages carefully and see if you will in the long run actually be saving money, or whether you would be better off with another solution, for example making a lump a few payment.

Of course, several of these costs may be reduced if you move your mortgage within your present building society. They might be willing to not charge you some of the fees if you only swap to another mortgage product that they have on offer. This can be seen as a way of tempting you to stay.

After you have decided to move your mortgage, you have to decide what type of mortgage you want to move to. A fixed rate guarantees your monthly payments for an agreed period of time. If you take out a fixed rate mortgage at a time when rates might go down there is always the risk that they will drop and you will be paying over the odds.

To get around this a few people opt for capped rate mortgages. Here there is a maximum interest rate that you will be charged, but if rates do drop you benefit from the drops. Of course, with both of these there is a payback and that is that the rates you will be offered won’t be the lowest available. For a lower rate, you may need to look at a tracker style mortgage or a discounted mortgage, which follows the base rate, with a slight voucher.

With these you should get a good monthly interest rate, but with the risk that if rates rise, then so does your monthly payment. So what type of mortgage you select is not a easy choice, but it is based on your financial position. Do you want a low rate, but are able to cope with impending increases in payments if rates shoot up? Or do you need to get the best likely guaranteed deal with a fixed rate?

Finally, depending on your credit score and how your house price has changed since you last mortgaged, your bank may be willing to offer you a lower rate or demanding a higher credit risk rate. But merely a trained person with a full understanding of the mortgage market will know the best deals on offer and be able to talk you through the process.

So, for my final tip, do not go it alone. Ask an independent mortgage broker for some advice.

Written by Keith Lunt of compare UK mortgage rates. If you want to know more about mortgages, call in!

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