General Mortgage/Real Estate Information

Archive for the ‘General Mortgage/Real Estate Information’ Category

When Are Mortgage Loan Rates Going To Rise?

February 18th, 2012 |

Author: yroth

When Are Mortgage Loan Rates Going To Rise?

This is a great question – it seems it’s the $64,000 question and I get it a lot from homeowners and first time home buyers.

Mortgage loan rates are very low right now.

Mortgage refinance business is still very strong as most people who can qualify for refinancing are taking advantage of the low home loan rates and refinancing their existing mortgage loans.

They are either dropping their mortgage rate and mortgage payment and staying with the same home loan type or reducing their mortgage loan term to either a 20 year fixed, 15 year fixed or 10 year fixed mortgage. All smart decisions.

But when are mortgage rates going to rise?

Mortgage loan rates will begin to rise once we begin to see sustained improvement in the US economy.

Remember, inflation is what causes mortgage rates to rise.

As long as there are no signs of inflation in the US economy, mortgage loan rates will remain low.

There are certain economic indicators that are measured each week that tell us how our economy is doing and whether inflation is rising.

Consumer Price Index CPI and Producer Price Index PPI, the monthly jobs report, the Federal Reserve Open Market Committee minutes or comments that a particular Fed governor may make regarding inflation or the US economy, can all impact mortgage loan rates.

But it’s sustained improvement in the US economy that will lead mortgage loan rates to rise.

It’s just a matter of time before we begin to see this.

So if you’re unsure whether it makes sense to refinance your home loan or you may be thinking about buying a new home, now is an ideal time as mortgage loan rates are very low.

Why Prepaying Your Mortgage Loan Is A Good Alternative To Refinancing

February 15th, 2012 |

Author: yroth

prepay mortgage loan instead of refinance to save money

Why Prepaying Your Mortgage Loan Is A Good Alternative To Refinancing

One of the best ways to lower your current mortgage rate as well as reduce your current mortgage loan term is by prepaying the mortgage.

What I mean by prepaying the mortgage is that you apply extra money each month to be applied to lowering the principal balance of the mortgage loan.

Who can this help?

Let’s start with homeowners who want to refinance into a lower mortgage rate but are unable.

Either they don’t qualify for a new mortgage loan because they owe more than their home is worth and they don’t qualify for the HARP home loan program or their credit is poor or they’re self employed and don’t report enough income to qualify for a new mortgage loan.

Or, let’s say their attempting to refinance their home loan and the home appraisal comes in low.

Now they’re faced with the prospect of paying private mortgage insurance PMI or paying their mortgage loan down to get below the 80% loan to value threshold to avoid paying the PMI.

Here are the benefits of preapying on your existing mortgage loan:

1. You lower you net effective mortgage rate.

Let’s say your current mortgage rate is 5.25%. If you prepay that mortgage loan, your net effective mortgage interest rate will drop because your cutting into the mortgage term.

The degree of the drop in net effective mortgage rate will depend on how much you prepay and the existing term of the mortgage loan.

2. You pay you mortgage loan off sooner.

This is big as you’re taking years off the back end of the mortgage loan.

So let’s say your current mortgage loan principal and interest payment is $1000 per month.

If by prepaying against your mortgage loan, you eliminate 7 years off the mortgage loan term - that’s 84 payments (7 x 12 = 84).

84 payments x $1000 = $84,000. That’s nothing to sneeze at!

3. You’re saving money in mortgage interest.

By prepaying the existing mortgage loan, you’re lowering the net effective mortgage interest rate, reducing the mortgage loan term, and saving money in total mortgage interest you’ll pay on the mortgage loan.

So don’t despair if you’re unable to refinance – for whatever reason.

If you prepay your existing mortgage loan, you’ll be able to accomplish some of the same things that you set out to accomplish by attempting refinancing your existing mortgage loan in the first place!

Check out my biweekly mortgage payment calculator to see how much you’ll save!

Why A 5/1 ARM May Be A Smarter Mortgage Loan Choice Than A 10 Year Fixed Mortgage

February 12th, 2012 |

Author: yroth

I saw a friend of mine last week who asked me whether it made sense for him to refinance since mortgage home loan rates are really low.

He explained that he owed about 175,000 on his existing mortgage loan. He was about 10 years into it and had 10 years to go before it would be paid off. It originally was a 20 year fixed mortgage.

His current mortgage rate is 5.25%.

He told me that someone had told him that if he refinanced into a 5/1 ARM - also known as an adjustable rate mortgage – and paid what he’s currently paying, that the 5/1 ARM would pay off sooner than the 10 years.

So I went to my biweekly payment calculator and did the comparison.

The 5/1 ARM performed the way he suggested.

If he refinanced into a 5/1 ARM at 2.875%, which is a no lender fee mortgage rate, and paid what he’s currently paying on his existing 20 year mortgage loan at 5.25, the 5/1 would pay off about a year earlier.

For example, the current mortgage loan payment is $1850 per month. The mortgage payment on the 5/1 ARM at 2.875% is $726 per month. This is based on a mortgage loan amount of $175,000.

That’s a difference of $1124 per month.

If he applied the $1124 per month to the 5/1 ARM mortgage payment, even though the 5/1 amortizes over a 30 year period, the 5/1 ARM will pay off in 8.67 years. The total cost of the loan would be $197,721.

On the 10 year fixed mortgage loan, on the other hand, at a 3% mortgage rate, the principal and interest payment is $1689 per month.

If he prepaid $160 per month towards lowering the principal of the mortgage loan, maintaining the mortgage payment at $1850, the mortgage loan would pay off in 8.3 years. The total cost of the mortgage loan would be $197,742.

Now here’s the rub.

If the mortgage rate on the 5/1 ARM stayed at 2.875 or lower for the full 8.7 year term, then the 5/1 ARM would make sense.

However, that mortgage rate and mortgage payment might change after 5 years.

Theoretically, the mortgage rate on the 5/1 ARM could increase 5% over the 2.875% in the 6th year.

This is where the difference is.

All things being equal, the 5/1 ARM – going against conventional wisdom – would save my friend money compared to him doing nothing and staying with his 20 year fixed mortgage loan at 5.25%.

Compared to the 10 year fixed mortgage loan at 3%, the 5/1 ARM with the additional prepayments applied to mortgage principal performs well.

However, the fact that the mortgage rate can change after the 5th year and can potentially eat into his savings, makes the 10 year fixed mortgage loan the safer and less expensive option.

Here’s Some Bad Mortgage Loan Advice

February 9th, 2012 |

Author: yroth

I was talking to a homeowner today – nice guy.

He was shopping around wanting to take advantage of the low mortgage rates.

He was telling me that he had spoken to a mortgage broker who advised that he go into a 3/1 ARM - also known as the adjustable rate mortgage.

I asked him how long he planned on keeping the home and he told me that he planned on keeping it.

I said, “Did you tell the other mortgage broker that and he told you the 3/1 ARM was the right mortgage loan for you?”

He said, “yes.”

I couldn’t believe that someone would recommend a 3/1 ARM when the homeowner wanted to keep the home for the long haul.

With the mortgage rates on fixed mortgage loans so low, why not go into a 30 year fixed home loan while he can fix it in the 3-4% range.

Doesn’t that make more sense?

The guy is keeping the home for the long haul – say 10 years.

Even though the rate and mortgage payment on the 3/1 ARM are lower, in 5 years the mortgage payment and rate could be higher.

I’d rather sit on a 30 year fixed mortgage loan at a slightly higher rate and payment. No worries about any future increases.

Don’t you agree?

Is A “No Cost” Mortgage Loan A Scam?

February 7th, 2012 |

Author: yroth

Homeowners and first time home buyers will ask me whether I offer no cost mortgage loans and whether they are a scam.

The answer to the scam part of the question is “No, they’re not a scam.”

One thing that you need to keep in mind when you’re either buying a new home or refinancing your existing mortgage loan is that there are going to be closing costs associated with the transaction.

For example, the mortgage lender is going to want to be paid for their service and product.

A home appraisal is needed to determine the home’s value. The home appraiser charges for their work.

The title will have to be searched and a new title policy issued. That costs money.

Finally, the county and state that the home is located in will charge a recording fee to record the mortgage and in some states, taxes are paid on the new mortgage loan amount.

So, with all these fees, how is it that you see advertised “no cost” mortgage loans?

It’s because the lender is offering a higher mortgage rate. It’s out of the revenue generated through the higher mortgage rate that the mortgage lender, acting as an interested third party, will pay your title and government recording fees and/or taxes.

This is definitely not a scam.

Now some people will say, “i’m paying for it one way or the other.”

And in a way, that’s true.

However, that doesn’t mean that there isn’t benefit to you to take a higher mortgage rate and have the mortgage lender pay your mortgage closing costs.

For example, if your goal is to lower your mortgage rate and lower your monthly mortgage payment, you still can accomplish that by taking a higher mortgage rate and have the mortgage lender pay your closing costs.

If you’re buying a new home and you’re s first time home buyer who has limited cash to pay mortgage closing costs, then having the mortgage lender pay the mortgage costs can make sense.

If you’re refinancing your existing mortgage loan and you can drop your monthly payment by, say $150 per month, and it doesn’t cost you anything or it costs you very little, then the “no cost” mortgage loan can make sense.

In conclusion, the ‘no cost” mortgage loan is not a scam and can make a lot of sense to a lot of homeowners or first time home buyers.

What Happens At A Mortgage Refinance Closing?

February 5th, 2012 |

Author: yroth

What Happens At The Mortgage Refinance Closing?

For first time home buyers or homeowners who haven’t refinanced their existing mortgage loan, here’s what a mortgage loan refinance closing is like.

The homeowner, together with their spouse, will go to the title company office that did the title work for the refinance loan. That’s where the mortgage refinance closing will take place.

The mortgage lender will order the title work unless the homeowner has a specific title company they want to use for the mortgage refinance closing.

Sometimes, certain home loan lenders will allow you to close in your home, and have a notary republic come to your home with the mortgage loan paperwork.

At the conference table – and it’s usually a conference table because there are a lot of papers to be signed – you’ll sit with a title officer.

You and your spouse will have to sign a lot of mortgage loan paperwork.

Specifically, you’ll review and sign the HUD-1 Settlement Statement, which is a breakdown of the associated mortgage refinance closing costs.

The HUD-1 Settlement Statement will also show whether you’re going to get cash back or whether you’ll need to bring money to the mortgage loan closing.

You’ll also have to sign the Mortgage, which is the collateral instrument that says if you default on the mortgage loan, the lender can foreclose on the property.

The Mortgage document is about 10 pages long.

You’ll also have to sign the Note – also called the Promissory Note.

The Note will outline the terms of the mortgage loan.

That is, the Promissory Note will show how much you’re borrowing, the mortgage loan interest rate and principal and interest mortgage payment.

It’ll also show the mortgage term and when the loan will be paid in full.

In addition to signing the HUD-1 Settlement Statement, Mortgage, and Promissory Note, there will be miscellaneous mortgage loan disclosures that the mortgage lender will want you to sign.

The title officer, who is managing the closing, should explain what all the mortgage papers mean.

If you get a copy of the HUD-1 Settlement Statement before you go to closing – and you should as you’ll see all the fees and money coming to or from you upfront, the mortgage refinance closing should go smoothly.

Mortgage refinance closings usually take about 45 minutes, depending on how many questions you have at closing and whether everything is what you expected it to be when you mortgage loan was originated.

What Is A Mortgage Loan Refinance?

February 3rd, 2012 |

Author: yroth

What Is A Mortgage Home Loan Refinance?

A very simple question, but many homeowners don’t know what a mortgage loan refinance is.

In a nut shell, a mortgage loan refinance is when a homeowner will borrow money to remortgage or refinance their existing mortgage home loan.

Why do homeowners do this?

Homeowners will refinance their mortgage home loans because they want to lower their mortgage rate and lower their mortgage payment. They can save thousands of dollars doing this.

Or they may want to reduce their mortgage loan term from 30 years to 15 years or 10 years. They can also save a boat load of money by reducing the mortgage term.

People also may want to refinance their existing mortgage because they may want to take cash out of their home, which is called a cash out refinance.

Finally, people sometimes refinance or remortgage (which are both the same thing), because they are getting a divorce from their spouse and they want to get the spouse off the existing mortgage loan.

To refinance an existing mortgage home loan – for whatever reason – the homeowner will have to qualify.

So they complete a mortgage application, provide copies of their income and asset documentation, have the credit checked and have the home appraised.

It’s a process similar to the mortgage process that they went through when they got a mortgage loan to buy the home.

A mortgage underwriter underwrites the mortgage loan application and approves (or denies) the application.

Once the mortgage loan application is cleared, a closing date is scheduled and the mortgage loan refinance closes!

The closing for mortgage loan refinance usually take about 45 minutes. The mortgage refinance process itself takes about 30 days to close.

What Exactly Does A Mortgage Broker Do?

February 2nd, 2012 |

Author: yroth

What Is A Mortgage Broker?

The mortgage broker is becoming an endangered species as a result of the mortgage industry meltdown beginning in 2007.

Homeowners still ask me: “What does a mortgage broker do?”

Here’s the answer.

A mortgage broker is licensed to originate mortgage loans including conventional, jumbo, FHA, VA, HARP, construction loans and second mortgages.

The mortgage broker has relationships with third party mortgage wholesale investors who provide mortgage loan rates, mortgage products, and their guidelines to the mortgage broker.

The mortgage broker will take the mortgage loan application, and then forward the mortgage loan application to the third party mortgage wholesaler who will underwrite the mortgage loan, close the mortgage and fund the mortgage loan.

The mortgage broker will act as a middle man and communicate to the borrower what the mortgage wholesale underwriter needs to underwrite the mortgage loan.

The mortgage broker can be paid a few different ways.

The first way the mortgage broker is paid is by the mortgage wholesale investor.

The mortgage broker is paid what’s called yield spread premium by the wholesale mortgage investor.

So what the mortgage broker does is look at a rate sheet and see what the yield spread premium is attached to the various mortgage rates.

The higher the mortgage rate, the higher the yield spread premium and the more the mortgage broker will earn.

The mortgage broker has to disclose the amount of the yield spread premium to the borrower.

This disclosed amount is called the adjusted origination fees on the Good Faith Estimate GFE which the borrower is provided at the time the mortgage loan application is taken.

In conclusion, a mortgage broker will take a loan application, collect the mortgage loan disclosures and appropriate income and asset paperwork from the borrower, forward the mortgage loan application to a third party wholesale mortgage loan investor who will underwrite, close and fund the mortgage home loan.

The mortgage broker will be paid by the wholesale mortgage investor or – secondly – by the borrower separately, depending on how the mortgage broker wants to structure his or her compensation.

The mortgage broker is involved throughout the entire mortgage loan process, even though the mortgage broker doesn’t control the underwriting, closing or funding of the mortgage loan.

5 Mortgage Loan Types That May Help You Get What You Want

January 31st, 2012 |

Author: yroth

There used to be a whole myriad of mortgage loan types available to the consumer and first time home buyer – as long as they qualified. For many, qualifying for the mortgage loan wasn’t difficult.

Times have changed.

Here are the 5 mortgage loan types that are now available to homeowners and first time home buyers.

1. Conventional Mortgage Loan.

This is a mortgage loan that is less than $417,000 and is sold to Fannie Mae or Freddie Mac.

To qualify for this mortgage loan, the homeowner needs credit above 620, at least 5% equity in the home and total monthly installment debt not to exceed 50%.

Pros: Low rates, all mortgage loan types (i.e. fixed rate as well as adjustable rate mortgages.)

Cons: Homeowners have to meet Fannie Mae, Freddie Mac and the mortgage lenders’ underwriting guidelines.

2. FHA Mortgage Loan.

FHA, which stands for the Federal Housing Administration, isn’t just for first time home buyers.

With a FHA mortgage loan all you need is 3.5% equity in the home for a new home purchase or rate and term refinance, also called a no cash out refinance. Homeowners can also take cash out of their home up to 85% of the value of the home.

Pros: Low rates, full range of mortgage loan products, only need 3.5% equity in the home for a home purchase or a no cash out refi.

Cons: High monthly mortgage insurance premium that has to stay on the mortgage loan for 5 years and 22% equity in the home. The MIP goes on no matter the loan to value ratio.

3 VA Mortgage Loan

This mortgage loan is for Veterans of the Armed Services and stands for the Veterans Administration – not the state of Virgina!

Pros: low rates, 100% financing, no VA funding fee if the vet is disabled, full mortgage loan product range

Cons: underwriting is cumbersome, VA funding fee for non-disabled Vets

4. Construction Loans

A construction loan is for a homeowner who wants to build a custom home. So they hire a builder and architect, have plans drawn up, and use the construction loan to buy the land and pay the builder as he builds the custom home.

FHA provides a 203(k) mortgage loan, which is their version of the construction/renovation loan.

Pros: if you’re building a custom home, it’s the only mortgage loan type available. You’re only billed on what you use. The mortgage loan is refinanced after the home is completed into a permanent mortgage loan.

Cons: mortgage loan rates are higher.

5. Second Mortgages

A second mortgage comes in 2 forms: a fixed rate second mortgage and a Home Equity Line Of Credit HELOC. If you want access to your home’s equity, a second mortgage is a good way to get it. It may be a good alternative to refinancing your existing first mortgage and taking additional cash out.

Pros: Allows you to access your home equity. Your only billed on what is used on the HELOC.

Cons: HELOC rates are variable and can move higher. Fixed rate second mortgages have higher mortgage rates than first lein mortgage loans.

So there you have it: the 5 Mortgage loan types that may help you!

Important Things To Consider Before Taking Out Home Mortgage Loan

January 30th, 2012 |

Author: yroth

If you’re in the market for taking out a home mortgage loan, you mustbe looking for ways to finance your new home.

As it involves a huge amount, you have to make sure that you have a trustworthy companythat will lend you with a loan amount at an affordable rate.

When you take out the mortgage loan, you become obligated to repay the loan ininstallments of principal and interest rate.

Depending on yourinterest rates, you have to make sure what your monthly payments willbe like.

There are some things that you have to take into consideration before taking out the mortgage loan.

If you’re unaware of the facts, here’s help for you.

Calculate your affordability: You must make sure that the loan amount that you’re taking out is within your affordability. Taking out a loan beyond your affordability is a big financial mistake and it can lead you to grave financial mess in the long run. You may fall back on the monthly payments and the lending company may have to foreclose your home to recuperate the loss. Always be sure that you will be able to make the payments on time to avoid an imminent foreclosure. Find various mortgage calculators here http://www.mortgagefit.com/calculators/

Your monthly income: Depending on your monthly income, the mortgage loan lender will give you a loan with a reasonable interest rate. If you do not have a lump sum amount of money as your gross monthly income, it is most likely that the lender will give you a loan with an interest rate that is within your monthly budget. If you comprehend that the lender will go for high rates with your present monthly income, you must first look for ways to boost your income in order to grab better rates in the market.

Your credit score: The entire lending industry is dependent on the credit and the lenders will not give you a loan if you have a poor credit score. Your credit score implies your financial history and a poor credit score implies irresponsibility on your part as an individual. Therefore, most mortgage experts always recommend that one must first go for effective credit repair and then apply for a mortgage loan so that he can get the best rates in the market. With a better interest rate, he can make monthly mortgage payments with ease and without causing much stress on your wallet.

Your other debt obligations: You must also take into account all your other debt obligations in order to make sure that you can pay off the monthly payments after arranging the money for all your other debt obligations. If you have too many outstanding debts, your debt-to-income ratio will be high and therefore the lenders will give you a high interest rate to reduce their risk. Pay off some debts before applying for a mortgage loan.

Thus,getting a home mortgage loan may not seem to be an easy process. Youmust not make any mistakes that will make you repent in the long run.Follow the points mentioned above and snatch a good mortgage loan inthe US housing market.

Guest post by Grace Ruskin.

Yale Roth M.A., M.Ed

Archive for the ‘General Mortgage/Real Estate Information’ Category

When Are Mortgage Loan Rates Going To Rise?

Related Posts:

Why Prepaying Your Mortgage Loan Is A Good Alternative To Refinancing

Related Posts:

Why A 5/1 ARM May Be A Smarter Mortgage Loan Choice Than A 10 Year Fixed Mortgage

Related Posts:

Here’s Some Bad Mortgage Loan Advice

Related Posts:

Is A “No Cost” Mortgage Loan A Scam?

Related Posts:

What Happens At A Mortgage Refinance Closing?

Related Posts:

What Is A Mortgage Loan Refinance?

Related Posts:

What Exactly Does A Mortgage Broker Do?

Related Posts:

5 Mortgage Loan Types That May Help You Get What You Want

Related Posts:

Important Things To Consider Before Taking Out Home Mortgage Loan

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