Home mortgage financing. This is a subject that many people find intimidating, yet it should not be. Click on a button on the left to go to another site that provides a broad ranging education on home mortgage finance, from discussing some of the basic mortgage products available to the terminology of the mortgage lending industry; or explore the options below.
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While this site provides resources to acquire mortgage loans, my other site is an informational one providing an education on mortgage terminology and processes. Clicking the button above for "Home Mortgage 101" will take you to the head of the class. Between these two sites, I hope you find what you need to shop for and acquire the right home loan financing.
No one's dream of homeownership should remain unrealized because the process of getting the financing is far too intimidating. Knowledge is power, and once you're familiar with all of this mortgage business, it takes the teeth out of it and it's not so scary anymore.
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Here's a little food for thought as you begin your search through the wonderful world of mortgage finance....
Many people automatically obtain mortgage financing that amortizes over thirty years. Amortize, according to Wikipedia, “is the process of decreasing, or accounting for, an amount over a period of time. The word comes from Middle English amortisen to kill.” Basically, applying it to a mortgage, it means the terms for killing off that huge debt to which you just obligated yourself. That’s a nice thought – killing your mortgage, right? Now, consider the basic question - how long are you going to be hacking away at this debt?
Typically, as aforementioned, the most common loan term is for 30 years. But also quite common is the 15 year mortgage. What’s the most obvious difference? In basic terms, it’s the payment itself. The loan that amortizes over 15 years costs you approximately 20% to 25% more out of pocket per month. That difference oftentimes is where the buck stops. It’s a matter of affordability.
However, if the numbers work for you, a 15 year mortgage has its added attractions. In a nutshell, you pay less interest over the period of the loan, so it’s less out of pocket at the end of the day (or mortgage, in this case). Over fifteen years, this time reduction can result in considerable savings.
There’s another solution to this dilemma. However, it requires personal discipline. You can obtain a 30 year mortgage, figure out what extra principal payments to make each month, and pay it off in 15 years. This situation works for a lot of people. For instance, if your monthly income is inconsistent, it’s a great plan. Say you consistently make $60,000 annually, but you get the majority of your income only two times a year. Obtaining a fifteen year loan, although affordable on paper for you, doesn’t pan out realistically. Yet, if you’re disciplined, you can plop down a big principal payment when the money is flowing those couple of times a year. That way, you’re not backed into a corner to always have to cough up the higher payment. This scenario works for some people quite well.
There are other loan terms besides 15 or 30 year mortgages. There are 10, 20 and 40 year mortgages, too. However, they are not as common. The reason they aren’t is because of the very fact that they are uncommon. You see, the secondary market wants to sell loans into pools of other loans similar in interest rate, type and amortization. Since there aren’t a lot of these “diffent’ type amortizing loans, the appetite to buy them isn’t as evident. And if no one is hungry for the item on the menu, you either don’t carry a lot of it, or you price it a bit higher for the rare, discriminating palate.
But again, you can always choose a 30 year mortgage, and pay it off on a shorter schedule to suit your own personal needs. What you choose to do need only make sense to you. You may qualify for a 15 year loan, but only be comfortable with a 30 year loan. Only you can say. However, if it is easily affordable, then the chance to build your equity more quickly may be a deciding factor.
Other Articles You Might Find Interesting
Can’t Refinance? Then Get a Loan Modification
By Marlon Baugh
If you live in areas such as south Florida and you bought a house within the last 5 years, then you are probably having equity issues, such as no equity or worst negative equity, which mean you are upside down and now owe more to you lender than your house is worth. Or if you are being denied for a refinance loan for other reason such as low credit scores, late mortgage payments or even foreclosure, then a loan modification could be answer you been waiting for.
Now what is a loan modification?
A loan modification is a restructuring and renegotiation of an existing mortgage loan. Now most of us have done some type of loan modification in the past, but just don’t know it, for example; If you have ever called your credit card company to ask for a reduction in your interest rate, then you have done loan modification. Getting you mortgage modified however can be a little trickier.
A loan modification can include any or a combination of the following;
-Forgiveness of missed payment or adding them to the back end of the loan to get the home owner up to date.
- If the home owner has an adjustable rate mortgage, then the modification could freeze or reduce the interest rate.
-Reduction in the principal balance to match the current market value.
Most homeowners are unaware that a loan modification is an option if they don’t qualify for a refinance and that can also be used to prevent foreclosure and save their home, as well as preserve their credit. Loan modifications are granted especially to individuals that can demonstrate a current hardship, such as job loss or serious illness.
The first step of the loan modification is to go thru a brief interview either with your lender or a loan modification consultant. If the home owner’s case proves to be a strong candidate, then the lender will request a financial statement that will break down all the income and expenses of the home owner. Once this financial statement is completed then the homeowner will need to package this with a hardship letter, along with supporting documentation such as tax returns, pay stubs and bank statements and send to their lender. From this package the lender will then make a determination for the new loan terms which could take up to 60 days.
The loan modification is becoming one of the mortgage industries most popular tools for preventing a foreclosure and creating a win-win situation for both lender and homeowner. As the typical terms will normally be more affordable for the home owner and will put them back on track and the lender gets to collect its interest payments in a timely fashion and won’t have to go through the expense of foreclosure.
When foreclosures are prevented then families get to keep their homes, the surrounding neighborhood maintains the value and the lender maintains a profit.
It is important for home owners to understand that loan modifications are on a case by case basis, on the individual level as well as the lender level, each lender have their own guidelines for loan modifications and with saying that, no one or company can guarantee any results. If you choose to hire a loan modification company to handle you modification and they make these types of guarantees, then don’t do business with them, as the lender has the final say. Don’t get me wrong, but while I want home owners to be aware of unscrupulous loss mitigation companies that are looking to take advantage of people, there are also reputable companies that can present the home owners case the right way to the lender that maximize their chances of getting the modification approved. The lender only gives the homeowner one chance within any 12 month period whether it’s favorable or unfavorable, so choosing a legitimate loan modification company can be beneficial.
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in FHA mortgage loans for people with Bankruptcies, Foreclosure or with other credit issues, as well as Loss Mitigation. If you would like a Free Copy or to get instant access to the remainder of this Insider Mortgage Report, please visit http://www.specializedfinancialsolutions.com/foreclosure.htm or Call 954-678-5796
Steps to Refinancing a Mortgage
By Ned D'Agostino
A cheerful voice over the phone informs you of this great plan they have to refinance the mortgage on your house. Before you go ahead and say "Yes", take a few minutes to read these important things you should consider before refinancing your house. One of the first steps to refinancing a mortgage is to decide if it will be beneficial. That's what we'll look at here.
There are two common reasons to take a fresh mortgage on your house. Your current mortgage is an adjustable rate mortgage (ARM) where the interest you pay varies according to the market rate and the interest rate on real estate is showing an upward inclination. If this is the case, then you should refinance your house with a fixed rate mortgage where the rate is less than or near about your current rate of interest. The other common reason is that you need a loan real soon. Look to refinance your house with a mortgage that allows you a cash component.
Taking advantage of lower interest rates is good sense. But be warned that the fat savings you anticipate may shrink to Size Zero! Your mortgage company will ask you to pay a penalty (pre-payment penalty) for prematurely terminating the mortgage. Bearing this in mind re-compute your savings on interest. Maybe refinancing won't be worthwhile after all!
One situation where refinancing is inadvisable is when you are not sure of staying in that house for the next few years. You will have to pay the pre-payment penalty when you refinance. Given a moderate interest differential, it will take you maybe three years to break even. If you have to move before reaching breakeven, the balance will add to the second pre-payment penalty when you move, and there will be no way of recovering that.
The pre-payment penalty may range from one year's interest to five years' interest. That is no small amount! So be very careful to plan your refinancing only after determining the exact quantum you'll have to pay as penalty.
If you are going to stay in that house for a long time, and if the fresh interest rate is less than the one you are currently paying, then refinancing is a good idea. The savings in interest will give you a nice nest egg when the mortgage is finally over!
If you are taking a top-up mortgage, that is taking a fresh mortgage to clear off the current one plus a cash component over and above that, you must expect to pay a bigger instalment. Check what this is going to be and make sure that you can handle the payments comfortably.
You can earn a hefty saving by refinancing your house provided you time it right, which is when the interest rates are low. Just make sure of two things: that you can handle the payments comfortably, and that the mortgager is trustworthy.
