Mortgage

Obama's New Plans to Help Homeowners

2009-06-05T02:12:00.000-07:00

The Obama Administration recently announced new details to bring relief to homeowners under the Making Home Affordable program. On April 28, 2009, two new programs were unveiled. The first one is called the Second Lien Program which is designed to help homeowners achieve affordability. The second program involves the integration of the FHA Hope for Homeowners plan into the Making Home Affordable Plan.

There are significant challenges to modifying loans for homeowners with first and second mortgages, especially in cases where the first and second mortgages involve different lenders. It is estimated by the U.S. Treasury that up to 50 percent of homeowners at-risk of being foreclosed involve homeowners with Second Mortgages on their homes. Hence, the Second Lien Program announced last week is estimated to help millions of homeowners.

The Second Lien Program
The Second Lien Program is envisioned to work together with the loan modifications offered under the MHA program. When a Home Affordable Modification is initiated on a first mortgage, lenders participating in the Second Lien Program will automatically reduce payments on the Second mortgage according to some standards set by the U.S. Treasury. This program also makes it possible for homeowners to buy out the second mortgage with a lump sum payment under a formula also set by the U.S. Treasury. This gives homeowners the chance to extinguish second mortgages when appropriate.

Hope for Homeowners/Making Home Affordable
The other announcement by the U.S. Treasury involves steps to incorporate the FHA's Hope for Homeowners into the MHA program. Hope for Homeowners require the lender to accept a payoff below the current market value of the home, allowing the homeowner to refinance into a new FHA guaranteed loan. Refinancing into a new loan below the home's market value gives the homeowner equity in the home thus resulting in a better financial position for borrowers who qualify.

Under the program changes announced last week, when lenders evaluate a homeowner for an affordable home modification, lenders will be required to determine the homeowner's eligibility for a Hope for Homeowners refinancing. Where the homeowner qualifies, the lender must offer this option to the homeowner. To encourage lenders to join the program, they will be given incentives similar to the success payments in the MHA program.

To better illustrate the second lien program, the U.S. Treasury came up with two case examples.

The first example involved Family A, which took out a 30-year closed-end second mortgage with a balance of $45,000 and an interest rate of 8.6%. Today, the Family A has an unpaid balance of almost $44,000 on their second mortgage. Under the second lien program, the interest rate on Family A's second mortgage will be reduced to 1% for the 5 years reducing their annual payments by over $2,300. After those 5 years, Family A's mortgage payment will rise again but to a more moderate level.

The second example involves Family B, which took out an interest only second mortgage with a balance of $60,000 with an interest rate of 4.4% and a term of 15 years. Today, Family B has $60,000 remaining on their interest only second mortgage because none of the principal was paid down. Under the second lien program, the interest rate on Family B's interest only second mortgage will be reduced to 2% for 5 years reducing their annual payments by $1,440. after those 5 years, Family B's mortgage payment will adjust up and the mortgage will amortize again over a certain term.

Treasury Secretary Tim Geithner said that: "With these latest program details, we're offering even more opportunities for borrowers to make their homes more affordable under the administrations housing plan." These programs are part of the ongoing effort of the Obama administration to solve the current economic crisis. Programs, guidelines and participants in these programs are likewise being constantly revised. Thus, homeowners also need to be vigilant and get up to date information on all their options as available programs are also constantly changing and updating.

Buying Your House With a FHA Mortgage Can Save You Money

2009-06-05T02:06:00.000-07:00

One of the more significant benefits of buying a home with an FHA loan in today's real estate market is the incredibly low prices for which many homes are now selling. It isn't hard to find houses in the Phoenix metro and other areas of Arizona that were previously selling for $400,000 - $500,000, now priced at $300,000 and under. With homes prices being offered at such low costs, it could potentially be more expensive to rent than to buy.

Renting may seem like the only viable choice you have when it comes to your living arrangements, but that might not be your sole option anymore. With homes priced so low in Arizona's current real estate market, the dream of buying your own home could come true more quickly than you realize. Buying your own home can help you build equity, increase your credit score, and acquire better financial standing overall. Renting does not allow you to build any type of equity to your name and may do substantially less to help your credit score and financial standing than buying can. Banks and other financial officials often view homeowners as being more financially stable and responsible than those who rent and have never owned their own property. If you want to be recognized by your potential lenders as a responsible and stable person, worthy to be offered other loans and incentives for the things you need, you should consider buying now while the real estate market continues to favor new buyers.

Rental payments are usually more expensive than regular mortgage payments unless you sacrifice quality for quantity. For example, in today's market you may be able to find a beautiful, four-bedroom, three-bath home to buy that, on average, may require $1,000 rent each month for the mortgage. In order to only pay $1,000 per month for a rental property however, you would likely have to sacrifice one or more of the bedrooms, as well as one of the bathrooms in the home. Renting a four-bedroom, three-bath home, would likely increase your payments to $1,500 per month. When you pay rent, you pay the mortgage and accumulating interest, just as you would a home you bought yourself.

But when renting, you also pay additional funds each month to give your landlord incentive to keep renting. Buying a home entails repaying your lender with an accumulated interest; renting a home also requires that, plus some extra for your landlord. Is it really worth it to pay extra for a rental property when you won't even be able to claim it as your own once the mortgage has been entirely paid? Will you even know when that happens? Likely not, because you will always be paying payments to your landlord, regardless of whether any of that amount is being paid toward the mortgage.

Your Mortgage Lender is Not Your Financial Advisor

2009-06-05T01:59:00.000-07:00

"I don't know how much I can afford to spend on a house, so I'm going to pre-approved by a mortgage lender. They'll be able to tell me how much I can afford."

I hear first-time home buyers say this kind of thing all the time, and it always disturbs me. It's indicative of a false and dangerous notion that is prevalent among U.S. home buyers -- the idea that a bank can tell you what you can afford. This notion is dead wrong, and it's also my motivation for writing this article.

If you rely on a mortgage company to determine your home buying budget, you may end up spending a lot more on a house than you can afford. "How is this possible?" people often ask. "Why would a bank give me more money than I could afford to pay back?" I'll tell you why, and I'll also tell you how to avoid such mistakes when getting a mortgage loan.

How Much House Can You Afford?

You are the only person who can determine what you can afford to pay each month, in the form of a mortgage payment. A lender cannot tell you this. They can only approve you for a certain size of loan -- but that's it. Their responsibility stops there. The lender is not your financial advisor or your friend. They are in the business of making money by charging interest. Period. End of story.

So before you start talking to mortgage companies ... before you try to get pre-approved for a home loan ... and before you start the house hunting process ... you need to determine your monthly budget and maximum spending limits. Many home buyers skip this step altogether, relying on the lender to do it for them. That's why we have so many home foreclosures in the Untied States -- people set their common sense aside and rely too heavily on the judgment of mortgage lenders. Big mistake.

Here are the steps you should take before you start talking to lenders:

Add up your monthly expenses and write that number down on a piece of paper. You can exclude your rent payments, because those will go away when you buy a house.
In your expenses tally, be sure to include everything you spend money on each month. Car payment and insurance, other insurance premiums, credit card payments, groceries, savings, entertainment and recreational expenses, etc. Everything but your rent.
Next, write down your net monthly income. This is your "take-home" pay, after taxes are taken out.
Subtract your monthly expenses from your monthly net income. This is the amount you have to put toward a mortgage payment each month. Your monthly payments on a home loan should not exceed this amount. If they do, you are buying too much house!
Now that you have a firm budget established, you can get pre-approved by a lender to see what they're willing to lend you.

Here's the bottom line. It's possible to get approved for a mortgage that's too big for you. Banks do not care about affordability as much as they once did, because they know they can sell the loan into the secondary mortgage market (through Freddie Mac). So if they give you a loan that's too big for you, and you end up defaulting on that loan down the road, it's not their problem.

So say it with me: "The mortgage lender is not my financial advisor. They are not looking out for my best interest. They are in the business of making money -- period. I need to establish my own monthly budget and spending limits, before I start talking to lenders."

Repeat this mantra as you enter the home buying process, and you'll be on the path to success. If you ignore this mantra, you could become yet another foreclosure statistic down the road.

Three Things That You Must Know About Home Mortgages

2009-06-05T01:21:00.000-07:00

When it comes to owning a new home, a person often feels very excited and become very impulsive in dealing with the home mortgage company or the house broker. In such cases, you are very much likely to take some wrong decisions, which you will get to know about at a later stage when you start paying your monthly mortgage bills. Therefore, if you are planning to buy a house, you are strongly recommended to follow the right procedure. You must be well aware of each and every aspect associated with the process, such as the type of lending company or the broker, the maximum amount of monthly payment that you can afford, whether you want to borrow for a short or long period of time, and your capacity to pay the loan. A careful assessment of all these things is very important, as it will help you make the best decision. Following are some of the most important things that you must know about home mortgage.

If You Want To Keep The Amount Of Interest Low, Owe Less
The simplest way to keep the amount of interest low is to owe the least amount that you can do with. In order to maximize your savings and to get off on the right foot, you should try to make the down payment as much as you comfortably can. Many homebuyers simply pay the minimum required down payment even though they can afford to pay much higher. It is very important for you to understand that the higher the amount of down payment you pay, the lower rate of interest you are likely to be offered. You can also get some special discounts by paying your mortgage earlier than the scheduled due date.

Approval For A Mortgage Vs Owning A House
Another thing that is very important for you to understand about home mortgage is that approval for a loan does not mean that you have become the owner of the house. It just means that you can start living in the house. The lending company will keep the ownership to itself until you make the complete payment. Even your equity does not make you the owner - at least during the first few years.

Several Types Of ARM's
The common understanding is that adjustable rates fluctuate heavily - going up and down anytime during the year. But, very few people know that there are different types of ARM's offered by the home mortgage companies. For example, the one-year ARM with 2/6 caps means a fixed rate for the first year and a possibility of rate changes in the following years. Likewise, the three-to-one ARM means that the rate is fixed for the first three years and may change in the following years - but only once a year.

Negotiation also plays a key role in getting the best deal in home mortgage. Therefore, you should not take the rate posted on the listing as final. Do negotiate.

Why You Should Use a Mortgage Broker

2009-06-05T01:18:00.000-07:00

Top Reasons For Using A Finance Broker

When trying to arrange financing for a new home - or when looking for the best deal possible - going it alone is a risky proposition. Your chances of achieving the precise goals you have set are far greater when you employ the aid of professional Brisbane mortgage brokers. Below, we outline a few of the best reasons for seeking Brisbane financial services when seeking financing on a property.

Shopping Around

By using a finance broker, you can shop around for the best financing deal easily and efficiently. A broker can present you with options from various banks and other lenders, giving you the most variety possible to help you find the very best deal.

Making Educated Decisions

A mortgage broker can help explain the various options for Brisbane home loans to you in easy to understand terms. He or she can outline the pluses and minuses of different finance products, allowing you to make the most informed decision possible.

Determining How Much You Can Afford

You are less likely to take on a loan that you cannot manage when you employ the skills of a professional broker. Taking on more than you can handle is one of the worst mistakes you can make; you can avoid this major problem by having a finance broker at your side who can put all of their tools and resources to work for you.

Finding A Great Deal

An expert broker will be familiar with all of the lenders and what they have to offer, as well as any great deals they may be extending. Additionally, Brisbane mortgage brokers can often negotiate on your behalf for better deals, further increasing your chances of getting the best mortgage possible. A skilled broker is truly beyond valuable in terms of getting you what you want at a great deal.

Preparing Your Application

A broker will know the precise methods that various lenders require regarding loan applications. They will be familiar with what individual lenders look for on the loan applications that they process. Therefore, you will be able to submit a professional, effective application each and every time. This is a critical step in the lending process, and brokers really earn their pay in this regard.

Keeping In The Loop

One of the most stressful parts of applying for a loan is the waiting and wondering. When you go it alone, you are stuck waiting by the phone for word about the progress of your application. Also, any mistakes or errors on your application can hold it up, and you may not hear about it for some time. A broker can monitor the progress of your application, preventing delays and keeping you informed on what is happening.

How to Survive the Mortgage Crisis

2009-06-05T01:12:00.000-07:00

The current mortgage crisis is creating some horrific history; but you don't have to become one of the depressing statistics. Protect yourself from financial calamity by understanding your mortgage, being honest with your lender, and respecting your budgetary limitations.

While the root cause of the current credit crisis and housing turmoil can be traced to a wide variety of factors-including some predatory lending practices-hindsight is always sharper than foresight. In order to act now to guard yourself from the looming threat of this mortgage chaos, it's imperative that you first get to know your home loan so that you can make appropriate financial decisions.

Tips for home mortgage protection

Here are some ways to protect yourself:

If you're facing foreclosure , seek out professional financial guidance from your lender or from a credit counseling agency. Lenders are eager to avoid defaults, and may be willing to work out new mortgage terms to help you weather the storm.
Your current lender may penalize you for paying off your mortgage early, so before you refinance, check the small print on your loan documents. If necessary, ask your lender to waive that requirement. Some consumers have succeeded in getting those penalties removed, so challenging them is well worth the effort.

How much mortgage can you afford?

One of the fundamental factors in managing debt-and all mortgages represent significant debt-is to have a clear picture of how much you can afford. Leveraging debt can be a great way to increase your wealth and financial security, or it can be a surefire recipe for disaster. Not long ago, the mortgage industry applied a 4-to-1 formula to determine whether a consumer was qualified to repay a home loan. If your monthly income was four times as much as your mortgage, you were in a strong position. But in recent years, lenders and borrowers threw caution to the wind in order to justify paying for increasingly expensive houses. Today, it's not uncommon for a homeowner to spend half of her income on her mortgage, and that's entirely too much debt for a sensible consumer. If your mortgage uses up a third of your budget, you may want to figure out a way to refinance to lower it. If you pay more than that, you need to rework your budget to avoid dangerous pitfalls that can happen if your Mortage rate jumps, your income falls, or your home's equity shrinks.

Improving your working knowledge of mortgages, and how they can create problems, will help you both now and in the future.

2009-06-05T01:10:00.000-07:00

Well the answer is of course it is dependant on your individual circumstances. The mortgage market has certainly changed in the last eighteen months to two years. The credit crunch has reigned in the frankly ridiculous amounts mortgage lenders were offering; I doubt we will ever see 125% mortgages again. Lenders are being much more cautious, lending only to those that meet its strict lending criteria. You can no longer expect to get away with a small default. If you have missed your credit card or mobile phone payment by a few days this will be enough for a lender to deem you as too risky. However on to the point, to find out how much you can borrow you could have a look at one or two of the recognised and respected online financial portals. To find out exactly what you are able to borrow will require you to get quotes from real lenders or go through a mortgage broker. The latter can find out what different lenders are willing to offer you, find out what products meet your circumstances as well as answer any queries you may have. Find a whole of market broker meaning they will search every deal on the market for you so you can ensure you are getting the best deal. If you do want a rough estimate of how much you can borrow there are many mortgage calculators available on the internet that will take your income plus if applicable your partner’s income to give you a figure of the likely figure lenders will offer you. As I mentioned when you get a full quote it will depend on your circumstances and it will vary from lender to lender so it is worth shopping around to see what each lender will offer. As the banks positions in the market have changed a fair amount many are able to offer much more competitive deals that those trying to fix their balance sheet.

Mortgage Loan Modification

2009-06-05T01:08:00.000-07:00

Whatever the difficulty, we understand how it feels to choose between a mortgage payment and groceries. We understand what it's like to have continual phone calls from your lender ... calls at home, calls at work and letters in the mailbox.

You need to save your home but your lender is asking for too much money. You're not asking for them to forgive the loan but you need help creating a payment plan that you can handle. You just need someone on your side to negotiate with your lender to get you back on track that is where we come in.

We have caring people who want to help you save your home and get you back to where you need to be. We want to help you get back in charge of your finances.
You’ve probably tried to talk to your lender but their phone operators have one answer, “Payment in full.” Or maybe you call them and they don’t call you back. There are options. We have good relationships with mortgage companies across America. If you truly can afford your home and are sincere about getting your finances back on track, we can negotiate a payback-plan that is acceptable to your lender and within your new budget. They’ll talk to us. They appreciate our thoroughness and sincerity.
We’re trained to help you. It’s more than just a job…it’s our mission! We know the mortgage foreclosure process and steps that are available to save your home and stop the foreclosure. We correspond daily with mortgage company principals nationwide and have a solid reputation with them. As a third-party negotiator we have the ability to represent you to the lender in a professional manner. Let us give you the foreclosure help you need by negotiating on your behalf with your lender to save your home.

We have many strategies to help you save your home. Our counselors will make a detailed financial portfolio of your current situation and devise a plan that will keep the mortgage company satisfied and yet give you the breathing room you need to enjoy your home. We need to know: Can you afford the home you’re living in? Do you have a good-faith payment you can put toward your delinquency to show your lender that you are serious about resolving this matter? If you answered “yes” to these two questions, you are well on your way to securing your home.

Pledged Asset Loans

2009-06-04T09:55:00.000-07:00

Credit Score requirements for Super Jumbo Mortgages have become increasingly relaxed given that 2002, however credit score standards are on the other hand somewhat more stringent for Super Jumbo borrowers than they are for their conforming counterparts.

In view of the fact that Thirty year fixed rate mortgages are available in the super jumbo category, they do not represent nearly everyone of super jumbo mortgages. Securitization of Super Jumbo mortgages has not met with the same success as conventional jumbo mortgages, although career in this area is ongoing throughout the financial community.

Pledged Asset Mortgage

2009-06-04T09:54:00.000-07:00

It is an ARM on which the interest rate adjusts monthly and the payment adjusts annually, with borrowers offered options on how large a payment they will build. The options include interest-only, and a "minimum" payment that is more often than not less than the interest-only payment. The minimum payment option results in a growing loan balance, termed "negative amortization". Because Interest Rates are rarely the focal point of a typical Super Jumbo mortgage borrower's shopping list (most focus on cash flow and tax benefits), lenders routinely charge higher interest rates on super jumbo mortgage goods than they would for a borrower with similar qualifying criteria in a conventional jumbo loan, in big part to account for their risk and reduction of liquidity. A fixed interest rate for an initial One month period; thereafter the interest rate (fully indexed rate) accomplish make over monthly. Due to the unconventional requirements of many super jumbo mortgage applicants, the popularity of unconventional mortgage programs amongst the wealthy is understandable. Some lenders do allow for unlimited cash out on Super Jumbo mortgage refinance transactions, nonetheless their quantity is declining in step with the broader mortgage markets. Some lenders do allow for unlimited cash out on Super Jumbo mortgage refinance transactions, still their volume is declining in step with the broader mortgage markets.

Super Jumbo mortgage lending is a niche activity, not engaged in directly by nearly all consumer focused banks. Should the subject property be unique, Oregon comparable sales be difficult to buy for the purpose of deriving superiority, additional field review appraisals, desk review appraisals, and broker price opinions grasp be ordered to substantiate the property's excellence.

PledgeBank successes

2009-06-04T09:48:00.000-07:00

“Having signed a pledge on Pledgebank before, I decided it could be a really effective tool in helping me empower and mobilize others. We decided that we would raise some money to provide a small working stipend for a young woman intern. Within the first 48 hours, I had reached my goal of pledgers. It was profoundly exciting, and really helped energize our modest fundraising effort.”

I pledge allegiance to the system

2009-06-04T09:47:00.000-07:00

In the summer of 2003, I took my oral exams and passed to become a U.S. citizen. Being brought up in the U.S. education system, I had an advantage that other immigrants did not have: civic and U.S. history courses. Even then, I couldn't answer the questions without studying, because they are strangely detailed in some areas and oddly phrased in others.

Today, I volunteer every other week at a U.S. citizenship test coaching class. For 2-1/2 hours, the students go through flash card questions and practice interview questions with native English speakers. Many of them have lived in the U.S. for well over 10 years. Some have most likely stayed illegally. In the basement of a community facility, these men and women eagerly answer the questions.

"Which amendments are related to voting rights?"
"How many stripes are on the American flag?"
"What is the Congress?"
"Why do you want to become a U.S. citizen?"

Some questions sound reasonable. Others seem outright ridiculous to an average American (c'mon, who memorizes voting rights amendments? And 'what is the Congress?' - the question is horribly vague that you don't know what they are asking for, yet interviewees are supposed to answer, 'The Senate and the House of Representatives').

Most of the people who gather at the facility are Mexicans and South Americans. I met a 65-year-old Peruvian man the other day - he hardly spoke English and he was in his retiring ages. The U.S. is where he wants to spend his retirement. I was helping two ladies named Maria and Maria a few weeks ago - they were both in their 40's and found it difficult to study in-between raising a family and work (Maria from Mexico worked as a house-keeper, and Maria from El Salvador works at a factory). I was doing one-on-one coaching for a Mexican lady named Gloria the other day. She had failed the citizenship test once already. She was so eager that she kept on excitedly blurting any answer she could think of. (e.g. - "Who wrote the 'Star Spangled Banner'?" - "George Washington! No... three? Supreme Court?!?"). Sadly, to many of the test-takers, this exam is nothing but rote memorization. But you can see it in their eyes that they are up for the challenge. The advantages of becoming a U.S. citizen (assuming that you are a green card holder already) is a US passport, ability to apply to US federal jobs, and most importantly, being able to bring your relatives into the U.S.

Every time I work with the test-takers, I try to explain the structure of the government and write out the relationships between people, places, and documents. The US Citizenship & Immigration Services (USCIS) argues that the current test does not reflect the immigrants' understanding of the US government. In my opinion, USCIS needs to improve the way test-takers can study for the exam if they truly want the immigrants to understand US laws and governance correctly. But that would be costly, and why would the US gov't want to get a 100% passing rate for US citizenship tests, right? I guess it's up to the grassroots volunteer groups that can help improve this situation.

I find it difficult to stay objective on this topic, because it hits close to home (after all, my family came to the US for a new opportunity). And if you ever meet anyone who is applying for U.S. citizenship, you can see how excited they are. It's heartbreaking to think that their efforts may not pay off - especially when they have made the U.S. their "second home" and become a part of the community.