Mortgage pre approval is now a necessity as the credit market has changed significantly from what it was a few years ago. Before the financial meltdown, pre-approval was something most people didn’t even think about because getting a mortgage was as easy as walking down to the local bank branch and asking nicely. However, things have changed drastically and now most realtors advise home buyers not to even start looking for a property before they have mortgage pre approval.
Despite the fact that mortgage pre approval is essential to get a home loan nowadays, it does offer the home buyer some benefits as well, namely under the guise of saving both time and money. First of all, when you have pre approval, you know exactly how much money you have to spend. This can save you huge amounts of time and aggravation because you can narrow down the number of properties you visit to the ones in your price range. At the same time, it’s easier to make a logical decision on how much you can afford to pay every month before you’ve actually found the “home of your dreams.” Once you’ve already seen the property you want, emotion can often take over and logic falls to the wayside so you either end up with a mortgage you can’t really afford, or completely disappointed when you receive approval for much less than you need.
Additionally, while mortgage pre approval does not guarantee in any way, shape or form that you will be approved for the loan, it still sends a message to the seller that you are serious and your offer has a much higher chance of being chosen compared to someone without pre approval. This gives you more negotiating power as well, because when a seller sees a buyer who has already been pre-approved, they know they aren’t wasting their time and the likelihood of the sale going through is very high.
There are cases where a lender might approve you for a higher monthly payment than you believe you can afford and you might be tempted to use the full amount. This would be a serious mistake because you are the one who will end up suffering when you have to tighten the purse strings every month to make the payment. Be realistic and analyze your budget. You are the only one who really knows how much you can really afford, no matter what a lender tells you.
Mortgage pre approval is actually an asset and will make your life much easier when shopping around for a home. Not only will you be in a better negotiating position because realtors and sellers will take you more seriously, but you will also be able to make a much better decision in terms of how much you can actually afford to spend. By getting pre-approved, you will know in advance how much money you have available, helping you save time, and you will also know exactly how much you can expect to pay in full for the property you intend to purchase.]]>
Home Affordable Refinance Program (HARP) helps homeowners with refinancing their current mortgages. Homeowners that owe more money than their home’s existing value can also benefit from a HARP Home Affordable Refinance Program. This program assists responsible borrowers with reducing their monthly principal and interest rates so they are able to make payments without being financially stressed.
Refinancing is a term that is used for replacing an existing debt obligation with a different type of financing option. Refinancing plans vary and many factors such as inherent risk, currency stability and banking regulations play a role with determining the type of program that is available to homeowners. Offering homeowners lower interest rates is one type of plan that is used for affordable refinance programs. Other plans include consolidating debts into one loan, reducing the monthly payment amount, altering the risks for variable-rate loans and providing long term loans which helps to keep more money in a homeowner’s possession.
Most people who refinance their homes do so because they encounter financial difficulty and it usually results in them paying their mortgage off over a longer period of time. This process helps to make home ownership easier to accomplish for many people but they will not own the deed to their home until a much later date.
When the housing market went into decline during the late 2000s the government had decided to take action in order to slow this process. Since the housing sector of the nation’s economy is crucial to its financial stability the government had authorized the Federal Housing Finance Agency (FHFA) to use the Home Affordable Refinance Program (HARP) to keep many residential homes from going into foreclosure.
HARP is a model program that is used by many financial institutions who offer refinancing plans. Programs that are modeled after HARP is for borrowers who have demonstrated an acceptable mortgage payment history but who cannot refinance their homes due to declining prices or because they lack mortgage insurance. This type of program also applies to individuals who have to move to a more stable mortgage product to prevent foreclosure.
Risks are associated with any type of loan and the home affordable refinance program is not any different. Penalty clauses or provisions are a necessary feature of fixed-term refinancing programs. These provisions are designed financially penalize a borrower who is able to pay off their loan at an early date. This type of penalty is also activated when a refinanced loan is paid off early in part or in full. In other words, a person can’t send in extra money each month for a refinanced mortgage payment without being penalized. Transaction fees are also applicable to refinancing since they can wipe out any type of savings during the refinancing process. Points are up front payments on a refinanced loan that have to be made before the refinancing process can begin. Points are a percentage of the total loan amount and more points will result in a lower interest rate.
Most refinanced loans with lower monthly payments or with consolidated debts will usually have higher interest rates. Refinanced loans can also be considered recourse debt and this means that the borrower takes a loan without having any collateral to back the loan amount. Borrowers that fail to make payments under a refinance loan program typically have their homes taken from them by the lending institution or bank that made the loan. This is considered an act of default and is not a part of the foreclosure process.
There are some people who are not eligible to receive help from a Home Affordable Refinance Program. Borrowers who are delinquent on their mortgage payments cannot use this type of assistance. Borrowers whose first mortgage on the home exceeds 125 percent of the current market value of property are not eligible to receive this type of refinancing. Borrowers who have loans that are not owned by a sponsoring institution probably won’t be able to refinance their loans through another lending organization. Borrowers who do not have enough income to afford the new mortgage payments under a refinanced plan are not eligible for this type of assistance. The Home Affordable Refinance Program is arranged by FHFA and various lending institutions and homeowners should contact a financial expert to discuss terms and conditions.]]>
The USDA Home Loan is one of the few remaining 100% mortgage financing programs available in today’s credit climate. USDA or United States Department of Agriculture has earmarked funds available for their rural development loan program. This program is intended to offering competitive financing to rural markets.
For certain individuals, the benefits of a USDA Home Loan can be substantial. Here are some of the positive factors for the rural development loan program:
Eligibility for a USDA Home Loan is based on three primary requirements. First, the home must be in a designated geographic area approved for rural development funding. Second, the total household income may not exceed 115% of median income for the area. Lastly, applicants must meet credit and income requirements set forth by the lender.
A USDA Home Loan authorized lender or real estate agent can help you identify any areas local to you that are eligible for rural home loan financing. You might be surprised to find that there are homes around you that qualify. Generally, these are communities of fewer than 10,000 persons except that certain communities between 10,000 and 25,000 population are considered rural based on their distance from urban areas. Be sure to check with an authorized lender or real estate agent to be sure you are looking in the correct areas.
Income eligibility for a USDA Home Loan is based on the Adjusted Household Income. The ADI cannot exceed 115% of the median income level for the area and takes into account various factors such as:
Lastly, lenders set forth income and credit requirements. Although USDA does not have a minimum credit score requirement for a USDA Home Loan, most lenders require a 620 or higher credit score. Applicants must demonstrate the ability and willingness to pay for the loan in a timely manner and have a credit history showing timely payments as they become due.
In order to see if a USDA Home Loan is right for you, the next step is to contact an authorized rural financing lender. Lenders are available in every state. See our home page for USDA Home Loan lenders and their rates. To prepare for an application, you will need to know your current gross income, which is your income before any deductions are withheld, your liquid assets – statements for checking, savings, retirement, 401k, or money market accounts as well as your residence and employment history. With those items, a lender can appropriately determine if you qualify for a USDA Home Loan in your area.
The USDA Home Loan program is one of the best financing programs available if you meet the eligibility criteria. Not only is it one of the few zero down home loan programs available, it offers the added security of a 30 year fixed mortgage rate, giving you the added peace of mind that your budget won’t be affected by rising interest rates in the future. The stability of the interest rate, combined with the liberal income and credit eligibility requirements, make the USDA Home Loan program an excellent way for today’s families to purchase a home.]]>
An interest only refinance was a very appealing option for many first-time homeowners during the heydays before the housing and banking crisis that began in 2006. This option provided flexibility of payments useful to many whose intention it was to secure investment property for relatively quick resale, or for those who found interest only refinance a viable path to obtaining, or maintaining, a very important part of the American dream—home ownership. But what started as a tide that raised all ships, soon turned into a tsunami of foreclosures and defaults—a cautionary tale for those who may be considering interest only finance as a loan option. Albeit, interest only loan packages, including interest only refinance, was seen by some as a logical alternative to conventional loans.
To answer the question, “What is interest only refinancing” it would only be logical to first ask, “What is interest only financing?” The concise answer is that interest only financing is a loan that only requires the borrower to repay the interest on a loan, usually for a specified period, after which the terms of repayment are reset. The option to repay interest only usually last five to ten years. Payment on the principal is deferred, giving the borrower some relief financially, by reducing monthly payments by up to one hundred dollars in some instances. The balance, however, remains unchanged. The borrower, of course, also has the option to pay the principal, along with the interest, during the interest-only period of the loan repayment. As mentioned earlier, interest only financing provided the leverage for first-time homeowners to realize their dreams of owning property. Some used this vehicle as a way to trade up in obtaining another home. But, for many, interest only refinance was also a way to stave off financial ruin in very difficult times.
An interest only refinance mortgage is a viable option for those whose financial situation has taken a turn for the worse. Refinancing that fully amortized loan to a more manageable interest only package, may buy some borrowers time while they reorganize financially. A 30-year interest only loan of $100,000 at 6.25%, for example, only has the required monthly payment of $520.83, compared to the fully amortized loan (includes principal), which would have a monthly payment of $615.72. That is a difference of $94.88, which is the remaining monthly principal. Interest only finance rates are fixed for up to the first ten years. But borrowers should be aware that, since payment on the principal is effectively deferred, when the term of the loan resets, their monthly payment might be significantly higher. Also, during the period of interest only repayment, no equity is being built, since the principal is not being paid down. This may make refinancing a challenge, and selling your home not as profitable.
Most interest only refinance rates are associated with adjustable rate mortgages. In a very volatile market, this type of loan exposes the borrowers to certain risks like steep rate increases. A precipitous drop in home prices may, therefore, see huge upward swings in rates, leaving the borrower paying much more than the house is worth. For this reason, homes that have been obtained by interest only refinance have a higher rate of foreclosure than homes financed under different loan structures. The take-away message here is that prospective home buyer should consider very carefully the risks and perceived advantage of interest only finance or interest only refinance.]]>