In order to be competitive, a number of lenders are now advertising so-called “no fee” mortgages. According to commercials from a number of mortgage companies, you can obtain a home loan where you only pay the loan’s interest; there are no additional costs at closing. Can you really save money by applying for a no fee mortgage?
As usual with this sort of advertising, the answer is “perhaps, or perhaps not.” A mortgage company isn’t going to simply drop charges that can amount to as much as 3%-5% of the amount borrowed. Any lender that simply did away with a source of revenue would quickly go out of business, as those fees contribute to their bottom line.
How do these mortgages work? The lender is going to charge you a higher rate of interest than a mortgage company that itemizes closing fees will. Their profit must originate somewhere; it’s going to come from charging you more to borrow the money. That’s not necessarily bad; it means that they are earning their money in a different way. The increased rate of interest may make the loan more attractive to buyers on the secondary market. The company may make some additional money by re-selling your mortgage to another company later.
What does this mean for you, the buyer? As with any loans or anything else that you might buy, you need to shop around before applying for a loan. The only way to tell who is providing a bargain is to compare the costs of all the lenders and crunch some numbers. Only when you examine everything, including how much in total you will pay over the life of the loan, will you be able to tell who is offering the lowest cost. Each lender is going to have different ways of making their profits; some will charge higher interest rates, others will add more fees at closing.
Is the promotion a financial scam? No, but it might be rather misleading. The companies, via their advertising, would like you to believe that you are paying less, as suggesting that there are no closing costs might lead you to believe that you are paying less money. You aren’t actually paying less money, but it makes for good advertising. Whenever you think about taking out a home loan, you should assess all of the estimates from all of the mortgage companies you talk to so that you might find the deal that best meets your needs. Clever consumers always know to be suspicious when a promotion seems too good to be true.
Home Equity Loans – Source Of Cheap Rate Finance To Meet Needs
15-02-2010 by admin
Over the years you have made timely repayment towards the loan you took against your home. There is a greater price of the home in the market now. This clearly means that in the eyes of lenders your home is now a safer property if you take a loan against it. There is a good amount of equity build up in homes which can enable in borrowing money at cheaper rate.
Home equity loans are given against equity in the borrower’s home that is pledged as collateral. Equity is the amount that is arrived at by subtracting balance payments towards the home from market price of the home. You have repaid many installments of the home loan and in the mean time market price of your home has substantially increased. So there is a good amount of equity in the home. It is this equity that the lender will approve a loan against. This clearly means that you would be given loan almost equal to the equity. These are safer loans for lenders as in case of payment default; the lender will get back the loan on selling borrower’s home.
The advantage is that the borrower can release equity in home. The extra cash in the home can be used of variety of purposes like home improvements, holiday tour, wedding, paying for child’s tuition fee.
Because the loan amount approved is restricted to the equity, the lender feels more secured and so the rate of interest on the loan is kept low. These loans are therefore best suited option when it comes to searching a cheaper loan.
What is more if you have a bad credit history, then also a loan based on your home equity is easier to take and with better rate of interest. Since you have been making regular payments for past many months towards home loan, your credit score may have improved a lot. So the lender will seldom hesitate in giving you the loan.
Prefer online lenders over banks or financial institutions. Online lenders not only have lower interest rate but they process the loan without many additional costs and the loan approval comes within days.
Home Loans
28-12-2009 by adminhome financing or house loans have become one of the major businesses of a financing institution. Almost all the finance institutions are offering financial aid to those who want to own a home.
The nature of home financing
Home financing or house loans normally come under the category of secured loans. The person who borrows money from the bank to buy a house should be able to furnish security to the bank against the amount that the bank releases as housing loan. Normally the house that you are going to buy will constitute the security against non payment of the loan amount.
Home finance procedure
Before approving the house loan the bank will verify the nature and value of the property that you are giving as collateral to the bank. You will be directed by the banks to submit all the documents that support the value of the house that you are going to buy using the home loan of the bank. They will also look into the credibility, credit history and the employment of the person who have applied for a home loan.As a general rule, home financing institutions will ask you to make three to six percent of the total loan amount as your contribution. Normally this amount is negotiable.
Interest rates of home financing
Fixed interest rates and adjustable interest rates are the two different packages of interest normally offered by the banks while approving a home loan. As the very name suggests fixed interest rates will give you the stability of the interest rate throughout the loan period. Flexible interest rate may vary with the changing policies of the banks.
Annual percentage rates
Annual percentage rates or APR must be the most important consideration for a person who is looking for a home loan. APR includes the capital, interest, points,(profits earned by the lending institution) mortgage insurance, fees and other hidden costs that come with a loan. Try to understand the details of every head included in the APR before you finalize a home loan from a financial institution.
Debt Consolidation Home Loans – 5 Ways to Make Sure You Qualify For a Consolidation Home Loan
16-12-2009 by admin
Getting a debt consolidation home loan isn’t always easy if you have had credit problems in the past. Not too many banks will accept bad payers, and not too many home owners will agree to get into a refinancing program so that they can take care of the down payment on your behalf. In order to get debt consolidation home loans easily, you have to follow the next steps and make sure you avoid any money related problems in the meantime.
#1 Get a stable job, preferably one on an undetermined period of time. Make sure the income is enough to cover the monthly payment you plan on making after the loan. If your job falls into this category, try and arrange payments for all bills, loans or tickets as soon as possible.
#2 Make sure there is no due payment when you go and ask for your debt consolidation loan, other than the ones you are trying to cover with this loan. This includes home bills, or any other credits you might have.
#3 Calculate the amount you owe, and decide whether you want to refinance it all or just a part of it. If your income is good enough, you can decide to make a loan that can cover all your other debts.
#4 When you go to the bank to apply for a 2nd or third mortgage on your home, bring the last months bills along so that it will save you some time.
#5 Get the loan and recalculate your credit score. You will see that after making this type of loan it will be better, so you then might be suitable for a new mortgage so that you can cover some of the borrowed amount.
Who Qualifies For Obama’s Home Loan Modification Plan?
09-12-2009 by admin
Obama’s home loan modification plan is officially known as the Making Home Affordable (MHA) plan. The plan is expected to reach up to 9 million families, so that they can refinance or modify their loans and hold on to their houses during this economic recession. Even if you think you won’t qualify, think again. Learning about the requirements for modifying your home loan might surprise you.
The first criteria for modification is that your loan has to be a Fannie Mae or Freddie Mac insured loan. At the present time, only loans by those two organizations are eligible for special refinancing and modifying actions under the MHA plan. You also must be the primary resident of the house in question if you want to refinance or modify your home loan under the plan.
The MHA plan gives homeowners tow separate options. The first avenue is refinancing; the second is modifying their loan. Borrowers who have not yet fallen behind on mortgage payments and owe below 105% of the principal of their loan can take advantages of a special refinance. This is true even if they don’t qualify for traditional refinance. It’s important to know that only those who are still current on payments can refinance under the MHA act.
If you’re having difficulty making ends meet and paying your monthly mortgage premiums, then getting a loan modification with the government-sponsored MHA plan could be for you. People who are current as well as people who have fallen behind on mortgage payments can get loan modifications. As long as you own and occupy the house and have a monthly payment that exceeds 31% of your gross monthly income.
The loan modification plan target at-risk borrowers and adjusts the terms of their mortgages so they will pay below 31% of their gross monthly income. This is called their debt-to-income (DTI) ratio. The first step is for lenders to reduce the interest rate to a floor of 2% to try to meet a 38% DTI. If the interest rates hit the floor and still do not meet the 38% DTI, then further modifications can be made. The lender can extend the loan for up to 40 years, and then they can begin to forbear principal on the loan. After meeting the 38% DTI, lenders and the Treasury will work together in a dollar-per-dollar matching program to bring the rate down to below 31% DTI for borrowers.
After coming to an acceptable modification, borrowers will have three months to prove that the new loan rates are something they can handle. If they keep current for a trial period of three months, the new mortgage terms stay fixed for the next five years. This is the procedure that the MHA plan uses to prevent foreclosures and let millions of U.S. families remain in their houses.