Home Sweet Home… But Can You Afford It?

You’ve finally found your dream house and are ready to commit but there’s that question of home mortgage affordability.  Don’t let this thought scare you away just yet.  Find out if you can go ahead and buy that house at last.

 

1.  Know how much you have and how much you owe.  How much income are you receiving at present?  Is there a chance that it would increase?  What will be your financial situation several years from now?

 

How much money do you owe to creditors?  How much monthly payments do you make?  Can you still afford to shell out more money after the bills are paid?

 

You’ll need a consistent source of income that can cover your mortgage and other expenses.  Try to foresee possibilities that you’ll need to factor in: a new child, changes in the job, back-to-school plans and cash-flow five or several years from now.  Be prepared to be in it for the long haul.

 

2.  If your debts are well managed, then you can afford a home mortgage.  The lender will approve your loan more quickly if he sees that your debt-to-income ratio is well within manageable range.

 

The lender will ensure that your payments will only total 33% or less of your monthly gross income.  Otherwise, pay off some of your debts before applying for a home mortgage.

 

3.  Decide which one you prefer: fixed, adjustable or balloon rates.  Paying a fixed rate is a more popular choice because it can protect you from surges in interests while paying the lowest rate possible for an agreed period of time may be lighter on your budget, but your mortgage payment can go up later.

 

4.  Interest rates will go up and down depending on the activity of the market.  If you can read and understand market trends and economic indicators, you can save a lot of money.

 

5.  Be prepared to pay a downpayment.  Typically, it is about 20% of the total price.  A house priced at $200,000 will require a down of $40,000.  There are also loans with low or no-downpayments, but it will cost you in terms of equity in the long run.

 

6.  You have enough money saved that’s equivalent to at least three months’ monthly income.  This will help cover unexpected expenses that could affect your mortgage payments.

 

There is no fixed answer on the affordability of a home mortgage.  It will all depend upon your income, debt, interest rate and other factors.  If the home mortgage fits into your personal situation, then you can definitely afford it.

By :  Chaicen,  Family Reiews And Information

 

 

Towns That Could Be Hit Hardest by the Financial Crisis

by Prashant Gopal
Saturday, September 27, 2008 – BUSINESSWEEK

The upheaval shaking Wall Street will hurt privileged enclaves as well as working-class neighborhoods from coast to coast. Find out which will fare the worst.

How many former Lehman Brothers bankers or AIG executives are likely to be buying a Park Avenue apartment or a home in Darien, Conn., this year? Most likely answer: not many at all.

As anyone who works on Wall Street, invests in the stock market, or just reads the newspapers knows, the past few weeks for the financials sector have been as ugly as Frankenstein’s sister. People have seen their net worth eviscerated, if not obliterated completely.

 

 

Darien, Conn.

But Wall Street’s woes are going to have a direct impact on communities around the U.S.—and not just because the proposed $700 billion bailout will result in higher taxes for most Americans. The pain will spread beyond the banks themselves to their back-office and IT operations, accountants, lawyers, and other professional service employees who depend on work from finance companies. It will also reach regional banks across the country. Credit-card companies and firms that deal with auto loans are also vulnerable as the credit market tightens. Even insurance companies, which have remained relatively strong, could be hurt if the economy worsens and workers drop existing policies and decide not to take on new ones. From CEOs to security guards, the financial, insurance, and real estate sectors employ approximately 9.8 million people in the U.S. alone, nearly 7% of the entire American workforce, and their spending potential is even greater.

New York’s Ripple Effect

Moreover, many of these jobs often tend to cluster around certain towns; bankers in one community and tech support in another. And while Manhattan is at the center of the turmoil, the fallout will be nationwide. Already the financial sector alone has lost 10,000 jobs through July, or about 2% of finance jobs. Moody’s Economy.com projects that New York City and its suburbs will lose 65,000 finance jobs by the middle of 2010, or 11% of the total.

Economists are projecting that Manhattan real estate prices will finally sink under the pressure of financial-sector layoffs and shrinking Wall Street bonuses. Wall Street accounts for about 12% of jobs in the city of New York, and a quarter of salaries.

“New York is the stone in the puddle that ripples across the country,” said Scott Simmons, vice-president and founding partner of Crist/Kolder Associates, an executive recruiting firm in Chicago.

Smaller Cities Could Feel It More

In other words, smaller financial centers and their suburbs could also see trouble ahead. BusinessWeek.com worked with PolicyMap.com, a Philadelphia-based online data and demographics site, to rank the communities with the largest percentage of residents working in finance, real estate, insurance, and leasing. Topping the list is Darien, Conn., an affluent New York suburb where the median salary is $168,000 and 27% of residents work in those industries. Bloomington, Ill., home of State Farm Insurance, came in second, followed by Hoboken, N.J., which is across the Hudson River from Wall Street.

But the impact of a downturn could be more serious in smaller cities that are less diversified. Wilmington, Del., where many of the nation’s credit-card companies are headquartered; Charlotte, N.C., home of Bank of America and Wachovia; and Sioux Falls, S.D., where many back-office jobs are located, each have about 15% of residents working in finance, real estate, and insurance.

Jeremy Nowak, president of The Reinvestment Fund, a nonprofit group in Philadelphia that operates PolicyMap.com, and a board member of the Philadelphia Federal Reserve, said the towns on the list aren’t necessarily in trouble yet. Much depends on the health of the local employers and the mix of businesses. Not all banks, for example, are doing badly, he said. And the insurance industry is, so far, relatively healthy, despite the troubles besieging industry giant American Insurance Group.

“These are places to watch,” Nowak said. “This will be the starting point for investigation, and not the answer.”

Hitting Connecticut Commuters

John Tirinzonie, Connecticut’s state labor economist, wasn’t surprised to see that Darien topped the list. The Wall Street crisis puts stress on commuters in affluent Fairfield County, which includes Darien, Westport, New Canaan, Stamford, and Greenwich (home of former Lehman CEO Dick Fuld), he said. It remains unclear how the merger of Bank of America and Merrill Lynch will impact the thousands of employees who work at both banks in Hartford.

What seems clear is that the financial turmoil is already hurting the local economy. Connecticut’s unemployment rate jumped from 5.8% in July to 6.5% in August, he said.

“The problem is when you start to have people making good money who are commuting to New York and lose their job, they’re going to be in a very competitive market now with people in the same position. If they’re able to get a job … it may not be the same level and income they’re used to. And that affects the state in terms of tax revenue.”

New Jersey: Benefit Through Relocations?

In New Jersey, home prices in the wealthy towns of Madison, Summit, Chatham, and Millburn, which have direct train service to midtown Manhattan, had been holding up better than much of the state, said Rutgers University economist James Hughes. But that could now start to change.

One possible benefit for New Jersey: Manhattan companies that are coming to the end of their leases might consider moving to New Jersey where office rents are much lower, he said.

“You’re going to see a smaller Wall Street,” Hughes said. “Salaries will be less generous, bonus payments will be less. It’s going to ripple through the residential market.”

Manhattan Real Estate: Some Trouble Spots

The New York suburbs in Westchester, New Jersey, Long Island, and Connecticut could get hit harder than Manhattan itself, which has a relatively tight supply of housing. Jonathan Miller, chief executive of real estate appraisal firm Miller Samuel Inc. said the market for Manhattan units selling for more than $8 million is less vulnerable because many of the buyers come from overseas and are wealthy enough to survive an economic downturn, he said. Miller said the market for homes of $3 million to $8 million could get hurt more because many of the buyers work on Wall Street.

“The abruptness of all that has happened has caused many people to step back and wait and see whatever bad news will come along next,” Miller said.

Steve Spinola, president of the Real Estate Board of New York, said he expects prices to remain flat. He also said that many Wall Street employees who were laid off will be hired by new boutique investment banks that might be formed by executives from the former investment houses, and plenty of talent will be needed to implement the $700 billion bailout plan.

The Manhattan co-op market is tight. Spinola said the condo market might have more supply problems because builders, rushing to meet a June 30 tax abatement deadline, filed for about 17,000 new construction permits, he said.

“In two and a half years when these projects are done and open, will the market be back to buy them?,” Spinola said. “I think the answer is ‘yes.’”

Mortgage rates plummet, but borrowers beware

The takeover of Fannie and Freddie may make mortgage borrowing cheaper – but it won’t make getting a loan any easier.

By Les Christie, CNNMoney.com staff writer

Last Updated: September 10, 2008: 1:45 PM EDT

NEW YORK (CNNMoney.com) — Mortgage rates have plummeted, but that hasn’t made getting a home loan any easier for most borrowers.

In the wake of the government’s takeover of Fannie Mae and Freddie Mac last weekend, the 30-year fixed rate has dropped from 6.26% last Friday to 5.79%. But only buyers with a credit score of 740 of above – and a 20% down payment – can qualify for such a low rate. During the boom, borrowers only needed scores of 640 to land the lowest rates available. Even a 580 score would get them very close to the best rate.

During the credit crisis, Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) have become virtually the only source of funding for banks and other home lenders looking to make home loans. Their ability to lend is crucial to the housing market. To that end, the Treasury will buy mortgage-backed securities from the two firms, and lend them money if necessary, all in an effort to make credit more available to home buyers.

But that doesn’t mean that lenders won’t continue to subject borrowers to strict criteria, according to Keith Gumbinger of HSH Associates, a tracker of mortgage loan information. The aim is to make mortgages more available, but only to the most qualified borrowers.

“All the emphasis on credit scores is not going to go away,” he said.

High score, low rate

As the housing market has imploded, lenders have battened down the hatches on mortgage underwriting, consistently raising the credit scores necessary to qualify for the most favorable terms, and adding to borrowing costs to compensate for any extra risk factors they find. That’s not going to change.

“Credit score affects your rate more than they ever have before,” said Steve Habetz, a mortgage broker with Threshold Mortgage in Connecticut who has more than 20 years experience in the business.

An individual’s credit history is scored between 300 to 850, with 300 very low and 850 perfect. The median score, in which half of the borrowers have a lower score and half have a higher one, is about 720. Only those with very high credit scores are getting the best mortgage deals.

And Fannie and Freddie have raised fees for borrowers with lower credit scores as the housing crisis worsened – they’ve increased twice this year alone. The lower the score, the larger the fee.

For example, Fannie charges a 1% up-front fee (raised from 0.75% this summer) for borrowers with a credit scores of 680, even when they’re paying 20% down on their homes.

Even people with the very favorable scores, between 720 and 740, pay a small fee equal to an up-front charge of a quarter point. That’s a big change from the past. Habetz had a client recently with a 735 credit score putting down 20% -a very solid applicant -and the client still didn’t qualify for the best rate.

“You tell people with 730 credit scores paying 20% down that you have to charge them a quarter point extra and they look at you like you’re crazy,” he said. That comes to an extra $30 a month on a $200,000 loan.

Borrowers with scores below 600 may have to pay a fee of a full percentage point or more, adding $120 to the monthly costs of the average loan.

Nervous investors

Investors in mortgage-based securities are simply demanding that they be compensated for any extra risk that a borrower represents, according to Jon Kaempfer, a loan officer with Vitek Mortgage Group in Sacramento, Calif.

Kaempfer had a client with a 635 credit score recently who wanted to do a cash-out refinancing, a deal in which an existing homeowner takes out a loan for more than the mortgage is worth. The homeowner gets a bundle of cash, which this client wanted to use to pay for some home improvements.

The lender wanted to charge 1.5% of the mortgage principal up front simply because it was a cash-out deal, plus 2.5% more because of the home owner’s modest credit score. Those fees, folded back into the mortgage, added about a percentage point to the client’s interest rate.

“You have to be golden, have at least a 680 score or a 720 if you’re making a smaller down payment, to qualify for the best rates,” said Kaempfer.

Gumbinger expects lending standards to remain tight for the foreseeable future, as long as home prices continue to fall. The risk of foreclosure is of course much higher in a falling market, and lenders need to shield themselves.

If and when prices do improve, says Gumbinger, borrowers with less than perfect credit scores may get some breathing room.  

First Published: September 10, 2008: 10:33 AM EDT

When is the best time to buy?

Expert advice on timing the market & key points to consider before buying. Visit Yahoo! Real Estate now. A Conventional wisdom says that you need to stay in a home a minimum of five years to ensure that you recoup your purchasing costs. But with some markets soaring, this advice doesn’t always apply. It’s All About the Market Market conditions play a huge part in any decision about when to buy. Housing market values have varied widely from region to region in recent years. While the Florida market has seen meteoric rises in home values, Ohio has seen its real estate prices go into negative territory in the last year. Do not buy high and sell low – if your market is softening or has hit its peak and is heading south, you may want to wait on your purchase. The magazine Smart Money has created a worksheet to compare the costs of renting vs. buying using market appreciation calculations to determine at what point you come out ahead. Plugging in the price, down payment, your income bracket, interest rate, and current market appreciation rates, the worksheet will break out what you will gain. For example, say you were to buy a $400,000 house in Boulder, Colorado and you estimate the market will soften from the current 11% appreciation to about 9 percent annually. If you stayed in the house three years, you would recover $88,750 in equity at the end of that period; if you stayed five years, you’d realize $120,360. It’s All About You The top three reasons people file for bankruptcy are change of job status, divorce, and unforeseen health expenses. If you face any of these challenges and don’t have a financial cushion, this may negatively impact your ability to pay a mortgage. Big life events dictate your readiness to buy now or to wait for a little more stability. Signs you should not buy right now:   Will you be moving within the next five years? Will you be having kids soon? Will you be making a job change? Have you recently filed for bankruptcy or is your credit score below 630?   If you answered yes to any of these questions, or you are experiencing other life-changing events like illness, marriage, divorce, or breakup, you may want to wait. Your Financial Future Aside from life events contributing to your decision, getting your financial house in order before you begin your home search is key. Even with all the programs available for buyers with a low-or-no down payment, if your debts are growing steadily and you don’t foresee an increase in your income, you are putting yourself in greater financial risk by taking on a mortgage. With only a few exceptions, many loans for people who are still repairing their credit or recovering from bankruptcy carry higher rates than those available once your credit is in better shape. So the question comes down to this: Do you buy now, before prices appreciate higher than you can afford, but do so with an expensive loan? Or do you wait and repair your credit, then get a favorable loan, and pay more for your home? That’s the sort of analysis you need to go over with a financial counselor or mortgage broker before you start hitting open houses. Ways to Cushion the Blow On the other hand, if you are willing to buy a home that needs a bit of work and, over time, you can afford to get it done, your home could appreciate faster, strengthening your financial position. If you are willing to take on a roommate or renter, you can also soften the expense of a mortgage, which almost always costs more than rent. Buying a home is a risk, and it’s worth asking yourself hard questions about what you’re willing to do to protect yourself from getting in over your head. If you answered “no” the life-change questions, and have the down payment or equity from your current home, you still need to look at interest rates and at how buying affects your taxes. You can’t time the stock market, but you can time interest rate hikes, as they are a little easier to predict. If they are going up fast, you can jump in before they rise too far; if they are already high, you will have to calculate how refinancing in the future affects your budget. What to Do First If you are anxious to get moving, be patient. You have a few things to do first:   Go to open houses – get the lay of the land Talk to a mortgage broker to get pre-approved Interview agents (You may want to find an agent at the same time as you look for a mortgage broker – a good agent can recommend reputable brokers and help you make sense of the terms of the loan) Review credit report and scores with mortgage broker to determine if any repairs are needed Use Zillow.com to find info on neighborhoods that interest you and then use the Home QandA feature to ask current homeowners

Government To Make Billions From The Mortgage Crisis

The mortgage crisis has had a negative impact on everyone, not just homeowners. Elected officials are working hard to pass legislation that is designed to prevent future banking debacles. Unfortunately, history has proven that when legislators over-regulate banks that it tightens the reins on lending. This is done by raising the bar on what it takes to qualify for a mortgage or installment loan. Predictably, it’s the middle class that will feel the pinch more than anyone. Specifically, it’s the middle-class, self employed small business owner that be injured the worst.

Most people are aware that you can reduce your taxes by deducting expenses and qualified charitable contributions. What most people don’t realize is that small business owners live and die by those deductions. Tax rates have risen on the self employed more than any other segment in our society. To counter these tax hikes, legislators created more “loop-holes” write off’s and deductions for small business owners to use.

For this reason, small business owners rely on creative CPA’s to maximize their deductions in order to show less income and pay less taxes.There are nearly 23 million small businesses in America and over 35 million sole-proprietors and almost every one of them employ savvy CPA’s to keep them in the black. The draw-back is that by doing this most self employed borrowers are unable to prove enough income on paper when applying for a loan or a mortgage.

Traditional mortgage lending practices of yester-year required that borrower’s prove sufficient income when taking out a loan. Over the years, taxes have risen for small business owners at staggering rates, far above what they have for W2 employees. At the same time the self employed borrower’s “provable” income has dwindled proportionately. Under traditional banking rules most of the self-employed people wouldn’t be able to qualify for business loans or mortgages. This would ultimately force small business owners out of business and cripple our would economy.

This new business paradigm literally forced the banking industry to create lending products that catered to small business owners who could not prove all of their income. These products were called “stated” income loans and did not require borrowers who had good credit to prove their income. These products originally required good credit and sufficient assets in order to qualify for them. Responsible guidelines and common sense underwriting kept default rates on these products in line with conventional mortgages. Unfortunately, as competition for this segment of borrowers stiffened between lenders the stringency to qualify for these mortgages softened, thus the mortgage crisis.

It is exactly this type of loan that our law-makers are trying to do away with through legislation. The new mortgage bill being bounced around has specific remedies for irresponsible lending. Meaning, if a bank loans you money and it can be proven in court (attorneys like this law by the way) that the bank was irresponsible in doing so they could be penalized. The definition of “irresponsible” is did the borrower have the capacity to repay the loan, meaning did they prove enough income. This bill will kill stated income loans, period.

So where does this leave the responsible self employed borrowers who needed these loans to live and operate their businesses? This leaves them with higher taxes. Should this bill pass self employed borrowers will be forced to claim more income each year on their tax returns in order to qualify for car loans, mortgages and even business loans. This will negate any of the loop-holes and deductions they were promised in lieu of higher taxes.

This means the government will rake in billions in extra revenue as a result of this bill. For example, let’s assume that a small business owner claimed $40,000 in income last year after deductions and business expenses. If she was in a 40% tax bracket she would pay roughly $16,000 in taxes. Under the new banking guidelines that same business owner may have to claim $80,000 In order to qualify for mortgages, car loans and business loans. Assuming she’s in the same tax bracket, she would now have to pay $32,000 in taxes.

Multiply $32,000 by 23 million business owners and that’s one huge pay-day for Uncle Sam. You can bet that the Senators pushing this bill through congress are well aware of this left handed tax raise. You will never hear them mention it either, I wonder why?. You will hear about the naughty lenders that put good wholesome red blooded Americans in the street through predatory lending practices. You will never hear about the 20 million business owners who paid their mortgages on time and actually need these loans to stay in business.

By :  Aubrey Clark

Mortgage Arrears Counselling

I’ve been looking into mortgage arrears counselling services for people who need help and there doesn’t seem to be much free advice for this huge problem in the UK

We have recently seen news all over the web and programmes like panorama bbc on TV showing us the horror stories of people in trouble with mortgage arrears problems.

This is leading to massive repossession problems UK wide.

I think we have a clear picture of why this is happening and who is being affected by this – Sub-prime borrowers being sold mortgages they had no way of paying seems to be the usual problem. 70% of all repossessions are sub-prime cases with the sub-prime market being around 8-9% of the mortgage market.

So the first thing people need to do is try and avoid getting into arrears. If this has been unavoidable then you should look at paying it back without taking out another loan where possible.

If you cannot cut down on your outgoings and cannot increase your income and selling your home is not an option then the best counselling I have seen within my research is with the citizens advice bureau.

They offer free advice and there are local officies nation wide.
You should be able to book a meeting with an advisor who will be able to help you through the repossession process and offer some good mortgage arrears councelling

Read related Topics :  Ohio County Auditor Websites How to Stop Repossession Free UK Guide Payplan; Free Debt Management Plans, IVAs and Debt Advice Debra Drummond’s page about Plymouth, MI Buying a New Home

Japan Inc suffers 15 percent profit fall in April-June: report

The pre-tax profit of major Japanese companies fell 15 percent year on year in the April-June quarter, weighed down by the US economic slowdown and price hikes, a survey showed on Sunday.

The survey was conducted by the Nikkei business daily, covering 685 companies that had reported their quarterly earnings by Friday, or about 40 percent of all listed firms in Japan, excluding financial entities and those listed on the markets for start-ups.

It will be the second consecutive quarter of decline, the newspaper said, warning that Japanese companies may see their combined profit for the fiscal year to March 2009 drop on an annual basis for the first time in seven years.

Profit declined amid a changing business environment in which the subprime mortgage crisis significantly weakened the US economy, sharply lifting the yen against the dollar, the newspaper said.

Compared with year-earlier levels, the yen strengthened by nearly 16 yen on average against the dollar during the April-June quarter. The falling dollar was also responsible for boosting crude oil prices.

Surging fuel and raw material costs walloped steelmakers, although they were beginning to pass on a portion of the increases to automakers and other customers.

Aggregate pre-tax profit at listed companies was forecast at the end of May to fall 5.6 percent for the current fiscal year, but the size of the decline is expected to turn out even bigger, the Nikkei said.

False Hopes Cling to New Housing Aid

The U.S. housing crisis is hitting almost everywhere with record high foreclosures as credit losses reach into the trillions of dollars across the globe. Housing Predictor explores the crisis and reveals the future impact the new laws passed by Congress will have.

Destin, Florida (PRWEB) July 28, 2008 — The nation’s housing crisis is hitting almost everywhere from Wall Street to Main Street across the country as a result of the credit crisis. Credit losses across the globe are reaching into trillions of dollars. The lingering affects of the real estate crisis have widespread implications. Housing Predictor explores the crisis and reveals the future affects that the new laws just passed by Congress will have in the future.

President Bush was threatening to veto any bill brought to him with provisions for a bail-out, but when push came to shove the president finally gave in to Congress. The bail-out is certain to become the nation’s largest financial disaster yet due to unscrupulous lending by mortgage companies, banks and the development of new financial instruments to sell the loans on Wall Street.

Estimates range as high as 1.5 million homeowners that will be helped by the new programs, which effectively produces a bail-out of lenders and homeowners. But many expect a much smaller percentage of homeowners to actually get help. It’s another case of abuse and criminalized fraud and socialized pain, which the tax payers will eventually foot.

With help from reporters in Washington D.C., and across the country Housing Predictor details the nation’s plight and exposes the untold story behind the nation’s foreclosure epidemic. Mortgage companies weren’t just making loans by the truck loads during the real estate boom in the subprime and conventional markets. They were hauling all the money in they could before the lending door slammed shut.

Lenders and many of the country’s largest investment banks are under investigation for improprieties in relationship to the crisis, which equates to the largest redistribution of wealth in the country’s history. The fall out is massive and has devastating affects on the nation’s overall economy, resulting in a new home lending industry with tighter lending regulations. Some 75 percent of all home mortgages made in the last 10 years have been largely unregulated.

The number of homeowners at risk of foreclosure now tops 3 million after at least 2.5 million have been foreclosed. Housing Predictor was the first media outlet to forecast the foreclosure epidemic, which has made a severe impact on the national economy, and forecasts more than 250 local housing markets in all 50 states.

Follow the Housing Predictor series on the real estate crisis to get the latest inside track with analysis of what the future will bring at http://www.housingpredictor.com.

Financing Choices for Home Mortgage

There are several ways to finance your home. In order to choose the most appropriate home mortgage for your personality and lifestyle, assess the different type of financing for home mortgage:

 

1) Fixed-rate mortgage

 

Fixed-rate mortgage are those with interest rates that remain the same until the life of the loan ends. For consumers who are looking for a stable rate that will not experience interest rate fluctuations, this home mortgage financing is a great deal.

 

A favorite among first time homebuyers and retirees, it can help in organizing and budgeting finances while protecting consumers from increase of interest rates. This kind of financing for home mortgage is best for consumers who plan to stay in their homes for more than 5 to 7 years. 

 

2) Adjustable-rate mortgage (ARM)

 

Adjustable-rate mortgage, or simply ARM, is a kind of financing for home mortgage wherein the borrower and lender agrees on a certain interest rate that will periodically change. Interest rates will rise or fall, usually with regards to a specific index.

 

The advantage of an ARM is that the initial interest rate is usually lower than a fixed-rate mortgage. When the interest rate goes down, so will your payments. If you’re planning to keep a home for a short period, this mortgage financing is suitable for you.

 

3) Balloon Mortgage

 

A balloon mortgage is a loan that is amortized over longer period compared to the loan term. A balloon mortgage usually has a 15-year term, which is amortized over 30 years to make monthly payments controllable. When the 15-year term ends, you must repay the full principal due of the loan in one large sum, called the “balloon payment”.

 

When you plan to keep your home for a short time, this may be a practical financing plan. However, make sure to ask when the term ends to prevent possible financial problems.

 

4) Government loans

 

Through government lenders such as the Veterans Administration (VA) and the Federal Housing Administration (FHA), government loans often allows consumers with a lower down payment compared to traditional bank loans.

 

VA loans are perfect for veterans. Government loans are also suitable for consumers buying lower-priced homes with smaller down payments.

 

5) Convertible ARM (Adjustable-rate mortgage)

 

Convertible ARM usually starts out as an ordinary ARM, and then gives you an option to lock a fixed rate without refinancing. However, this option will only be offered after a specified time.

 

Knowing your financing options for home mortgage can save you money by preventing high interest rates and unworkable payment plans. Make sure to ask questions to learn which financing plan best fits your needs.

Choosing The Right Lender

Loans are often difficult to obtain, especially with credit reports and credit ratings made easier this time with the advent of technology. Some banks, financial institutions, and other lenders are very picky when it comes to the person applying for a loan, home mortgages included. You can’t really blame them, since they are just being careful with their money, just like any normal person would.

 

Lenders look for specific things when deciding whether to grant a loan or not, and this is usually reflected in either the credit rating or credit report, or both. However, being careful or specific when it comes to decisions should not be with the lenders only. The borrowers themselves can search for a specific lender, one that offers them the best deal and where they would be most comfortable with.

 

Lenders can come at various descriptions – national banks, financial and money lending institutions, up to small money lending businesses. They all are unique when it comes to their lending policies, which is a good thing because borrowers have the freedom to choose. In looking for the best lender for you, here are just three important things to consider:

 

First, the ability. Yes, lenders, no matter how big or small they might be, should have enough money to be able to lend you what you need, so it’s not really a question of their capability, since they won’t be in that business if they couldn’t lend. This is normally the area where national lenders beat out their local counterparts.

 

Ability refers to the various loan types that lenders can offer – which translates to diversity in products. Because a national lender has access to capital in any kind of economic environment, they often have more to offer than locals, which have fewer sources that potentially could dry up. As a borrower, you ought to consider the ability of the lender in various sources, including services during the loan (which could translate to less hassle), of which national lenders are advantageous.

 

Second, rate of interest. As is often the case, local lenders have more of an advantage here as they usually bring their interest rates down in order to entice borrowers to do business with them. It is understandable that they do this so that their national counterparts would not be able to monopolize the business locally. Nationals usually have a fixed rate that would have to go through some channels in order to be lowered, which is not much the case with locals.

 

Since the rate of interest determines how much you will be paying over the course of the loan, this is an important factor to look out for, particularly for the borrower. One percentage point can make a big difference between the borrower being able to pay the loan or not. The consequences of not paying a loan can be grave, both for the short term and long term of it, so this particular factor should be taken into consideration carefully.

 

Third, accessibility and relationship. As a borrower, it would be more to your benefit if you establish a good working and professional relationship with your lender. Sometimes, this is a hard task to accomplish, while sometimes it can be easy, and so it’s more of a case-to-case basis. A poor relationship with your borrower can potentially lead into a lot of different problems.

 

In accessibility, there are some things to look out for. One of these is what types of clients the lender loans money to – since there are some that require a higher credit rating, while some deal only with those who have bad credit. It would be better for you to know beforehand what type of borrower a certain lender does business with before actually applying for the loan.

 

In relationship, a one-on-one professional relationship with a lender is recommended. This is for your benefit as you will be updated and reminded as to the status of your loan, whether there is a payment soon, any potential problems, and the like. If there is no, one-on-one relationship, there could be problems.

 

These are just three important things to look for in a lender. There are some more, but these are some of the most important. By following these three, you are well on your way to choosing the proper lender for you.