Loan Secrets

Guest Article by Douglas Hanna

If you have a home that’s paid off – or almost paid off – a reverse mortgage can help you live better by providing a steady stream of dependable income.

This type of mortgage is called a reverse mortgage because instead of you paying the lender a certain amount per month for a certain number of years, the lender pays you. These payments are cash advances against the value of your home.

There are different kinds of reverse mortgages, but all of them are similar in certain ways. You continue to own your home just as you do with a normal mortgage. You pay the property taxes and are responsible for maintenance, homeowners insurance and property repairs.

At the end of the mortgage, you or your heirs must pay all of your cash advances plus interest. If you or your heirs cannot do this, the lender can foreclose on your house.

There are financing fees associated with a reverse mortgage just like with a forward mortgage. The money you get form the reverse mortgage can be used to pay these fees. These costs are added to your loan balance and must be paid back with interest when the loan is over.

How much money can you get with a reverse mortgage?

The monthly amount you get will depend on your age and the value of your home. Here’s an example. One reverse mortgage currently available is the Federally-insured Home Equity Conversion Mortgage or HECM. Assuming you have a home worth $200,000 and owe nothing on it, an HECM could get you $641 a month for the rest of your life. Alternately, you could get a credit line account in the amount of $107,466 that you then could draw from whenever you wished. Or you could choose to get a single lump sum payment for the same $107,466.

Keep in mind that, as a rule, reverse mortgages are first mortgages. In this case, if you still owe any money on your home, you must pay off the old mortgage first. If you don’t have the money to do this, you can usually use money from the reverse mortgage to pay off the old debt.

How much will you or your heirs end up owing?

The debt will equal all the cash advances you have received, plus all interest that is added to your loan balance. If that amount is less than your home is worth, you or your heirs get to keep the difference. The other good news is that you can never end up owing more than your house is worth at the time the loan is repaid.

If you are “house rich” but “cash poor,” a reverse mortgage could help make your golden years more golden, However, make sure you read the loan papers carefully to be certain you understand all the loan’s conditions.

Douglas Hanna is a retired marketing executive and the author of more than 100 articles on HD radio, the Internet and family finances.

Here’s something that’s both new and free, It’s a technology called HD Radio that enables AM and FM radio stations to broadcast their programs digitally. These digital broadcasts provide listeners with radically improved audio quality, more radio channels through multicasting, and new data services. To learn more about this amazing new technology, just go my Web site, http://www.hd-radio-home.com, to get all the buzz.

Article Source: http://EzineArticles.com/?expert=Douglas_Hanna

Bob Roscoe, Mortgage Marketing Associates, Minneapolis, Minnesota

Reverse Mortgage Tips 

By Guest Author Bill Tannebring

You’ve been looking at houses for months, and finally you’ve found it–the house that’s just right. So now, all you have to do is to purchase your new home, move in, and get settled, right? Not quite. There’s one more big step to go-getting a mortgage loan. You’re going to want to decide on the type of mortgage and payment terms that fit within your budget. And you’re going to have to prepare yourself by doing some research. What follows is valuable information that will be crucial in helping you make loan decisions that will fit your budget and circumstance.

Series: 3 Finding a Perfect Match for your Home Mortgage

Factors That Affect Your Mortgage

Mortgage payments are determined based on the following criteria:

Amount of the loan
Length of the loan
Down payment
Discount points
Closing costs
Credit quality
Income level
Lock in period

Loan Amount: The amount of your loan can increase your interest rate if the amount financed exceeds the conforming loan limits set by Fannie Mae and Freddie Mac, (private corporations regulated by the federal government) that administer loans. The conforming loan limit changes at the beginning of each year.

Shorter loans, such as a 30 year or 15 year note, can save you thousand of dollars in interest payments over the life of the loan, but your monthly payments will be high. An adjustable rate mortgage may get you started with a lower interest rate than a fixed rate mortgage, but your payments could get higher when the interest rate changes.

Down Payment: A large down payment will give you the best possible rate. If you’ve got the cash now and want to lower your payments, you can pay points on your loan to lower your mortgage rate. The concept is simple: In exchange for more money upfront, lenders are willing to lower their interest rate, cutting the borrower’s payments. Remember to consider upcoming expenses and closing costs in your down payment decision.

Closing costs. In addition to your down payment, you will need to pay closing costs for processing your loan and transferring the property ownership from the seller to you, the buyer. Closing costs can range from 3%-5% of your loan amount, depending on where you live, the loan you choose and your closing date. In some cases, you can finance certain closing costs in your mortgage loan. When you apply for loan, your lender will give you an estimate of closing costs, which usually include:

Origination fees.

Costs of processing your loan (includes property survey and appraisal). Items paid in advance, such as first-year mortgage insurance premium, first-year hazard insurance premium and first-year flood or earthquake insurance premiums, if required.

Escrow accounts – an account held by the lender into which the homebuyer usually pays for city/county property taxes, mortgage insurance, and hazard insurance, if required.

Title insurance charges.

Recording and transfer charges.

Attorney’s fees.

Credit Score: Your credit and debt-to-income-ratio affect the terms of your loan through your FICO score which is used to determine your credit rating. If you have good credit and your monthly income exceeds your monthly debt obligations, you will get approved at a lower interest rate. However, if your monthly income barely covers your minimum debt obligations, you will not receive the lowest available interest rate even if you have a good credit report.

Lock-in Rate: When shopping for a loan remember that interest rates change frequently. It is important to ask your mortgage representative if a lock-in rate is possible. This will guarantee you a specific rate, provided the loan is closed, with a set period of time. Determine How Large a Monthly Mortgage Payment You Can Afford

Your choice of mortgage will be influenced by questions such as How many years do you expect to live in your new home? How important is it to be free of mortgage debt before facing your children’s college bills or planning your future retirement? How comfortable are you with the certainty of a fixed mortgage payment vs. a payment that can change over time?

Your monthly payment will vary depending upon the type and length of the loan and the amount you put down. Most lenders will help you select the loan that’s best suited to your financial situation.

How Low an Interest Rate Can You Expect?

Shorter term loans offer lower interest rates and are divided into two types. A Fixed mortgage means that the rate is locked in for the life of the loan. Adjustable Rate, also called an ARM or variable rate note, is a note that generally offers lower payments for the first year and then changes periodically based on the terms and conditions of your note. Paying discount “points” can lower your interest rate. If your loan requires you to pay points or if you want to buy “down” the interest rate using points, remember that one point equals 1% of the loan amount.

Choosing the Right Mortgage

If you want the stability and predictability of a set rate for the life of your loan, then a fixed rate mortgage may be for you. Usually the longer the term of the mortgage, the more interest you pay over the life of your loan. Though, a longer term means your monthly mortgage payments will be less than they would be with a comparable shorter-term mortgage.

30 year vs. 15 year fixed rate mortgage.

A 30-year mortgage will have a lower monthly payment and a higher interest rate than a 15-year mortgage. You’ll have a smaller monthly obligation but you’ll pay more for your house over time because you’re paying it off with interest for a longer period. On the other hand, a 15-year mortgage will have a higher monthly payment and a lower interest rate so you’ll pay less for your house because you’re paying it off in a shorter period.

Adjustable Rate Mortgage.

ARMs, are short-term fixed-rate loans: After the fixed rate term is up, the rate adjusts at regular intervals in accordance with current interest rate conditions at that time. A 5/1 ARM, for example, has a fixed rate for five years and then adjusts every year for the next 25 years. (ARMs typically run on a 30-year schedule.)

The length of the fixed-rate term on an ARM typically can range anywhere from one month to 10 years. The longer the rate is fixed, the higher the interest rate you’ll get. But generally speaking — and there have been exceptions in the past — ARMs will cost you less in the short-term. With the ARM, both your monthly payments and interest rates should be lower than either a fixed rate 15-year or 30-year mortgage.

The risk with an ARM is that when interest rates rise, you could end up paying much more than you bargained for. Check to see if your ARM has a cap rate so that if rates increase, your change cannot exceed a certain pre-defined limit.

If you know you’ll be in a home for 12 years or more, a 30-year fixed rate mortgage might work better for you than, say, a 5/1 ARM, where you fix a rate for five years and then it adjusts every year after that. But if you think you won’t be in the home longer than five or six years, a 5/1 ARM might make more sense.

Mortgage Shopping Tips.

Talk to the mortgage specialists at your bank. If you are starting to look for a home they can asses your financial situation and help you determine a purchase price that is within your budget and a mortgage program that suits your lifestyle and income. In many cases your advisor can prepare a pre-approved mortgage before you finalize your purchase.

Ask a mortgage specialist at your bank to help you calculate payments at different interest rates. This will help you determine a monthly payment that can be comfortable integrated into your budget.

Types of Mortgage Programs.

Most lenders are committed to ensuring that your home financing experience is rewarding and effortless. To this end, there are many programs available to suit a variety of situations, lifestyles and your financial profiles. These include:

Fixed-rate loan. If you’ve found a home you plan to live in for 10-30 years, consider a fixed-rate loan. It’s predictable and stable since the interest rate is set for the full length of the loan. Because the monthly payment for the principal and interest stays the same for the life of the loan, it’s easier to plan a budget. Most lenders offer many fixed-rate loans with terms to fit your budget, including loans that require no money down.

Adjustable-rate loan.

If you plan on being in your home for a shorter period of time, or expect your income to increase of the years, an adjustable-rate mortgage (ARM) may just be the right fit for you. An ARM loan usually starts with a lower initial interest rate than traditional fixed-rate loans. After a set initial payment period (usually one, three, five, seven or ten years), the interest rate may change periodically (usually annually or semiannually) based on market conditions. As the rate changes, your monthly payment changes. ARM loans feature an adjustment “cap” which limits how much the interest rate can go up. This helps protect you from large increases in your monthly payment.

Loans for first-time homebuyers.

Most banks offer affordable loans to make it easier for first-time homebuyers with limited savings to qualify for a home loan. Specifically, FHA and VA government loans are available to qualified buyers, based on income or property location. These affordable financing programs can help make it easier to buy a home since they require little or no money down and also offer flexible credit and income guidelines.

Repayment schedule.

Also consider how quickly you’d like to repay your loan – within 15 years, 20 years, 25 years, 30 years? Do you want to make biweekly mortgage payments? Typically, the sooner you repay the loan, the more you’ll save in interest payments. However, the longer you extend the term of your financing, the lower your monthly payments maybe. So when choosing a loan term, consider your budget, your long-term spending patterns, your income over the life of the loan and how long you plan to stay in your home.

Which loan is right for me?

The lifestyle situations below can help you decide which loan you might want to consider.

”Getting the lowest monthly payment is most important to me, and I’ll be in my home for less than five years.” An intermediate ARM (five years or longer) if your income is fixed or expected to decline. A short-term ARM (three years or less) if you expect your income to increase.

“Getting the lowest monthly payment is most important to me, and I’ll be in my home for more than five years.” A fixed-term mortgage (for example, 30-year fixed). An intermediate ARM if you expect your income to keep increasing.

”I have little money saved for a down payment.” AN FHA loan. A VA loan, if you are a veteran.

“I have no traditional credit references (for example, car loan or credit cards) but I pay my rent and other bills on time.” An FHA loan. A VA loan, if you are a veteran.

“Paying off my mortgage faster and saving money by paying less interest long-term is what’s most important to me.” A shorter-term mortgage, such as 15- or 20-year fixed-rate loan. A biweekly 30-year mortgage accelerates the reduction in principal by applying more than one extra payment a year, reducing the total interest and term of the loan

Borrowers Protection Plan

Borrowers Protection Plan is an optional feature of your loan that can provide peace of mind during difficult times – like an unexpected job loss or disability. Borrowers Protection Plan will cancel your monthly principal and interest payment should you lose your job or are unable to work due to illness or injury. Borrowers Protection Plan may cancel a total of up to 12 months, depending upon the protection option and benefit period selected. And if you should die in an accident your entire loan balance will be canceled.

Benefits of protection.

Affordable. Decide what you and your family need and we’ll help make it affordable.

Easy to obtain. There are no health requirements or medical exams and any size loan qualifies.

Supplemental benefits. Your monthly benefits will not be reduced because of other state unemployment benefits or disability income you may receive. Protection options available prior to loan closing include involuntary unemployment and disability and can be purchased individually, or as a combination. These options also include accidental death protection and are available on a single or joint basis.

Fast answers and streamlined processing. The approval process should be fast and simple. Many homebuyers who have excellent credit history can be approved for a mortgage at the time of the application and with very little documentation.

Hassle-free mortgages with 80% less paperwork.

Use a proprietary process to determine if you qualify for this streamlined loan feature. This means less digging, sorting and collecting paperwork for you.

Your qualification for reduced paperwork depends on a number of factors: Strong credit — doesn’t have to be perfect Type of mortgage you choose — many mortgage types and loan amounts up to $750,000 are eligible Even if you don’t qualify for the 80% less paperwork mortgage feature, your mortgage request can still be approved.

Buying a home is one of the most important events in your life. So talk to the mortgage professionals, do your homework and select a loan that fits your lifestyle and your budget. And enjoy the satisfaction of owning your own home.
Bill Tannebring - EzineArticles Expert Author

Bill Tanebring is a Southern California based writer. His web address is http://www.billtannebring.net

Article Source: http://EzineArticles.com/?expert=Bill_Tannebring

Bob Roscoe, Mortgage Marketing Associates, Minneapolis, Minnesota

Mortgage Update

Article by Guest Author Donna Lewczuk

We’ve all heard the old stories. A successful, self-employed Canadian who can work wonders in his or her professional life can’t manage to secure a decent mortgage for a home. It strikes us as both ridiculous and unfair – given that nearly one Canadian worker in six is now self-employed. After all, these are some of the most independent and ambitious people in the country.

Thank goodness that times have changed for the self-employed! Policy changes at the Canadian Mortgage and Housing Corporation (CMHC) have begun to acknowledge the contribution and financial status of self-employed Canadians.

These days, self-employed homebuyers have the same access to mortgages as their salaried counterparts. It doesn’t matter what the nature of your income structure: whether you work on contract, whether your work is seasonal, or whether you’re a small business owner or an independent professional.

Now, newly self-employed Canadians can also get credit for their past work experience. Until early this year, you needed to demonstrate at least two years of employment in your own business, but that rule has been changed. Now, if you have two years experience in your field of expertise – whether you were salaried or self-employed – you can meet the new CMHC standard.

The new guideline is great news for self-employed Canadians who have extensive experience in their chosen field, but who are newly in business for themselves in that field. For example, maybe you’ve been building cabinets for years in a salaried workplace, and have decided to step out on your own. Now you can get credit for your experience.

The CMHC guidelines specify that you should be “performing essentially the same function with the same skill requirements” for your past experience to qualify. For the tens of thousands of Canadians pursuing their dream of self-employment in their field of expertise, the new guideline is great financial news.

The CMHC guidelines apply to any mortgage insured by CMHC… from any institution. It’s worth noting, of course, that some lending institutions are friendlier to the self-employed than others. Many lenders are still most comfortable with the traditional parameters for verifying employment and income. A steady stream of pay stubs is the simplest method of assessing your ability to service the mortgage debt.

If you’ve been self-employed for a few years, your lender may want to see detailed financial statements for the most recent years. That can be a problem. An astute business owner with a good accountant will be working hard to minimize taxable income for the business: a smart financial strategy. But according to traditional lending formulas – that business strategy could flag you as a high-risk borrower.

The most flexible and innovative lenders have discarded the old formulas for their self-employed clients. Some of the best mortgages for self-employed Canadians don’t even require proof of income. You could qualify for your mortgage simply on your own good credit and employment history.

If you’re self-employed, or considering taking the plunge into business for yourself, the latest mortgage news is encouraging. Check out your options… and get the credit you deserve.

About the Author

Donna Lewczuk, Burlington, On, Canada

More Details about mortgages for business owners here. Donna has been helping people take the struggle out of dealing with their finances for 20 years. She has been able to increase many of her clients’ cash flow by hundreds and even thousands of dollars a month. If you are struggling with debt please visit Donna’s website for more information. www.donnasmortgages.com

Bob Roscoe, Mortgage Marketing Associates, Minneapolis, Minnesota

Loan Application Checklist