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Rob K. Blake, author of the book Mortgage Secrets Exposed! has been teaching folks for the last 15 years all the tips and tactics to save $1,000s when shopping for a mortgage. For more home loan tips, Visit his website at www.themortgageinsider.net .
Many folks believe getting a handful of Good Faith Estimates and picking the company with the lowest cost estimate is the right way to shop for a mortgage.
After 15 years in the mortgage industry, I can unequivocally say?boy, is that wrong!
Once folks learn the frivolity of using estimates, the most asked question I hear is, ?If estimates are out, how do I pick one mortgage company over another??. To answer that question, I put together the ?Run, Don?t Walk? Checklist for mortgage shoppers. To use the checklist, remember, if the company/loan officer you?re evaluating, possess, says, or demonstrates any item on list?.Run, Don?t Walk!
Well, here we go: The Checklist
1. It?s a bank?.you know Countrywide, Wells Fargo, Washington Mutual etc, Banks are not the low cost providers of mortgage money ?big surprise, right! And they don?t have to disclose their overage (ie. YSP or SRP).
2. They don?t have you sign anything?no application, good faith estimate etc. (self-explanatory)
3. They have you sign blank documents. Signing blank documents is worse than no documents.
4. They are a friend or family member…once you learn the truth, so long friend.
5. They verbally lock loans?no lender lock confirmation. If they won?t send you a lender lock confirmation, they are hiding the YSP.
6. They play stupid or get irritated when you mention YSP (yield spread premium).
7. They promote loans with a pre-payment penalty. They make more YSP with a pre-payment penalty unless the lock confirmation shows otherwise.
8. They are uncomfortable or irritated discussing their compensation. If they can?t discuss and explain their total compensation without equivocation, run!
9. They push Adjustable rate mortgages (adjustable rate mortgage) when your hold period is 5 plus years or when the market has obviously changed to an increasing rate market.
10. They push an interest only loan when your hold period is 5 plus years or when the market has obviously changed to an increasing rate market. Interest only loans typically are used to obfuscate the underlying adjustable rate.
11. They push an FHA and/or VA loans when they haven?t attempted a conventional approval first. Conventional lending now provide 100% and bruised credit programs which formerly were the main reason for the FHA and VA programs. They are now obsolete.
12. They push a sub-prime or bruised credit loan without attempting an ‘A’ credit loan first.
13. They do not get immediate computer approval.
14. They insist on a personal meeting for application designed to pressure you into signing.
15. They promote a ?fixed fee? or ?No-Cost? loan?.there is no such thing! Yield spread premium rate hiking will cost you thousands over the life of the loan.
16. They won?t disclose their exact total compensation. This includes all revenue generated by origination fees, mortgage broker fees, processing fees, and all ?back-end? compensation also known as yield spread premiums (for brokers ) or service release premiums (for banks ).
17. They push an interest only loan and tells you to pay extra principal payments.
18. They promote Adjustable rate mortgages in an increasing interest market.
19. They can?t explain how the ADJUSTABLE RATE MORTGAGE index and margin come together to make an ADJUSTABLE RATE MORTGAGE rate.
20. They can?t explain what the initial, periodic, and lifetime caps on an ADJUSTABLE RATE MORTGAGE are.
21. They don?t know the difference between a convertible and a non-convertible ADJUSTABLE RATE MORTGAGE.
22. They push negative amortizing loans like the ?pick-a-payment? or ?option? Adjustable rate mortgages so predominant in radio and TV advertising these days.
23. They don?t know the difference between payment caps and rate caps on Adjustable rate mortgages.
24. They work part-time in the mortgage business.
25. They are new to the business and therefore lacking in experience.
26. They were referred by a Website lead portal like LendingTree and others. These lending sites increase the cost of the loan. In the case of LendingTree, the increase cost is over $700!
27. They were referred by a real estate agent. They will probably be related to the loan officer or have some financial arrangement that will increase the cost of the loan for you.
28. They work for the builder mortgage company. See 27 above.
29. They work for the real estate mortgage company. See 27 above
30. They are also your insurance agent or financial planner. See 27 above.
31. They claim or allow you to assume, you can get the lowest rate simultaneously with a No-Cost or Flat Fee loan. An example is when you see a low rate on a Ditech commercial flashed right next to a flat fee offer of $395?they don?t go together, but you?ll only discover that after you call.
32. They use massive TV or Radio Ad campaigns. The cost of those ads gets re-couped by increased cost to you. Yield spread premium to the rescue!
33. They collect a huge deposit. As in the case of LendingTree, where they collect a NON-refundable $600!
34. They quote you a rate without first gathering important, rate-changing, information like, type of loan, credit score, loan-to-value, and income qualifying vs. stated income, etc.
35. They don?t mention mortgage insurance when the loan to value is over 80%.
36. They can?t get a loan done in less than 30 days.
37. They push ?pay off your credit cards with a Home Equity Loan. These loans are by definition adjustable rate loans usually based on the Prime Rate which changes with each Fed change?not good.
This checklist should be used with a healthy dose of common sense. I always tell folks to trust their instincts as well. Knowing that your BS meter is going off at high volume should not be ignored. These points allow you to ask the loan officer the question, get the answer, and then listen for the alarm to sound. Of course, if you don?t listen for the alarm and act on it, no amount of advice will help you.
Good Luck!
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Rob K. Blake, author of the book Mortgage Secrets Exposed! has been teaching folks for the last 15 years all the tips and tactics to save $1,000s when shopping for a mortgage. For more home loan tips, Visit his website at www.themortgageinsider.net .
January 7, 2008
A mortgage is usually thought of as a home loan, but a mortgage is not a loan. You are not given anything by a lender through a mortgage; instead, a mortgage is a security instrument you give to the lender. The lender’s interests in your property are protected through a mortgage document.
A mortgage is executed by two parties - the mortgagor (borrower) and lender (mortgagee). The mortgaged property cannot be sold or transferred to someone else until you pay the debt that releases the lien. The lien is created by the mortgage document and it provides security for the lender on the debt owed by you. Full title to the property stays with you, even though your loan is secured by a mortgage and you do have full ownership rights.
If the debt is not paid, the lender is given the right, through the mortgage, to sell the property to recover the money owed them. A foreclosure sale is the process used to sell property that has fallen into this category and because of the mortgage used for security, this process has to go through the court system. Judicial foreclosure is what this type of foreclosure is called.
A mortgage should not be confused with a deed of trust. Over half the states in the United States use a deed of trust, which acts as a means of security for the lender in much the same way as a mortgage, with a few exceptions. A deed of trust is recorded in public records, which lets everyone know there is a lien on your property. Whereas there are two people involved in a mortgage, a deed of trust involves three parties, the lender (beneficiary), a trustee and trustor (you). The trustee holds temporary title of the property until the lien is paid and released. The trustee is not allowed to take your property and there are laws in place to protect you against them doing so. The trustee has to be a disinterested party and usually attorneys will perform the responsibility of trustee.
If foreclosure becomes necessary, then a mortgage and deed of trust will affect you differently, as the property may be sold by the trustee. This is the trustee’s responsibility if the loan becomes delinquent. He will be given proof of the delinquency by the lender and the lender will ask the trustee to start foreclosure proceedings. This type of foreclosure proceeding bypasses the court system and results in a much faster and cheaper way for the lender to foreclose.
You do not have the option of choosing which type of loan security you want, as this is decided according to the state where you live. But, it is essential you understand what type of lien is securing the debt for your property.
When purchasing a home, a mortgage broker provides a borrower with a program best suited for that particular individual. They are professional and can find a lender to meet your needs, even though you may have difficult requirements or special requests. A mortgage broker is regulated by state banking laws. A broker works for you, the consumer, in negotiating and processing loans.
When borrowing for the purchase of a house, the amount of money lent to you by the lender is called the mortgage amount and the amount of your monthly payment is determined by the term or number of years you pay back the borrowed amount. A term of 30 years is the most popular, as spreading out the payments over a longer period of time, reduces your monthly payment. The shorter the term, the higher the monthly payment, so keep in mind there are also 10 year, 15 year and 20 year terms.
Interest rates are on the rise again and this is something else to consider, when purchasing a home.
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Michael Russell
Your Independent Mortgage guide.
January 2, 2008
If you are considering refinancing your mortgage with an adjustable rate loan you should consider all of your options including the risk before taking out one of these loans. Adjustable Rate Mortgages can save you a lot of money when used correctly; make a mistake with one of these mortgages and you could lose your home. Here are several tips to help you decide if an Adjustable Rate Mortgage is right for you.
Adjustable rate mortgages are loans with an interest rate that changes based on some financial index. These mortgages come with an introductory period that has a low, often unusually low, fixed interest rate. At the end of this introductory period the mortgage lender will adjust the interest rate and monthly payment amount based on the new interest rate plus their markup.
The adjustments mortgage lenders make on your loan is based on a designated schedule outlined in your loan contract. Most mortgage lenders adjust their loans every six to twelve months after the introductory period expires. The index mortgage lender use varies; your adjustable rate mortgage interest rate may be tied to the Treasure Bill index, LIBOR, Certificate of Deposit index, or the COFI.
There is much more risk for the borrower with an adjustable rate mortgage. Rising interest rates and inflation can wreak havoc on your monthly mortgage payments. Adjustable rate mortgages come with payment and interest rate caps to limit changes; however, if these caps are structured incorrectly you could experience negative amortization where your mortgage grows with time. If you have little stomach for financial risk you are better off with a traditional, fixed rate mortgage loan. You can learn more about your mortgage options, including common Adjustable Rate Mortgage mistakes to avoid by registering for a free mortgage guidebook.
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To get your free mortgage guidebook visit RefiAdvisor.com using the link below.
Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of ‘Mortgage Refinancing: What You Need to Know,’ which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
Claim your free guidebook today at: http://www.refiadvisor.com
Adjustable Rate Mortgage
January 1, 2008
If you are in the market for a new mortgage loan, the term length you choose is an important aspect to consider. The length you choose along with the interest rate determines your monthly payment amount. Is a mortgage with a longer term better? The answer to this question depends on your current financial situation and your long term goals. Here are several tips to help you choose the right mortgage.
Choosing the right mortgage term depends on a number of factors including your monthly budget. If you don?t have a budget you need to prepare one before thinking about a mortgage loan. How much can you afford? Do you need a mortgage with the lowest monthly payment amount possible, or is your goal to pay off your debts as quickly as possible? Depending on what these goals are and your cash flow situation, you will be able to determine which term length is best for you.
Mortgages with long term lengths, 30 or 40 years for example, offer lower monthly payment amounts. The interest rate for these loans is typically higher because there is more risk for the lender; as a result of the higher rate you will pay much more in finance charges over the life of the mortgage. On the other hand, mortgages with short term lengths come with much higher monthly payments in order to repay the debt in a shorter period of time. These mortgages come with lower interest rates because there is less risk for the mortgage lender. Because the principle is paid back at a much quicker rate and the interest rate is lower you will pay significantly less in finance charges to the lender.
You can learn more about choosing the right mortgage for your financial situation and how to avoid costly mortgage mistakes by registering for a free mortgage guidebook.
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To get your free mortgage guidebook visit RefiAdvisor.com using the link below.
Louie Latour specializes in showing homeowners how to avoid common mortgage mistakes and predatory lenders. For a free copy of ‘Mortgage Refinancing: What You Need to Know,’ which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.
Claim your free guidebook today at: http://www.refiadvisor.com
Mortgage Refinancing
December 31, 2007
A Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit is like a credit card. You can borrow money up to your credit limit, and you only get charged interest on the portion that you borrow. You can pay down the balance, then reuse the credit. Most have a draw term, usually 5 to 10 years, where you can draw money out, then the loan is paid back over a 10 to 15 year period. You may also elect to refinance the Equity Line and get another 5 to 10 years to use the line of credit. However, Cash Out Refinance is paying off the existing mortgage and acquiring a new loan. The difference between the pay off balance and the new loan goes back to you as a cash. Example, if the existing pay off balance is $100,000 and the new loan is $120,000, then $20,000 less closing cost goes to you as cash. Since rates on Home Equity Line of Credit ( HELOC ) are usually higher than the regular mortgage rates, one might as well cosider refinancing the whole mortgage and pay off the first even though the loan amount of HELOC ( 2nd loan ) is usually much smaller than the first mortgage.
You choose what you want to do with your home equity line of credit or Cash Out money:
Remodel your home
Take a vacation
Consolidate bills
Buy a car, boat or RV
Finance tuition or other expense
Use it as an emergency fund
There are many features of HELOC loan programs. Ask your Loan Officer to help you decide which is best for you.
Great Rates: rates can be below the prime rate on some programs.
No Loan Fees: No appraisal fee or closing costs.
Convenient Closings: Some programs allow doc signing in your home.
Credit lines or maximum loan limits vary with each program.
Pricing varies with the LTV.
Accessing the cash in your credit line can be done by writing a check, charging on a credit card or making a withdrawal at a financial center.
Many of these programs have an early termination fee.
Some programs may offer a fixed rate loan option feature, where you can lock in a fixed rate on all or a portion of your outstanding balance.
Pricing is based on your Credit Score. These cutoff limits are fairly strict, so if your score is just below the next higher range, you may want to discuss how to improve your score with your loan officer.
A HELOC is usually 100% tax-deductible*, and a smart way to consolidate debt, pay for home improvements, new automobiles, student loans or even vacations or weddings.
Home Equity Fixed Rate Loan
You may prefer a home equity fixed rate loan compared to a HELOC. Home equity fixed rate loans offer a wide variety of amortization periods (length of time to pay it back), more choices for people with less-than-perfect credit, fixed rates so your rate can never go up and the interest paid may also be tax-deductible*!
* It is recommended that Customers consult their tax advisor. Not all loan fees or interest payments are tax deductible.
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George Tesfa. Sr. Loan Officer / Manager
American Mortgage
Houston, TX.
http://www.Amerimort.com
December 25, 2007
Only about 20 years ago choosing a mortgage was a fairly easy choice. You made the decision if you wanted a fixed rate or an adjustable rate mortgage, 15 year or 30 year term. My how the mortgage market has changed since then. Now there is dozens of choices and terms. Surely there is a mortgage that fits your needs, keeping your financial goals in mind?
The mortgage market now offers 10, 15, 25, 30, 40 and yes!, even 50 year terms. It offers Option ARMS, Pick a pay, Hybrid option ARMS, etc., etc., etc. There are just too many to even name! With all of these choices, which one is right for you? Read on!
To determine which mortgage is right for you, one must carefully take a look at his/her present financial picture, as well as their projected financial future. Many things need to be considered before making the decision. I suggest making this decision by taking the first and most important step. Choose a broker or lender who is willing to make an appointment with you and discuss your financial needs and goals. I also reccomend that you make an appointment with more than one broker. After you have met with 2 or more mortgage brokers, make a decision based on what mortgage program offered makes you feel most comfortable. Yes, it’s a big decision, so base your decision with good sound business like judgement. Ask the right questions, pros and cons and take notes. Is this a home that you wish to spend the rest of your life in? Is this home just a stepping stone to the home of your dreams? Is this house the home you will spend your retirement years in? Don’t forget to consider all of these things before you make your selection.
Take your time, interview more than one mortgage broker and do your homework. It’s not rocket science once you learn whats available out there. Take your time and good luck!
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The author of this article is Glenn Keller. Glenn is a veteran in the mortgage industry and is affiliated with Bretlin Home Mortgage in Jacksonville, Florida. To learn more visit his website at http://www.bretlinfloridamortgage.com
December 15, 2007
A report in the Los Angeles Times shows, ?When the price of houses in California soared 17 percent in 2003 and 22 percent in 2004, a curious thing happened: Instead of homeownership decreasing because fewer people could afford houses, it rose to record levels.?
Basically, people in Californian use interest only and payment option loans to purchase more home than they can actually afford and the game gets dangerous, when FMV (fair market value) starts to drop. ?Abundant foreclosures could spark a downturn in the entire housing market, leading to the long-feared bursting of what some call a housing bubble,? shows Streitfeld?s LA Times article.
An article in the San Diego Union Tribune, shows higher interest rates stopping prospective home buyers from signing on the bottom line. Those trends are forcing home owners to drop their prices.
The Federal Reserve shows, homes’ appraised value made up 145% of nominal gross domestic product in March, while stocks and mutual funds were worth 82% of GDP.
?The plan is for the feds to keep raising rates until inflation comes down.? says mortgage broker Mike Johnson. ?Expect higher interest rates for refinancing and home equity loans through 2006.? The balance of the bubble means as interest rate?s climb, those adjustable interest only mortgages climb as well. Two percent interest jump equals a 40% percent higher payment. If home prices start to fall, when those interest only loans convert, homeowners face a full amortization on a principal amount possibly higher than the home?s actual FMV. In other words, they get locked into the loan. Refinancing won?t help because there?s no equity to borrow, or if housing prices drop, they
As interest rates climb, more than one mortgage expert suggests homeowners find a way to refinance using a fixed rate mortgage. Chances are you probably have equity built up in your home. You may want to consider pulling the equity out now in case home prices plummet. At the very minimum set up a home equity line of credit. Lock in a fixed interest rate, invest the equity, and use the cash to off set a possibly higher payment. Then if the bubble doesn?t burst, and interest rates drop while housing prices soar… Refinance!
| Nick Rian is an award-winning journalist who has written many real estate and home financing articles online. You can read more of Nick?s work at Home Equity and Second Mortgage Loans and get more information about refinance mortgages. Look for current interest rates Second Mortgage Refinance Loans or California Home Mortgage Loans if you would like to speak to a loan professional for a cash out refinance loan. |
December 14, 2007
If you need a home equity loan to refinance debt and currently have a negative amortization loan as your first mortgage, you may find the neg am can hold you hostage. It can be very difficult to get a second mortgage behind neg am loans. In fact, very few home equity lenders will go behind a negative amortization first. It?s just too risky.
Home equity lending underwriters calculate the 1st mortgage balance by gross up balance, 115% or 125% depending on the mortgage note. With this in mind, a 100% home equity loan behind a negative amortization 1st mortgage that has been losing equity is a dangerous situation. Depending on your credit score, you may need to refinance your negative amortization 1st and then get a new home equity loan. In fact, even if you can?t get an equity loan yet, you may want to refinance anyway.
Countrywide Home Loans recently stated that 75 percent of their payment option borrowers choose the one with the cheapest mortgage payment, the negative-amortization option and are worried enough that they recently sent out a letter to each of these borrowers. Angelo Mozilo, Countrywide?s chairman and chief executive hopes that the borrowers that are about to get into financial difficulties will refinance.
Dean Vigfusson, SVP Retail Lending for Arizona State CU in Phoenix notes of Neg Am loans ‘?the trend towards using these products to assist people to buy more home than they can afford is disturbing. Ultimately, this could contribute to any downturn certain markets experience in the next 12 to 24 months. For example, a large percentage (50%-plus) of home sales in certain California markets last year were financed with these loans, and this may have a very negative effect on foreclosure rates in those areas and hence, the overall market.’
As interest rates rise, now may not be the time to utilize negative amortization loans. Consider whether you may need a second mortgage before you get a payment option mortgage with a 1% start rate or any other product that will ultimately lead to negative amortization. If the balance owed on your house is growing instead of diminishing and creating equity, a cash out second mortgage is an impossibility. Worse, you may find yourself deeper in debt.
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Rebecca is a highly regarded free-lance writer and article contributor to the Los Angeles Times. For the updated guidelines for fixed rate 2nd mortgages and interest only lines of credit, please visit the online resources at Home Equity Loan & Mortgage Refinancing. Please visit these additional resource websites:
To get a free loan quote for a Payment Option Home Mortgage Loans for people with all types of credit, please check out the special loan offers for lower payments. If you need more loan advice about credit lines, take a look at the flexible programs offered for second mortgage loans with bad credit.
December 5, 2007
A study released Wednesday indicates that black and hispanic homeowners are more likely to receive refinancing loans aimed at borrowers with low credit ratings.
The study, conducted by the Consumer Federation of America, surveyed nearly five million refinanced mortgages made by 30 lenders nationwide. The study found that about half of black mortgage seekers and one-third of Hispanics received subprime mortgages with higher interest rates. Only one-quarter of white borrowers received subprime mortgages.
Subprime loans have higher interest rates in order to compensate the lender for the increased risk that borrowers with lower credit ratings bring to the table. Interest rates on subprime, adjustable-rate fefinanced mortgages increase sharply as the market sees increases. This often makes it harder for the borrower to repay the loan.
‘Some of the differences in lending we saw are undoubtedly due to risk-based pricing, but the variation is too great to be explained by risk factors along,’ said Patrick Woodhall, senior researcher with the Consumer Federation of America.
The study looked at 300 different cities and compared regional differences in lending practices. Over 36% of mortgage refinances were made at subprime rates in the Southwest and the Great Plains. Only 18% of mortgage refinancings were at subprime rates in the Pacific and Northwest.
Banking industry insiders say that comparing mortgage rates from different regions can overstate differences. It isn’t suprising to find higher rates of subprime loans in remote areas of the country since there are fewer competing lenders to drive down rates, explained James Ballentine with the American Bankers Association.
‘It’s important, when you look at a particular market, to compare it to similar areas and not drastically different ones,’ he said. ‘Comparing Jackson, Mississippi, to Los Angeles doesn’t tell you much because it’s not even comparing apples to oranges — it’s more like apples and grapefruits.’
According to American Banker Online, the top issuers of subprime mortgages in the first half of 2005 were New Century Financial Corp., Countrywide Financial Corp and Washington Mutual Inc.
A Federal study is currently looking into lenders’ practices based on 2004 loan data, with April through August 2005 data already collected. The information is also being looked at by the Federal Reserve for a study that will come out this month.
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