The Mortgage Guide

The Mortgage Guide

Applying for a house mortgage does not have to be a difficult, stressful process as long as adequate measures are taken. It is, however, important to understand that you are getting yourself involved in a legal agreement with a bank or other creditor. If you don’t take caution and explore all your options, this may become a problem down the road.

When in search of a home mortgage, consider the following factors before getting yourself into an agreement you may not be able to afford years from now. Don’t worry if you are unsure about how to get started. This is why we are here to help. Let’s get started!

Benefits of a Mortgage Broker

In a fast paced living society, it’s hard to make time to gather all necessary information before heading to the bank to apply for a mortgage. This may take several weeks as you may need to go back and forth between your lender before any decision can be made. Consider whether or not you have the time and resources to do this on your own. If you do not and need the extra assistance, this is where a mortgage broker comes in handy.

Mortgage brokers serve as the middleman between yourself and the lender. They act like a liaison between the two, gathering all important information and considering every detail. They take your income, assets, employment, and credit report into consideration to determine an appropriate loan value and type.

Even though you, as the borrower, have complete control over any final decision, assure yourself that you have hired a dedicated, trustworthy broker. Because the broker communicates directly between the bank and the borrower, prior to hiring one conduct a little bit of research to ensure you are in good hands.

Additional Factors to Consider

If you decide to hire a mortgage broker, they should be well aware of the factors to consider before applying for a mortgage. If you decide you don’t need a mortgage broker, please assure yourself that you fully understand the following points:

Do you know what the average mortgage rates for your home location are? How about the key factors that affect your interest rate when applying for a mortgage? Don’t be alarmed if you answered no. This is information that not everyone has until they decide to obtain a mortgage, which is why we are here to help!

When you decided to do without an experienced broker, be sure to analyze all aspects and options such as compare mortgages, assuring yourself you are making the best decision. The best mortgage deals may not be as accessible, so be sure to conduct thorough research.

Contact Us Today

Fill out the contact form below to get started with the home mortgage process. At Service Saves, our main objective is to help you get the best mortgage deals when wanting to purchase a new home. Our expert staff is glad to assist you with any questions you may have on how to get started. We look forward to meeting you!

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Refinancing Your Mortgage

Refinancing Your Mortgage

So, you have been hearing about the historically low- interest rate buzz for refinancing your mortgage over the last several years, and now you have decided it is your turn to take advantage of these offers. Where do you start? First thing you want to do is look at your financial mortgage health and make sure you are really to make that leap. What is your financial mortgage health in refinancing your mortgage it is a set of questions that your mortgage company is going to ask, and you want to have the right answers for this test. These questions are:

1. Have I been employed for the last two years at the same employer without any breaks in employment?

2. Is my current debt at a minimum level not more than 30% of my total credit limits?

3. Do I have at least three months of reserve mortgage payments in my bank accounts?

4. Have I check my credit report for inaccuracies?

5. Do I know where my last two paycheck stubs are, last two months bank statements, most recent mortgage statement, social security card, and the last two years Federal Tax Returns with their w-2 statements included are stored.

6. Have I not been late on any debts including the mortgage in the last 24 months?

If you can answer yes to each of these five questions you are probably ready to start the pursuit of refinancing your mortgage. Now the question is where are you going to apply for that reduction in interest rate you are seeking? The best place to start is your current mortgage holder. Dig out that mortgage statement look for the mortgage company’s toll- free telephone number and give them a call. Before you give the representative any new personal information you want information from the mortgage company about new mortgage refinance programs.

The representative will provided you an array of information so you need a pen and paper to write it all down you are still in homework mode. Not only are you wanting to know about the lowest interest rate program available for you are wanting to know if they offer to current mortgage customers a zero point and zero loan origination fee program fee as well. What are points and origination fees? These are fees that the mortgage company will charge to increase their yield of profit for the loan it is usually from one to three percent of the mortgage amount you are seeking. Being that you are current customer, and probably already paid it the first time that you took out the mortgage you should expect to have these fees waived or drastically reduced.

This is the whole purposed of calling your current mortgage company first to save money. The representative will attempt to have you to start the loan application at that point now that they were friendly and courteous to you and gave you all of the parameters on what to expect in refinancing your mortgage. Be polite, and let them know that you need a day to think this information over, and that you will call the mortgage company back to start the process in the next few days. The representative that you are speaking is not on commission so don’t worry that you have just wasted their time. Answering your questions is what they are paid by the mortgage company to do. If the quote that you have received is competitive you will be calling them back, and starting the mortgage refinancing process any way you just want to make sure of the information.

Next step is to do a little shopping around so open up that computer there are variety of mortgage companies, and banks out there looking to get your business. As you surf their websites you will see mortgage companies that are advertising their loan programs. Browse through the programs keeping in mind that these are the mortgage company’s teaser programs to get you to call them. Read through some of the lenders information and compare your notes to your mortgage company’s quote. If you see a program that may be better than the program offered by your mortgage company give them a call and ask them the same questions that you asked your mortgage company writing down their information as well. Repeat this process at least one or two more times. There is some work involved here but you are working to save yourself money here. It is the same as getting an extra paycheck just larger seeing that you will probably refinance your mortgage for a new mortgage of 15 to 30 years so your savings could be tens of thousands of dollars over that time period in savings from the quote of other lenders. Keep in mind the mortgage representative you are speaking to does this every day you don’t so they are ahead of the game all you have is your wits, and competitor information to compete against them.

Now that you are armed with several mortgage companies’ data you have one more thing to do before deciding who is going to getting that next call to start the mortgage refinancing process. You need to know what your house is worth. Why would you need this information you are not selling your home at this point. The reason for this is the mortgage company is going to estimate the value of your home against the loan that you are seeking. They are trying to determine a loan to value ratio to know what loan program to fit you in as there are qualification parameters. A good place to start looking for this information is back on the internet again. The lower the loan to value ratio the better you are in to get the best loan program. The target you are aiming for is a number less than 80%. If you are not able to reach that goal the mortgage company still has programs to assist you.

Armed with all of this information you are ready to make the decision as to who will get the call to refinancing your mortgage, and fill out that credit application with. So, good luck.

Mortgage Terms Explained

Mortgage Terms Explained

When you are hunting for a mortgage, you will find that there are many different types of mortgages available. I will list some of the more common ones and their uses.

15 vs 30 Years

Your mortgage term can be just about anything you choose. 15 and 30 year terms are popular these days, although 10 and 20 years also are available.

The shorter the term, the lower the interest rate. But the main attraction of shorter term mortgages is the money you save.

For example on a $200,000 mortgage with a fixed 4.5% rate, you would pay $1013.38 a month for 30 years and $1529.99 a month for 15 years. Over 30 years you would pay $364,816.80 versus $275,398.20 over 15 years, a savings of $89,418.60 or 24.5% in interest.

If you cut a very conservative quarter of a percent off for reducing the lenders exposure by 15 years, your savings will be nearly 26%.

Adjustable Rate Mortgages (ARM )

ARM’s are mortgages whose rates adjust according to the terms of the contract you made with the lender.

Usually interest rates are fixed for the first 1, 3, 5, 7 or 10 years. After that period is up, rates will be allowed to fluctuate within the limits of your contract with the lender.

Terms are usually 15 or 30 years (although you can negotiate just about any duration you want). There can be a balloon involved.

Because the lender is not taking as big a risk on losing money if interest rates rise, these loans will have a lower initial rate than a fixed mortgage. The lowest rates will be for 1 year ARM’s and will go up accordingly.

Many people will take out an ARM even in period of low rates, such as now, because they get even lower rates and are able to afford more house. However, the borrower is taking the risk that he can still afford the house after the rates are free to rise.

It used to be common for the contract to limit fluctuations to 2% a year. However, 5% swings are becoming more the norm. Depending on what happens to interest rates, you might find yourself priced out of your house. Of course, you could renegotiate if rates start to go back up.

The average homeowner owns his or her house for approximately 7 years. If you plan to move before the initial fixed term of the ARM is up, it’s a good choice. If you plan to stay longer than ten years, a fixed rate might be a better option.

Balloon Mortgage

A balloon mortgage is one that is not completely paid off at the end of its term.

For example, you might obtain a 15 year fixed rate mortgage that allows you to pay less than the normal amortization schedule would call for. At the end of the 15 years, you will still owe a portion of the principal. How much depends on the terms of the contract.

An interest only mortgage is an example of this type of loan. In the case of an interest only loan, the balloon will be the full amount you originally borrowed.

This type of mortgage allows borrowers either to afford more house then they otherwise could buy or its reduces their monthly costs, allowing them to spend or invest their savings elsewhere.

Again, if you are planning to move before the balloon is due and your proceeds from the sale are enough to cover the balloon, this might be a good idea. However, you face the very real possibility of having to come up with cash when you sell to cover the balloon, especially if you have to sell at a time of declining housing prices.

BiWeekly Mortgages

A biweekly mortgage is one where pay half of the normal mortgage payments every two weeks. Since you are making 26 payments a year, rather than 24, you wind up paying off the interest sooner and saving considerable interest.

Take the example of a $200,000, 4.5% fixed rate mortgage with a 30 year term. The normal payment would be $1013.37 a month.

The biweekly amount is $506.91. But the payoff is huge. Your loan will be paid 5 1/2 years earlier and you will save 28% or $32,639.75 interest.

You can set up your own biweekly mortgage plan with your existing mortgage, assuming there is no prepayment penalty (which usually only applies the first few years anyhow). Simply send in or have your bank debit your checking account for one half your mortgage payments every two weeks. There should be no extra costs or fees to do this.

Or you can reach a similar result by dividing your monthly payment by twelve and adding that to your payment. In this example that would come out to be an extra $84.44 a month.

The secret is that any prepayment, no matter how small will result in saving in interest and a shorter payment period.

Bridge Loans

Bridge loans are used in real estate transactions to cover the down payment on a new home, when the borrower has equity in his old home, but not enough cash.

It is generally a short term, interest only loan that is repaid when the homeowner sells his old house.

Conventional Mortgage

Most mortgages are conventional, the terms just vary. A conventional mortgage to most people is a 15 or 30 year fixed rate mortgage with at least 20% down.

Construction Mortgages

These are really loans that carry a higher interest rate than a normal mortgage. They allow you to borrow the money to build a house and are converted into a mortgage once the house is finished.

FHA (Federal Housing Administration)

The FHA is a branch of the Housing and Urban Development (HUD) Department. It is a depression era creation, meant to make it possible for people to buy homes at a time when banks where not granting mortgages.

The FHA insures loans up to certain set amounts, which vary with the region of the country and the type of loan. Right now the guarantees run from about $160,000 for a one family house to somewhat over $300,000 for a four family home.

This type of mortgage is designed to help low and moderate income people become home owners. It requires low down payments and has flexible lending requirements.

If the borrower defaults, the government steps in and pays the guarantee. This makes it easier for lenders to write mortgages they would otherwise refuse.

Fixed Rate

Fixed rate mortgages have interest rates set for the term of the mortgage, which can be anywhere between 5 to 30 years.

Although they can be interest only or have a balloon, they usually are conventionally amortized mortgages.

At times like now, when rates are low, most homeowners want to lock in the low fixed rates. They are popular when rates are falling, not so popular when they’re high or going up.

This type mortgage is a very good idea if you’re planning to live in your house for a while.

Home Equity Line of Credit

A revolving credit line secured by your home. Because it is a mortgage, it carries a lower rate than other forms of credit and is tax deductible.

It differs from a second mortgage in that it is not for a fixed term or amount and can be kept in effect as long as you own your home.

This is used most frequently for debt consolidation and can be useful if you rip up your credit cards and use the money you save on interest to invest.

Interest Only Mortgages

This is just what it says. You only pay interest, the principal is never reduced.

This is the grand daddy of all balloon mortgages and you taking a big risk that your house depreciates in value rather than the other way around.

You could very well have to come up with extra cash at closing.

The payments are much lower than on a normally amortized mortgage and if you have the discipline, it can be a useful financial planning tool.

Jumbo Mortgages

Mortgage loans over $322,700 (the limit is periodically raised). Otherwise, the mortgage can be fixed or variable, balloon, etc.

Rates are usually a little higher than for smaller loans.

No Doc or Low Doc Mortgages

This refers to the mortgage application, not to the mortgage itself. Business owners, people living off investments, salesmen and others whose income is variable might use low or limited documentation mortgages.

Very wealthy borrowers or those who want substantial financial privacy will sometimes use the no doc option.

In either case, in spite of their names some documentation is required. The lender will accept nothing less than excellent credit and even then you will pay more for the privilege.

No Money Down Mortgages

These come in two flavors: FHA type loans that allow low or moderate income borrowers to buy a house with little or nothing down and the 80-20 plans, where wealthier borrowers with little money saved up finance 100% of the purchase price.

Under the 80-20 plan a first and second mortgage are issued simultaneously. The borrower avoids having to buy mortgage insurance. The two loans are designed to cost less than an 80% loan plus the insurance, otherwise they make no sense.

If the borrower puts some money down, you will see the mortgage referred to as 80-10-10 (the last digits will be the percent of down payment) or some similar number.

It is mostly used by borrowers who haven’t saved enough for a down payment or by those who have the money, but would rather use it for other purposes.

Refinancing

This technically means getting a new mortgage at different, hopefully better terms. A lot of people use it interchangeably with obtaining a second mortgage or line of credit; in other words tapping into the equity of their house.

Second Mortgages

Secondary financing obtained by a borrower.

They can be fixed in amount or take the form of a Home Equity Line of Credit, which is simply a revolving credit line secured by a house.

Homeowners use these forms of financing to consolidate bills, do home renovations, put their kids through college, etc. They are tapping into the equity they have in their house to use for other things.

This is not necessarily a great idea. You must take firm control of your finances when you start doing this or you risk either losing your house or having to raise cash to pay the mortgages off when you sell.

If done properly, you can pay off your debt at a lower, tax deductible rate and invest your savings.

VA (Veteran’s Administration) Mortgages

The VA provides mortgage guarantees to active duty and ex-servicemen who meet certain eligibility requirements. (To read the requirements click here.)

Like with FHA loans, the government guarantee makes it easier for low and moderate income veterans and active duty service personnel to obtain mortgages.

The current VA guarantee is $89,912. It is raised periodically.

125% Mortgages

If you want to bet house prices will rise, some lenders will lend you up to 125% of the value of your house. If you’re right, you’re okay. Otherwise be prepared to have your checkbook available when you sell your house.

I’m sure that there are other financing options available that I haven’t covered and don’t even know about. But most of the main financing types are here.

Home Loan Tips

Home Loan Tips

Home Loan Tips

To buy a home can be exciting and fun too. You would feel that you are ready to invest something for your future. But purchasing the right home comes with steps and a legal process if you can choose a reliable real estate agent and he or she gives you the best home loan for your future. Whether you like or not, you must consider this process if you want it legal and you don’t want to encounter some problems after. If you were ready to choose the best one then you must consider some things for you to be prepared for this significant investment, you should take heed to these following tips:

Save money for initial equity or down payment

If you’re eager to get a house, you should start to save money now, or you should have enough savings for this kind of investment. You must have enough for your full down payment and potentially any closing costs to buy the house that you want.

Organize your financial documents

Start preparing your necessary financial statement and documents that state that you are qualified to proceed for this housing loan.

Make estimation

If you want to be sure about the house mortgage, then you have to make an accurate estimate about the structure as well as the lot suitable for the price you are going to pay.

Compare mortgage

Learn to compare one mortgage from the other to make sure you are getting the best mortgage rates. You should at least be sure that you are paying right for a sound investment.

Be knowledgeable about different loan options

It is important that you read and think first which is best and suitable for your budget and finances, whether it can afford your salary or other means of livelihood.

Be responsive to lenders

It is important to remain active and sensitive to your lenders so that they can give you factual updates about your house loan.

The importance of knowing the tips of how to start home loans is for you to be guided and be aware of what to do when you negotiate different housing loan options and financial consultant. It is important for you because here lies the future of your family as well as your fruit of your hard work. If you don’t want to be cheated or bribed by someone else, then these tips can best help you to have a background understanding of how to choose the best house and lot for your future living.

If you plan to buy a house and or decide for a home loan for the future, you should be wise and ask advice to experts first so that you can prevent fraud and those people who would attempt to bribe money to you. Buying a home is not easy, especially if you don’t have any idea about choosing the best housing loan or details which were this real estate agent and lenders who you will be going to negotiate in terms of finances or investment for the house. If you are doubtful with your choices or options, it is much preferable if you go for those highly recommended and positive home lenders association. You can ask help from your family and friends who have experience in securing a housing loan so that you can best assure that your money will not be wasted.

Our expert mortgage brokers are also a very handy resource and can make sure you are getting the best mortgage deal out there. Don’t hesitate to reach out!

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Mortgage Do's and Dont's

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Mortgage Do's and Dont's

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