The Kinds Of Mortgages Available

A mortgage is an agreement between a borrower/mortgagor and a lender/mortgagee. The former applies for a mortgage or a loan for a lump sum payment or for the purchase property and promises to pay on installment entire amount by paying regular installments of the principal and interest. The latter either approves or denies the application based on the amount of or type of risk the applicant presents and requires the former to use the property purchase as a collateral or as a security in case of non payment. This article will discuss the different types of loans that you may encounter. A Definition of Terms Before discussing the types of mortgages let us first define some mortgage terms. Principal: the amount of payment that is directly applied to the payment of the amount loaned. For example, if Mr. A loaned $600,000 payable on 12 equal monthly installments then the principal per installment is $50,000. Interest: the amount paid over and above the principal, representing the lender's profit. In the above mentioned example if the interest is 1% per amortization then the interest payable is $5,000 per amortization. Annual percentage rate (APR): the total interest per year. In the above mentioned example there are 12 amortizations in a year. Therefore the APR is 1%x 12 = 12% APR. Fixed Term Mortgage This type of loan is the ideal type because the interest rate is stable and does no change from the first to the last installment. For example, the contract of loan or the promissory note provides that the interest payable per amortization is 1% from start to finish. Tip, negotiate for a lower interest rate taking into consideration your credit rating and score. Adjustable Rate Mortgage (ARM) This type of loan provides for an initial fixed term of 1 to 5 years and then the interest changes based on a specific market, standard or index. Of course in theory the interest rate may fall if the index during the change computed with the rate is lower but in practice this almost always never happens. The enhancement is capped for each increase and for the entire interest rate. For example, the promissory note provides that the interest rate will not rise more than 1% per increase but in no case shall reach 10% interest per amortization. Balloon Type Mortgage This type of mortgage provides that the mortgagor pays regular amortizations and a lump sum payment within specific intervals. For example, Mr. ABC is made to pay $500 per month and at the same time must pay $5,000 every 12 months. This type of loan effectively lowers the regular amortization but burdens the mortgagor with a huge lump sum payment. This is a very good choice for a borrower who earns a huge bonus at the end of the year or has a trust fund payable to him/her each year. Principal Only Mortgage This is a very rare type of mortgage given to valued customers or given as a promotional scheme to a select few. The lender gives a lump sum payment and refrains from requiring the borrower to pay anything over and above the amount owed. For example, Mr. A is given a mortgage for $120,000 payable on 12 monthly installments without interest. Therefore the amount given to Mr. A is the same amount he will pay in 12 months. Article Source: http://EzineArticles.com/7013542

The Secret to Getting Mortgage Loan Approval

Much as it might seem that applying for a mortgage loan with bad credit is a futile exercise, the possibility of approval is much higher than generally expected. The fact is that factors other than credit scores are more influential in the application assessment process. This is a useful fact to keep in mind. But as is the case with all loans, getting loan approval is impossible if the right boxes are not ticked. In this case, there needs to be attention paid to issues like income and the income-to-debt ratio, to name just two. There is a secret to enhancing the effectiveness of a mortgage loan application, and making it as close to what the lender is looking for as possible. Here are three such secrets which, if an applicant sets about addressing, can result in the thumbs up from the lender rather than the thumbs down. Income and Debt-to-Income Ratio As already mentioned, these are two of the more influential aspects of any application for a mortgage loan, with bad credit taking more of a back seat. Of course, income seems only logical, but it is not the size of the income that really matters. What matters is how much of it is free to use to repay the new mortgage. For example, if an applicant has a monthly income of $10,000 but has monthly obligations of $8,000, then getting loan approval on a mortgage of $250,000 is highly unlikely. This is because the debt-to-income ratio recommends only 40% of the income should be dedicated to repaying debts, so that enough is left over to cover emergency expenses. However, someone earning $5,000 per month could be approved for the same mortgage loan if 40% of their available income is enough to meet repayments. If their outgoing are just $2,500, then with $2,500 free to cover a mortgage repayment of maybe $1,400 per month, approval is likely. Save For A Down Payment There is no denying that getting together a large lump sum as a down payment is not easy. But when applying for a mortgage loan with bad credit it can be worth the effort. In fact, it can often prove the difference between success and failure. This is down to two simple things. Firstly, lenders are always impressed by the degree of discipline typically needed to save large sums over a relatively short period of time. A 10% sum for a $250,000 home is $25,000, which requires $1,000 put away every month for two years. Since getting loan approval depends on convincing lenders to trust in the borrower, this is excellent proof. Also, the size of the down payment reduces the size of the requires mortgage loan, which in turn reduced the sum of interest (not the rate), and monthly repayments. Saving $100 per month on a 30-year mortgage translates to savings of $36,000 of the lifetime of the mortgage. Show An Improved Attitude Finally, when applying for a mortgage loan with bad credit, showing lenders that the reasons for getting a low credit score in the first place are no longer relevant also helps. If a bankruptcy ruling is in your past, show that your money management is now up to scratch. If overspending was a trait, show that saving is now a priority. Of course, saving a down payment helps in both those respects, but it confirms that getting loan approval takes longer to secure than filling out a form and waiting 24 hours. It can take a year or more. So, build a savings account balance from nothing, and convince the lenders that a mortgage loan is in safe hands. Article Source: http://EzineArticles.com/7170031

US Mortgage Application Volume Up

The number of total mortgage applications filed in the U.S. last week jumped 17% as mortgage rates fell to new lows, the Mortgage Bankers Association said Wednesday. The refinance index increased 22% from the previous week, according to the MBA's weekly survey, which covers more than three-quarters of all U.S. retail residential mortgage applications. On a seasonally adjusted basis, the purchasing index slipped 0.1% from a week earlier, MBA said. "Refinance application volume increased last week to near peak levels for the year as mortgage rates dropped to a new low, driven down by growing concerns about the health of the US economy," said MBA Vice President Mike Fratantoni. Low mortgage rates have convinced many homeowners to refinance their mortgages, though tougher lending requirements still keep many prospective home buyers from taking out new debt. The share of applications filed to refinance an existing mortgage increased to 80% of total applications, from 77% in the prior week. Adjustable-rate mortgages decreased to 4.1% of total activity. The average rate on 30-year fixed-rate mortgages with conforming loan balances fell to 3.74%, the lowest rate in the survey's history, from 3.79% a week earlier. Rates on similar mortgages with jumbo loan balances decreased to 3.98%, another survey low, from 4.05%. The average rate on FHA-backed 30-year fixed-rate mortgages declined to its lowest rate in the survey's history of 3.55% from 3.63% in the prior week. The average for 15-year fixed-rate mortgages slid to 3.12%, also a survey low, from 3.15% a week earlier. The 5/1 ARM average remained unchanged from the prior week at 2.71%.

What Is Mortgage Refinance?

Understanding the entire process of re-financing can be very mind-blowing. Everyone who thinks about re-financing might at first be overcome by the number of choices open to them. However, after taking some time to teach themselves about the procedure, they are going to find out that the procedure is not as challenging as they had thought. This article will talk about a few of the solutions to those thinking about re-financing along with some of the essential things to consider in order to decide if re-financing is worth it. Property owners have a number of choices at hand if they are thinking about the chance of re-financing their house. The most important decision is the type of mortgage they will select. Fixed rate loans and adjustable rate mortgages are the two primary forms of home loans the property owners will likely come across. There are also hybrid loan solutions. As the label implies, a fixed rate mortgage is one where the interest rate stays constant through the time period of the loan. This is a particularly beneficial type of mortgage when the property owner has credit that is satisfactory enough to secure a low- interest rate. ARM's are home loans in which the rate of interest may differ throughout the loan period. The interest rate is generally linked with an index like the prime index and is governed by increases and declines according to this index. This can be considered a more dangerous type of mortgage and is therefore usually presented to house owners that have less favorable credit ratings. Hybrid loans are home loans which blend a fixed element with an adjustable element. A good example of this type of loan is a scenario in which the loan provider might offer a fixed interest rate for the first five years of your mortgage and an adjustable rate of interest for the rest of the mortgage. Loan providers usually provide a lower introductory rate of interest for the fixed time period to make the mortgage loan seem more desirable. When deciding on if you should re-finance, the entire savings is one issue the property owners need to carefully think about. This is very important because re-financing is usually not considered beneficial unless it produces financial savings. However some property owners re-finance to reduce monthly expenses and are not focused on the complete picture, most house owners think about whether they will be saving cash by re-financing. Article Source: http://EzineArticles.com/7129310

Understanding Home Loan Interest Rates

Securing your home loan is a scary process, there are many things that you'll need to know and take into consideration. Understanding your options will ease your mind. There is no lack of information available online. You should take some time to learn more and also to talk with a professional to get answers to any questions that you may have. Regardless of the type of loan you choose, whether it's a table home loan, interest only loan or an offsetting home loan you'll be faced with either a fixed or a floating interest rate. There are some people that split the amount they borrow with a fixed interest rate and a floating rate. This is always an option. A fixed rate will remain the same during the duration of your loan. This means that you won't be affected by the fluctuations in interest rates. With this type you'll want to ensure that you are getting the lowest possible rate. Fixed rates are often lower than the floating rates. This is often the most common because it offers you consistency and security. You know what your payment will be each month. There are no surprises. A floating interest rate will change with the market, so it will go up or down. You'll have the ability to make lump sum repayments without being penalized. So when the interest rate is low you can make a larger payment to get the loan paid off sooner. With a floating rate you have the option to changing to a fixed rate. But you should know that this type of rate is often offered with specific loan types. There are pro's and con's to both of these interest rate types. Often the choice is made based on your circumstances. For example if you expect to sell your home in the near future and believe that the rates will go down choosing floating interest rate may be the right decision. You can learn more by searching online. You'll want to take the time to examine your future plans and financial situation. Discussing it with your mortgage broker will help. Their expertise will guide you to the right choice. Don't rush into any choice without thinking about it carefully. At the end of the day, buying a home is one of the biggest purchases that you will make in your life. Hence, it should not be taken lightly. Article Source: http://EzineArticles.com/7136650

Things To Consider For First Time Home Buyers

If you want to buy a home for the first time, then there are some things to always keep in mind. Purchasing a home is possibly the most important financial decision that you will do for your whole life. The financial after-effects of your home payments are still felt even years after buying the home. From the time of choosing the home up to negotiating prices up to purchasing and then up to making monthly payments, the entire process can be stressful. Buying a home is a calculated decision, so before you finally commit on paper, here are five things that you have to consider first: 1. Consider your priorities in buying a home. In other words, what matters most to you in choosing a home? Is it how big the home is? Is it the home's proximity to many types of establishments, such as schools, hospitals, malls, or parks? Is it its distance to your workplace? Is it the characteristics of the neighbors? Are there any developments that are being planned in the area where your prospective home is? Weigh all of them then decide if the price of the home is worth all of the benefits. 2. Examine the neighborhood. Never overlook the significance of having a good neighborhood. This will be the main determinant of your home's value years after you buy it. When you are thinking about purchasing a home, taking a look at the surroundings can pay off big-time. When the people living nearby seem to be rough, then bad neighbors will begin flocking nearby, thus reducing the value of your home when you go sell it. 3. Find a good inspector who will look at your home in great detail. A good inspection is a crucial part of examining a prospective home before buying it. Find many good home inspection companies by seeking out referrals and contacting buyers who have obtained their services before. Standard inspection can spot portions in the home that need repair. For additional inspection, such as termite, mold, drainage, insulation, or electrical inspection, additional fees may be required. However, inspection is always worth it; you can determine problems before they worsen. 4. Determine if you have to pay extra expenses and factor them into the negotiation. For instance, if the home inspector determines that repairs are needed, then try to shave a few thousand from the price that the seller asks for. Other situations where you can negotiate for a lower asking price are a need to replace the roof and a need to change the appliances to something new. 5. Find out whether you can afford the home that you want to buy. Even if the lender of your mortgage deems you qualified for a loan, you have to ensure that you can pay off the loan regularly. When giving you a loan amount, lenders do not take into account the way you spend your money (they care about your income and your credit score the most). Therefore try to cut down on unnecessary spending habits first before purchasing a home. Also, if you don't have a stable job, wait for your employment situation to stabilize. Article Source: http://EzineArticles.com/7171413