Many experts in the real estate industry predicted the credit crunch to have eased by now but that is not the case. Good borrowers with excellent credit payment histories are being turned down due to rising foreclosures from borrowers who cannot afford their mortgage payment. Some of the keys to getting approved is the loan guidelines have become more strict and underwriters are eyeing loan applications with more scrutiny. The borrower never gets to speak with the underwriter and probably never will. So, the approval is in their hands.

An experienced loan officer can convey or send your message to the underwriting department along with your application which could be the missing link or go-ahead to getting approved for a loan. Especially, if the underwriter was on the fence before, now they have something to hold their hats.

Also, a borrower should educate themselves on the mortgage process by going to their local library or bookstore to get informed on the basics of a home mortgage. The reason being is so they can ask the loan officer questions that can be relayed to management so you know you are proactive in becoming approved. In addition, knowing a bit more about mortgages before you apply will help in choosing the best possible home loan product for your needs. You will be less attracted to a negative amortization loan if you knew all about it and also be less vulnerable to unscrupulous lending tactics.

Mortgage companies and loan officers are eager to receive loan applications from prospective borrowers they’ve never met in person. A borrower can still apply for a home loan over the telephone just like the days before the internet.

An in-person meeting can be very important for those expecting to encounter unusual walls for loan approval. These walls may include self-employed borrowers, applicants with credit scores under 720, and little liquid assets. Borrower credibility is added when you explain your situation, dress appropriately and arrive with related documents in hand for your meeting.

The lender’s loan officers, underwriters and staff work hard at packing files to make it a more efficient system. So they really appreciate it when a borrower is prepared also. It makes everyone’s job easier and more streamlined. Being prepared such as knowing your credit scores and having supporting documentation to dispute any possible credit report errors helps tremendously in all phases. Borrowers should stay in touch with their mortgage lender during the process. Make it easy for them to reach you and be proactive and forthcoming to the loan officer you are working with. In the end your chances of getting approved increase dramatically.

Author: Frank Collins
Article Source: EzineArticles.com
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The current real estate situation is a killer for most borrowers. While prices are down to very attractive numbers, getting funding to buy a home is very tough given the current credit crunch.

If you want to get funding these days, you need to eliminate the risk most lenders feel in providing loans. Specifically, you need to come up with sizeable down payments. Using a 20 to 25 percent down payment is going to make a lender feel more comfortable giving you money. Whereas a person putting down 3 percent wont be particularly bothered about a short sale or foreclosure, one that puts 20 percent down will!

Now, 20 to 25 percent is a lot of money. The question you probably have is where to find such funds. Well, there are a number of strategies you can pursue. Let’s take a closer look.

The obvious approach is to save up the money. Americans are not exactly known for disciplined saving efforts, so this looks like a laughable strategy at first glance. Well, it really isn’t if you think outside of the box. Many of us actually do save money. We just don’t use savings accounts. Instead, we use retirement accounts.

Many retirement plans have provisions allowing you to borrow part of your money. Every plan is different, so you’ll need to check with your plan administrator. Regardless, many plans have a 50 percent provision. This essentially says that you can borrow or use 50 percent of your vested interest in the plan as a down payment on a home purchase. This can be a very big number depending on how long you have been saving.

A second approach is one you’ve probably used before. I would like to introduce you to a special lender – the Bank of Mom and Dad. Don’t laugh. The final step for many parents in parenting 101 is to loan their kids money for a down payment. Heck, some will even give it to you outright. Never look a gift horse in the mouth…

A third secret strategy involves the seller of the property. Most sellers can’t give away their homes at this time. This makes them highly motivated to work a creative deal. Many will give you the money needed for a down payment as a second mortgage. A seller willing to do this should also be viewed as one who took good care of the property. If they didn’t, they probably wouldn’t be willing to put their money in the equation.

So, which strategy is best? Well, it depends on your situation. Most people actually use a combination of these strategies. With the low prices we are seeing in homes, just getting into the market is the key these days.

Author: Raynor James
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In this modern economy, lenders provide loans tailored to just about any situation. Balloon loans are one such loan, but carry a serious downside if youre not careful.

Balloon Loans

A balloon loan has nothing to do with hot air or floating around the world in 80 days. Fail to plan very carefully when using one of these loans, however, and your financial world will definitely go down in flame like the Hindenburg.

A balloon loan is a mortgage with a fixed interest rate for a set period of years. Unlike traditional fixed rate home loans, the interest rates on balloon loans are nearly as low as those found on adjustable rate mortgages. The problem with balloon loans, however, is the term.

While balloon loans provide a low fixed interest rate for a set period of years, those years are not in abundance. Instead of a fifteen or thirty year repayment term, a balloon loan typically has a term of seven to ten years, depending upon what the lender was willing to give you. At the end of the term, you must repay the balloon loan in full. Yes, in full. Lets take a look at how this can play out.

In 2005, you find a home you love but cant qualify for a loan. You are so engrossed with the loan that you eventually locate a lender willing to write you a balloon loan. The loan is for $400,000 and has a 7 year term. At the end of the seven years, youve paid the loan down by $50,000, but still owe $350,000. Somehow and someway, you must come up with that $350,000 to pay off the loan. If you dont, the lender will foreclose on the home.

Every borrower that goes with a balloon loan fully intends to refinance the property before the balloon blows. While this makes sense, you have to keep in mind that refinancing is no sure thing. Maybe you can, but maybe you cant. Also, we are experiencing some of the lowest loan rates every seen. Chances are very strong that in seven years, rates are going to be much higher. Are you really going to be able to afford those rates?

Balloon home loans are all about seeing the future. In essence, you are pulling out the tea leaves and betting on rates in 2012 or so. If you get it wrong, your financial life can become a nightmare.

Author: Sergio Haros
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Get a lower interest rate
If you have 20 percent of the value of the home to put down as a down payment, you can find yourself having a lower interest rate and you won’t have to pay private mortgage insurance premiums. Investing the 20 percent of the money in a down payment can be a great way to invest your money in your real estate and secures your money for you for the future.

Invest your money elsewhere
If you don’t have the 20 percent to put down or if you have a lot more than 20 percent to put down as a down payment, you should first look for other ways to invest your money. You may be able to find a better place to put your money as an investment. Look at stocks, mutual funds, certificates of deposits-whichever investment forms work for you.

Putting more than 20 percent of the value of your home down as a down payment doesn’t net you a whole lot unless you have a personal concern about having a sizable debt to your mortgage lender. The other good reason for investing your money in your property is if you belief putting your cash into the value of your home will prove to be a better investment than investing your money in other ways.

What if I have less than 20 percent?
Carefully consider what to do with your money. There are many ways to get a mortgage loan, even if you don’t put any money down as a down payment.

The Bottom Line
The main reason to invest as much as you can in your home as a down payment even if you don’t have the 20 percent down payment is because the more money you use as a down payment, the smaller your loan. And the smaller your loan, the less money you’ll owe in interest payments each month.

Author: C.L. Haehl
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An Adjustable Rate Mortgage is also referred to as an ARM. This is a mortgage with an interest rate that can change; this is usually in direct response to changes in the Treasury bill rate or the prime rate. The function of the interest rate adjustment is predominantly to bring the interest rate on the mortgage in line with market rates. The mortgage holder is sheltered by a maximum interest rate (called a ceiling), which might be reorganize annually. ARMs typically start with better rates than fixed rate mortgages, in order to recompense the borrower for the further risk that future interest rate fluctuations can create.

The first thing you need to know about adjustable mortgages is that your interest rate is not fixed. The rates on your loan can go higher or lower depending on your geographical location and the prevailing market rates. This means that your rate can be based on economic policies between different states, depending on the laws which are prevalent in your state.

When you consider mortgage rates are subject to economic conditions, the varying economic conditions in different states may mean different rates of interest. Interest rates tend to vary from state to state. Since interest rates are open to fluctuation, shopping for adjustable mortgage rates is a difficult proposition, when compared to fixed rate mortgages. Since the rates are subject to market conditions, you have to be ready to pay, for instance, a higher amount as repayment, once the interest rates go up. It is fine as long as the interest rates are stable or low; it becomes a risky proposition once the interest rates go up. This is the reason why a prudent and informed decision is to be made before deciding to obtain an adjustable rate mortgage loans.

It is important that you are informed about the prevailing interest rates. Talk to your lender about the rates in your state before you get an adjustable rate mortgage. You can also find out from reliable resources about the basic rate and index in your state, as they are the factors that decide the rate, for particular states. One of the best ways to get information about interest rates in your area is to speak to homeowners in the area.

It is very important to take the time to go through the ‘fine print’ of a lender’s quote in order to find out about the various details involved in an adjustable rate mortgage. There are a lot of lenders and mortgage brokers that have no problem with giving you a loan that doesnt best fit your finances or your needs. Adjustable rates are one reason there is a booming real estate market. Just spend some time on the web or watching TV and you will notice these offers everywhere and sometimes they can be very misleading. Younger people just into their mid -careers are lured by the adjustable nature of the mortgages and don’t think twice before joining the bandwagon.

Adjustable rate mortgages are based on a money market index, which decides whether your payment goes up or down, through the life of the mortgage, depending on various economic factors. They are very different from fixed mortgage rates, where you pay a fixed amount throughout the life of the loan. In case you go in for an adjustable rate mortgage and if the rate of interest were to go down, your repayment will go down or up accordingly. Most adjustable rate mortgages come with a ‘cap’ which decides the maximum amount the rate can change at any one point during the loan term. The maximum amount can vary from the original rate over the life of your loan. Now this is where adjustable rate mortgages are considered a risky financially dangerous proposition. With repayment terms on these loans as long as 30 years, one can never be exactly sure what will happen down the line.

There are several lenders that offer something known as ‘conversion option’. This option allows you to convert your adjustable rate mortgage into a fixed rate mortgage. Check to see if your lender offers this option because its a good thing to have the ability to do in case interest rates begin to increase. You can also consult your friends or colleagues or other family members. They will be able to give you valuable tips on prevalent adjustable rate mortgage scenarios in the real world. Please dont waste a lot of time with guess work, we suggest you seek the advice of a qualified financial consultant before deciding on an adjustable rate mortgage loan. A professional consultant is always available at Loan Choice Direct, so please check us out today to find the correct solution for your mortgage loan needs.

Author: John R. Smith
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Getting an FHA loan used to be a person’s last choice when sales of homes were thriving. Prospective homebuyers did not want to go through all the documentation and sellers didn’t like the requirement by FHA for any needed repairs to be completed before closing.

Now that home prices have been declining, asking for a FHA loan has become routine.

Mortgages insured by the Federal Housing Administration are enjoying a crowd pleasing comeback due to lenders making it difficult to be approved for conventional loans. People who have refinanced or bought a home this year using an FHA loan has increased over last year by well over 150 percent and refinances by almost four times as much. It is due in large part to the fact that the FHA only requires 3 percent down for buyers. For an existing homeowner, they only need to have at least 3 percent equity and be able to fully document their income. What’s more, a borrower can have not so good credit including a recent mortgage late.

FHA mortgage loans are originated by lenders, similar to other home loans, but are federally insured by the government. The typical conventional home loans are different because it needs insurance by private mortgage insurers when a borrower brings in less than 20 percent down. In addition, since minimum credit scores for class “A” loans, also called prime credit, have increased FHA has gained borrowers because there is no so-called minimum credit score for FHA. Although, people in the business know the threshold is closer to 560 credit scores. Nevertheless, FHA will qualify potential borrowers on their financial history, their current income and if they have sufficient income to cover their current and proposed new debt, a FHA mortgage.

Coming changes in FHA

The federal housing rescue bill that passed legislation will raise the down payment by FHA borrowers beginning October 1, 2008 to 3.5 percent from 3 percent. Buyers are not eligible to receive down payment assistance from nonprofits or sellers. Spokespersons for the FHA claim it is due to taking on more risk than they normally would. So, they would like to be compensated for the increased risk.

Plus, the FHA will increase its fees on Oct. 1. The majority of borrowers will continue to pay upfront 1.75 percent mortgage insurance premiums based on the loan amount versus the normal 1.5 percent along with yearly premiums of 0.55 percent versus 0.50 percent.

Author: Frank Collins
Article Source: EzineArticles.com
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In today’s real estate market things have changed a lot when borrowers are pursuing a home loan qualification or approval.

It was only 12 months to 24 months back, that all you needed to qualify for a loan was a credit score and a job. The creativity to get you approved was endless. Terms could be made for almost anyone.

Want to pay interest-only and get qualified using the interest only payment? It’s a done deal. Can’t afford the even the interest only payment, pay less than interest only? OK, you’re approved. Were you self-employed for less than two years? Not a problem. No income documentation or asset evidence? That is acceptable too. We take your word for it.

Mortgage companies would run your credit report and if your score was in the low 500′s there were still loan programs with 10% or less down payment. You would only have to pay a higher interest rate and possibly two loan points (a point is one percent of the loan amount) in costs. The point is there is a company or a few that would say “Yes”.

Currently, prospective homebuyers and existing homeowners are experiencing a more difficulty in securing financing for a home loan. Lenders are saying “No” even when buyers and owners have good through excellent credit scores and credit histories.

It seems like they have turned to becoming major green living supporters by not wasting paper or time with applicants who do meet all of their new lending guidelines. The major change is due to how much risk mortgage investors will accept as their portfolio of real estate loan losses pile up. Once the credit markets see some positivity, the real estate market will be what it is.

So, how can you raise your chances of becoming approved for a home loan? Begin with gathering your pertinent documentation.

- Last two years of W2 tax forms for each person who is going to be a borrower on the loan.

- Provide the contact address and phone number of the human resources manager, so the mortgage underwriter can confirm and verify your income.

- Copies of last two years of your federal tax returns for the, including all schedules and attachments. These are mandatory for self-employed persons or those who claim external income sources such as rental income and other assets.

- Copies of last 30 days of work pay stubs, if employed (W2′d)

- Copies of last two or three months of bank statements, brokerage accounts, 401(k), IRA, Keogh, and other retirement accounts the borrower(s) own.

- Any larger than normal deposits into your bank accounts in the last three months will need to be explained by providing proof where the funds originated with an explanation letter.

These are the standard requirements for full documentation borrowers as stated income lender sources have all but dried up. You may find some available but rates will be higher along with down payments in the 25% range at a minimum. So, full disclosure of income and assets is a must to get a good home loan. The loans that have become very popular as a result are FHA Loan. They only require 3 percent down, full documentation and allow multiple borrowers to become approved.

Author: Frank Collins
Article Source: EzineArticles.com
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A down payment is very important when you are buying a home because it can lower your monthly mortgage payment and also build your credibility with the bank. In this economy the banks are looking for a 15-20% down payment because the real estate market has been going down. As the market goes down the bank has less of a chance to get their money back if you don’t pay the loan.

Your down payment will also increase the amount you can buy because it will be less of a monthly payment. The amount you can borrow from the bank is based on your monthly income so if your mortgage payment is less then you can afford more of a home.

If you don’t have 20% down then I suggest trying to get approved for a much smaller loan. If you have a very low debt to income ratio and a good credit score then the bank will be more likely to approve you. You can use a mortgage calculator to figure out a monthly amount you can afford. You can also find the current interest rates online to make sure you have the correct information to plug into the calculator.

Sometimes people will take out a home equity loan to use it as a down payment on an investment property. When you are buying a home to rent it out then you will need at least 20% down and sometimes even 25% because it’s a much higher risk for the bank.

The bank would like you to approve for the loan with under a 40% debt to income ratio without the new rent money as income. Once you have had a renter for about 6 months the bank will include that as income if you want to buy a third home.

Author: Chris G Bell
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In the mortgage industry, there are mortgage loans approved without requiring proof of the borrower’s income or assets. These are termed as “liar loans”or Alternative-A loans (ALT-A loans for short). Some of the worst types of these in involve proving no income, no job and no assets. This is known as the “ninja loan”. The industry calls them bad but in fact if utilized the correct way by requiring a down payment and not offering them to investors. These loan types would still be in favor. It just so happened that wall street money offered them to people with ridiculously low credit scores and sometimes zero down payment. It’s with noting that the no income verification loan, with proof of assets was around since the early 90′s but it was given only to borrowers who had 25% down, not zero down.

The housing market which has been hammered by the subprime foreclosures, may get hit by another wave of homeowner losses with these ALT-A loans go into default in unprecedented numbers. In certain parts of the nation, such as California, Florida, Nevada and Arizona, these loans could lengthen the mortgage crisis for another two years.

Many homeowners with ALT-A loans can’t do anything. They are unable to refinance because their home value has decreased, and nowadays, banks and lenders are requiring full documentation for income and liquid assets.

The total losses of sub-prime and ALT-A loans is estimated to be nearly $500 billion according to Moodys. ALT-A may become responsible for 100 of the 500 billion.

Many of the lenders that specialized in ALT-A loans are gone such as American Home Mortgage, First National Bank of Arizona, Bear Stearns, Countrywide Financial, IndyMac Bank and more lenders are sure to follow.

Fannie Mae and Freddie Mac got into the industry for risky loans once they were cleared of accounting scandals. During this time, Bear Stearns and Lehman Brothers were supporting an increased portion of ever-riskier loans, and both government-sponsored companies felt the pressure to offer the same just to compete.

During the housing boom, ALT-A loans were very popular with investors who sought to buy properties then sell quickly within months. Moreover, the loans featured an interest-only payment that allowed investors or primary residence owners to pay only the interest on the loan for the first years whether it be one, three, five seven or ten years.

The most risky loan was the pick-a-payment or option ARM loan. Even I despised this loan for being offered. It is an adjustable-rate mortgage that allows the borrower the choice to defer interest payments and have it added to the principal loan balance. When this loan came out, you knew the end was near. Each month real estate was on the news for increased median average home price. Now it is the complete opposite and worsening. Although, the silver lining is some savvy investors do see opportunity where the numbers make sense on a cash flowing property. As the adage goes, buy when people do not even want to hear the word real estate.

Author: Mario Olivera
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With the lenders in a mortgage crisis the mortgage companies are getting more and more creative with the types of loans they have and how to put the 20% down without having to pay the PMI. A lot of institutions are using a combo mortgage loan with a equity or personal loan so that you can have the necessary down payment needed to get the loan. The question is to decide whether this is the best option for you, what are the pros and cons of getting this type of loan?

First you need to be educated about PMI and what it does for you. Private Mortgage Insurance (PMI) allows protection for the lender against default on your loan if the time comes that you can not make the payments. Usually PMI is required when the payback of the loan is more than 80% of the value of the house. If you want to avoid paying this extra insurance it is important to put the required 20% down payment on your new home. It is better to wait until you can make the 20% down payment on your new home then have to make extra payments that will cost you more in the long run.

You can get combination loans that are based on equity that will help you get the 20% down payment you need. When you use this kind of loan you may pay a little higher interest rate but it will be cheaper than paying the PMI Insurance that will cost you more. It is important to look at your situation and decide if this is right for you. Also contact your lender and check with the market conditions and see if they agree to go in this direction.

Always be aware of your situation and investigate if a Mortgage with No Down Payment and No PMI is the right option for you, it can save you a lot of money over the period of your loan.

Author: Bryan Burbank
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