About Home Loans & Mortgages

20 Ways to Expand Your Purchasing Power

Pay off your debts.
Consolidate your debts into a lower-interest rate loan.
Use an adjustable-rate mortgage (ARM).
Use a portfolio lender.
Buy with someone else.
Ask your parents to give you money for a down payment (requires a gift letter).
Ask the seller to pay some of your non-recurring closing costs.
Ask the seller to carry a second mortgage.
Ask the seller, or lender, to buy down the interest rate on your mortgage.
Ask your employer to lend you money, pay some of your closing costs, or buy down an interest rate for you.
Buy when interest rates are low.
Buy a property that generates rental income.
Take advantage of a first-time buyer loan program, if you qualify.
Take advantage of government-assisted financing programs, if you qualify.
Close late in the month to reduce the interest owed to the lender at closing.
Reduce the cash you need for closing costs with a zero-point loan.
Borrow against a 401(k) retirement plan or insurance policy.
Borrow against or liquidate securities.
Use a mortgage with a forty-year due date (but watch out for prepayment penalties).
Take a penalty-free IRA withdrawal. >>return to index

Mortgage Information

How can I ensure a high credit score and is it possible to raise my score?

Your credit score and past credit history play a very important role in getting approved for a mortgage. A stronger credit score ensures a stronger credit history, which makes it more likely that lenders would approve your application for a loan. In addition, lenders offer better rates to those with higher credit scores.

Your credit score and past credit history is maintained in your credit report that also includes detailed information of all your past debts, finances and how well you have repaid your debts. Looking at your credit report, a lender can make a decision on your loan application. Call 1-800-814-1103 to speak with a mortgage specialist, who can obtain your credit report, and review it in detail with you. You may also fill out this form, and a mortgage specialist will call you to review your credit with you.

Here are some tips that will help you in maintaining a good credit rating. >>return to index

Tips to Having a High Credit Score:

Pay your bills on time. Make sure that you do not miss any deadlines. If you have missed payments earlier, avoid it in future.
Get your credit report a few months before you apply for a mortgage loan and review your credit score. This will also help you correct any errors in the report
Shop for a mortgage within a 2 or 3-week period. Do not prolong this period. If your credit is pulled often, in a small time period, this is not so bad. But if you continually get your credit report pulled month after month, this will lower your score.
Maintain small balances on credit cards and other loans. The closer you are to the limit on your cards, the more your credit will be hurt. Use your credit cards responsibly.
If there are any blemishes on the report - attempt to get them removed >>return to index

Which Mortgage Should I Choose?
Key Questions to Ask Yourself and Lenders When Shopping for a Mortgage!

Traditional Fixed Rate Mortgage? Graduated-Payment Mortgage? Adjustable Rate Mortgage? FHA Mortgage? Two-Step Mortgage?

You are wondering which kind of mortgage is best. The answer: There is no one correct answer. Deciding which type of mortgage will best fulfill your needs can be difficult. There are so many types of loans and different term lengths. Your choice is extremely important and can take some time and effort to research. While often neglected by homebuyers, a little research before choosing your mortgage can save you thousands of dollars in the long run.

There are several elements of a loan that should be analyzed. While one of these elements may suggest one type of loan, another may call for a different type. You must weigh each ingredient separately and collectively. You will find that your answers to the questions below will ultimately determine the type of mortgage that best fits your needs.

How long do you plan to stay in this home?
Five years? Ten years? Thirty years? The length of time you will be in the home will certainly play a part in determining which loan to apply for. If you only plan to be in the home for 5-7 years or less, you should seriously consider an adjustable rate loan. If you intend on staying 20-30 years, a fixed rate mortgage may be right for you.

How much risk are you willing to accept?
If you are the type of buyer that needs to know exactly what you will be paying each month for the term of the mortgage, a fixed rate mortgage will fulfill this need. The fixed rate loan, however, will also net a higher interest rate. If you are willing to take some risk of fluctuations in the interest rate, you may be able to receive a lower interest rate.

What are your income expectations?
Plan for the future. Do you anticipate a gradual or dramatic increase in your income in the next few years? If you expect a big increase, a graduated payment mortgage may be best for you.

How much cash do you have available for upfront costs?
If you have the resources, you may want to make a larger down payment to lower your monthly payment. By keeping a higher monthly payment however, you might be able to shorten the term of the loan to a 15-year loan in order to pay it off quicker.

Keep in mind that you´ll have closing costs and fees to pay in addition to your down payment. If you don´t have much cash saved for your upfront costs, don´t despair. You may be need to accept a higher monthly payment or even lower your monthly obligation by choosing an adjustable rate mortgage.

In addition to choosing a type of loan, you must also consider which lender to use. Once again, several factors will influence your decision.

Annual Percentage Rate (APR)
This is most likely the best way to make an "apples-to-apples" comparison of lenders. The APR reflects the cost of credit on a yearly rate and includes any points and fees in addition to the interest rate.

Interest Rate
Find out the rate the lender will commit and how long the lender will guarantee it. Get any commitments in writing. As with any transaction, if it isn´t in writing it doesn´t exist.

Points and fees
These factors will vary greatly. Look out for hidden fees. Make sure the lenders disclose all fees; ask what they charge and what is included and what is not.

Loan Approval
Both approval and funding time should be considered. You don´t want to lose a prospective home because your lender takes weeks to fund your loan. A lender should be able to fund the loan within ten days.

Lender Reputation
Don´t rely on solely someone else´s recommendation. You, not your friend, must feel comfortable with your lender. If you do feel good about your lender and trust him , it will be much easier to trust his advice on what kind of mortgage will best suit your needs. >>return to index

How Much Loan Payment Can You Carry?

Down payment aside, brokers say you should only spend between 25 and 33% of your monthly gross (before taxes) pay on housing.

Let´s say your monthly gross income is $5,000 ($60,000 annually). Divide by four ($1250) or three ($1667). Let´s say you have a car loan ($150/month) and you´re paying off a credit card balance ($100/month).

$1250-$250= $1000 or $1667-$250= $1417

In this example, you´d be able to spend between $1000 and $1417 a month on your principal and interest payments, real estate taxes, and insurance. If real estate taxes are $100/month and insurance is another $50/month, that will leave you between $850 and $1267 to spend on a mortgage.

Here´s how to calculate the amount of the mortgage you can afford to carry: Multiply the net amount you can spend ($850 to $1267) by twelve (for an annual mortgage amount), then divide that number by the current prevailing interest rate (say, 8 percent for a 30-year fixed-rate loan).

25% of gross income: $850 x 12 = $10,200 &div;.08 = $127,500
33% of gross income: $1267 x 12 = $15,204 &div; .08 = $190,050

So how much house can you afford? Assume you add a 20% down payment to each of these mortgage amounts (divide $127,500 or $190,050 by 5 and add that number to the total).

$127,500 &div; $25,500 = $153,000
$190,050 &div; 38,010 = $228,060

According to these calculations, on a $60,000/year income, assuming you have 20% to put down in cash, you´d be able to afford a home that costs between $153,00 and $228,060.

The 8% interest rate allows you to purchase a home between two and a half and nearly four times your income!
>>return to index

Figuring Out Your Budget

If you keep careful track of your expenses, it´s not too difficult to estimate how much you can afford to spend on a house.

Here´s a list of expenditures that you can use to help tally up your monthly expenses:

1) Rent
2) Electricity
3) Gas
4) Telephone
5) Auto Loan
6) Auto Insurance
7) Health Insurance
8) Renter´s Insurance
9) Savings/Retirement Contribution
10) Grocery Bill
11) Weekly Transportation
12) Restaurants/Food Delivery
13) Entertainment
14) Health Club
15) Child Care
16) School
17) Children´s Expenses
18) Housecleaning Expenses
19) Vacations (divide annual expense by 12 to figure monthly average)
20) Books/CDs
21) Newspapers/Magazines
22) Laundry
23) Gifts
24) Major Purchases (stereo/computer)
25) Furniture/Decorating
26) Clothing
27) Sundries/Drugstore Items
28) Miscellaneous Expenses >>return to index

If your monthly expense total is too close to your monthly after-taxes take-home pay, you should start looking at ways to cut them down.
One of the newest ways to get pre-qualified for a home loan in minutes is a system called "Computerized Loan Origination" (CLO). Some brokers use it in their offices, but they´re currently unregulated so there are still some potential problems with them:

Many CLOs only use mortgage packages from one lender. Therefore, the mortgage company and broker view you as a captive audience, and you could wind up paying more than market value for your loan.
Even if more than one lender is included in the CLO, it still may not be truly competitive. It´s best to use a CLO only when all lenders are included.
The broker may ask you to pay a fee for using his CLO service. Be aware, however, that the broker may have a financial arrangement with the mortgage company or companies displaying their loan packages. In that case, the broker may have a financial incentive to steer you away from better loan.

The best person to pre-qualify you for a loan is usually an independent lender, not your broker, particularly if they´re a sub-agent for the seller. >>return to index

How Do I Apply For A Loan?

Applying for a loan is different from getting pre-qualified for one.

Getting pre-qualified simply means that a lender suggests a dollar amount that you can borrow based on a list of your assets and liabilities.

When you actually apply for the loan, however, the lender will want to examine documents that prove your worth.

Here´s a list of some items a loan officer will probably ask about:

Copies of all bank statements for the past three months;
Copies of all accounts, including stock brokerage accounts;
Most recent pay stub;
W2 form for the past 2 years;
If you´re self-employed, your last 2 years of tax returns plus a profit-and-loss statement for the year to date;

Here are some important decisions you´ll have to make at that time:

What type of mortgage should you choose? It all depends on how much risk you´d like to assume. For less risk, you´ll want a fixed-rate. For more risk, you can try a 7/23 or a 5/25. And for the most risk, there´s always an adjustable-rate (ARM). The loan officer should help you decide which is best for your situation.
Should you float the rate or lock it in? If you think the mortgage rate will drop before you close, float it. If you don´t want to take the risk of it rising, however, lock it in.
How long should the lock be? The longer the rate lock, the higher the rate will generally be. You should base the length of the lock on when you´re supposed to close the loan. The shorter the lock, the more important it is to furnish your lender with everything he or she will need to get your loan approved.
How many points do you want to pay? Most first-time borrowers don´t realize that there´s an inverse relationship between the number of points you pay (a point is one percent of the loan amount) and the interest rate you receive. Points are paid in cash at the closing, but the federal government allows you to deduct them from your income taxes during the year of the closing. Or you can also pay them over the life of the loan, which will increase your rate. For instance, if you need a $100,000 mortgage, each point is $1000. If you decide to "buy down" your loan (paying more points to get the lender to lower your rate) with five points, you´ll need $5000 in cash at closing just to pay the lender.
You receive two significant benefits from a buy down:
A larger tax deduction;
A lower interest rate for the life of a loan.
Every time you apply for a loan, the lender, by law, has to provide you with a "good faith" estimate of your closing costs. You may even be asked to sign the document, to prove you´ve seen it.
If the actual closing costs turn out to be significantly higher than the estimate, you may need to consult a real estate attorney to re-negotiate it. If any charge seems particularly unfair ? and was not part of the estimate ? you should refuse to pay it.
Always read every document before you sign it, take a copy with you, and don´t be afraid to ask questions. It pays to be cautious. >>return to index

"Get the Skinny"
Skinny Pixel Technologies