Pre-qualification occurs before the loan process actually begins,
and is usually the first step after initial contact is made.
The lender gathers information about the income and debts of
the borrower and makes a financial determination about how much
house the borrower may be able to afford. Different loan programs
may lead to different values, depending on whether you are qualified
for them, so be sure to get a pre-qualification for each type
of program you are suited for.
Popular Mortgages
Fixed Rates
A conventional fixed-rate mortgage offers you a set rate and
payments that do not change throughout the life or "term",
of the loan. A conventional loan is fully paid off over a given
number of years, usually 15, 20 or 30.
A portion of each monthly payment goes towards paying back the
money you borrowed, the "principal", and the rest is
"interest". Any money paid into the value of the house,
including your down payment, is known as "equity" in
the home. For instance, if your house is worth $100,000 and you
owe $65,000 on your mortgage, then you are said to have 35% equity
in your house.
Temporary Buy-Downs
"Buydowns" usually refer to a borrower "buying
down" the interest rate on a loan. This is the same concept
as paying "points" on a loan, except that points buydown
(or up) the rate of a loan over the entire term while a buydown
is usually only a temporary reduction.
Credit Repair
Dealing with Credit Bureaus
It is essential to understand that Credit Bureaus are nothing
more than record keepers.
Simply put, they keep a record of who has given you credit, when
they gave you credit, how much credit you are given and whether
or not you paid it back on time. When you want to obtain credit
cards, loans, financing for a car or home, leases, apartments
and sometimes even employment, the lender or bank will check your
credit to see your financial history.
Credit Bureaus are paid by the people who request your credit
file. Credit Bureaus have no legal power over you. Banks, police
or the government does not run them; so don't be intimidated by
them. They are the Credit Bureaus because they own large computer
systems capable of storing credit information on everyone in the
United States. However, because of the tremendous amounts of information
on their computers, their method of storing information is very
basic and ridden with many errors. Since the bureaus have made
so many errors in the past, all Federal Laws regarding credit
information are very much in your favor.
Avoid Foreclosure
How
to Avoid Foreclosure
When you miss your mortgage payments, foreclosure may occur. This is the legal
means that your mortgage company can use to repossess (take over) your home.
When this happens, you must move out of your house. If your property is worth
less than the total amount you owe on your mortgage loan, your mortgage company
or HUD could seek a deficiency judgment. If that happens, you not only lose your
home, you also would owe your Mortgage Company or HUD an additional debt.
Foreclosure or a deficiency judgment could seriously affect your ability to
qualify for credit in the future. So you should avoid it if all possible!
Don't ignore letters from your mortgage
company!
If you are having problems making your payments, contact your mortgage company
immediately. Explain your situation. Be prepared to provide them with financial
information, such as your monthly income and expenses. Without this information,
they may not be able to help. Stay in your home for now. You may not qualify for
assistance if you abandon your property.
Some of your options include the following:
Special Forbearance. Your mortgage company may be able to arrange a repayment
plan based on your financial situation. Your mortgage company may even provide
for a temporary reduction or suspension of your payments. You may qualify for
this if you have recently lost your job or your source of income or if you had
an unexpected increase in living expenses. You must furnish information to your
mortgage company to show that you would be able to meet the requirements of the
new payment plan. Mortgage Modification. You may be able to refinance the debt
and/or extend the term of your mortgage loan. This may help you catch up by
reducing the monthly payments to a more affordable level. You may qualify if you
have recovered from a financial problem but your net income is less than it was
before the default (failure to pay). Partial Claim. Your mortgage company may be
able to work with you to obtain an interest-free loan from HUD to bring your
mortgage current.
You may qualify if your loan is at least 4 months delinquent but no more than 12
months delinquent; your mortgage is not in foreclosure; and you are able to
begin making full mortgage payments. When your mortgage company files a Partial
Claim, HUD will pay your mortgage company the amount necessary to bring your
mortgage current. You must execute a Promissory Note, and a Lien will be placed
on your property until the Promissory Note is paid in full. The Promissory Note
is interest-free and will be due if you sell or leave your property, or when
your mortgage matures. Pre-foreclosure sale. This will allow you to sell your
property and pay off your mortgage loan to avoid foreclosure and damage to your
credit rating.
You may qualify if: the "as is" appraised value is at least 70% of the
amount you owe and the sales price is 95% of the appraised value; the loan is at
least 2 months delinquent prior to the pre- foreclosure sale closing date; and
you are able to sell your house within 3 to 5 months (depending on what your
mortgage company agrees to). An additional benefit to this option is the
assistance you will receive with the Seller-paid closing costs, a deed-in-lieu
of foreclosure. As a last resort, you may be able to voluntarily "give
back" your property to the mortgage company. This won't save your house,
but it will help your chances of getting another mortgage loan in the future.
You can qualify if: you are in default and don't qualify for any of the other
options; your attempts at selling the house before foreclosure were
unsuccessful; and you don't have another mortgage in default. A housing
counseling agency can help you determine which, if any, of these options may
meet your needs. You should also discuss the situation with your mortgage
company.
BEWARE OF SCAMS!
Solutions that sound too simple or too good to be true
usually are. If you're selling your home without professional guidance, beware
of buyers who try to rush you through the process. Unfortunately, there are
people who may try to take advantage of your financial difficulty.
Be especially alert to the following: Equity skimming. In this type of scam, a
"buyer" approaches you, offering to get you out of financial trouble
by promising to pay off your mortgage or give you a sum of money when the
property is sold. The "buyer" may suggest that you move out quickly
and deed the property to him or her. The "buyer" then collects rent
for a time, does not make any mortgage payments, and allows the mortgage company
to foreclose. Remember that signing over your deed to someone else does not
necessarily relieve you of your obligation on your loan. Phony counseling
agencies; some groups calling themselves "counseling agencies" may
approach you and offer to perform certain services for a fee. These could well
be services you could do for yourself, for free, such as negotiating a new
payment plan with your mortgage company, or pursuing a pre-foreclosure sale. If
you have any doubt about paying for such services call a HUD-approved housing
counseling agency for advice. Do this before you pay anyone or sign anything.
Please consider several precautions that should help you avoid being
"taken" by scam artists: Don't sign any papers you don't fully
understand. Make sure you get all "promises" in writing. Beware of any
loan assumption where you are not formally released from liability for your
mortgage debt and contracts of sale. Check with a lawyer or your mortgage
company before entering into any deal involving your home. If you're selling the
house yourself to avoid foreclosure, check to see if there are any complaints
against the prospective buyer. You can contact your state's Attorney General,
the State Real Estate Commission, or the local District Attorney's Consumer
Fraud Unit for this type of information.
Should I Refinance?
If you are a homeowner who was lucky enough to buy
when mortgage rates were low, you may have no interest
in refinancing your present loan. But perhaps you
bought your home when rates were higher. Or perhaps
you have an adjustable rate loan and would like to
obtain different terms.
Should you refinance? This refinancing tip will answer
some questions that may help you decide. If you do
refinance, the process will remind you of what you
went through in obtaining the original mortgage. That's
because, in reality, refinancing a mortgage is simply
taking out a new mortgage. You will encounter many
of the same procedures-and the same types of costs-the
second time around.
Would Refinancing Be Worth It?
Refinancing can be worthwhile, but it does not make
good financial sense for everyone. A general rule
is that refinancing becomes worth your while if the
current interest rate on your mortgage is at least
two percentage points higher than the prevailing market
rate. This figure is generally accepted as the safe
margin when balancing the costs of refinancing a mortgage
against the savings.
Rent vs. Own
If you're thinking about buying a home, you
probably have a mental list of the benefits
owning a home would bring to your life. You
imagine waking up and falling asleep in your
own home, decorating as you please, or maybe
even getting away from the loud neighbor you
hear every evening through the paper thin walls
of your apartment complex. You are ready to
invest your monthly housing expense, instead
of giving it all to your landlord every month.
The desire to own a home has been felt by nearly
all Americans. Owning a home is the American
dream. So what's stopping you? That's a good
question, one that should be carefully answered.
It's important that before you buy a home, you
understand the potential impact it will have
on your finances and lifestyle.
Listed below are some of the new responsibilities
and added benefits of owning your own home.
Avoid Foreclosure
How to Avoid Foreclosure
When you miss your mortgage payments, foreclosure
may occur. This is the legal means that your
mortgage company can use to repossess (take
over) your home. When this happens, you must
move out of your house. If your property is
worth less than the total amount you owe on
your mortgage loan, your mortgage company or
HUD could seek a deficiency judgment. If that
happens, you not only lose your home, you also
would owe your Mortgage Company or HUD an additional
debt. Foreclosure or a deficiency judgment could
seriously affect your ability to qualify for
credit in the future. So you should avoid it
if all possible!
Don't ignore letters from your mortgage company!
If you are having problems making your payments,
contact your mortgage company immediately. Explain
your situation. Be prepared to provide them
with financial information, such as your monthly
income and expenses. Without this information,
they may not be able to help. Stay in your home
for now. You may not qualify for assistance
if you abandon your property.
