Watch Out! Protect Yourself from Homeowner Scams

Watch Out-Protect Yourself from Homeowner Scams- 150x150Whether you are a home seller, a home buyer, or a home owner, there is always a chance that someone will try to take advantage and scam you. Homeowner scams have been around for a while, but depending on the state of the housing market, new and improved scams are developed. Sometimes, even those who have taken all the necessary precautions to protect themselves can be preyed upon by scammers.

Most scams are designed to prey upon those who try to refinance existing mortgages, but there are plenty of scams designed for home buyers and sellers, as well. There are several laws, such as the Fair Housing Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Truth-in-Lending Act and many others that have been created to help home buyers, sellers and owners, but some lenders find ways to circumvent them. Organizations like the Federal Trade Commission are responsible with implementing these laws, but consumers should also be aware of the dangers that are out there and find out how to better protect themselves. Here is a list of the most common homeowner scams that you should protect yourself from.

1. Bait and switch. This scam is used in many industries, especially in retail stores, but it has also found its way into the lending industry. Lenders who use the bait and switch usually advertise a low interest rate through several means, such as newspaper advertisements or billboards, but don’t actually offer that deal to anyone. When the borrower inquires about the low rate, he or she is told that it is not available anymore, but a slightly higher rate can still be obtained.

2. Bait and remember. Mortgage loans have pretty high closing costs. These costs should be taken into consideration when applying for a mortgage loan and your lender should inform you of them. But some lenders pretend that they forgot to inform you until you are too far into the process to back out. This can be a very expensive problem for you, as some of the closing fees are as high as several thousands of dollars.

3. Loan steering. Some lenders may deny your application for an advantageous loan which features great terms, such as a low interest rate and low closing costs, even though you are perfectly qualified for that mortgage. In order to make more money, they will steer you towards a more expensive loan, giving you reasons for being denied on the better loan such as having a low credit score or problems with your income.

4. Adjustable-rate mortgages. Adjustable-rate mortgage loans are perfectly legal, but the lenders are required to inform the borrower of how much the loan interest rate can fluctuate in the future. Some lenders offer great deals on adjustable-rate mortgages initially, but with very high interest rates in the future.

5. Negative-amortization loans. This type of loan is illegal in most areas of the United States, but some lenders still get away with offering it to their customers. A negative-amortization loan requires you to pay a smaller interest than what it is owed, with the difference being added to the principal balance of the loan. This leads to a principal balance that increases over time instead of decreasing.

6. Cash-out refinancing. Cash-out refinancing is legitimate and is a viable option in certain situations, but some lenders use it in order to get borrowers to use it for paying off smaller debt. This seems like a good choice for borrowers because their monthly payments for credit card and other debt decreases, but the overall cost will be much greater than their initial debt.

7. Equity stripping. An owner who is struggling financially is convinced to transfer the title to his or her home in order to qualify for a different loan, after which the owner loses ownership of the home. Also, when this happens there is a big chance that the owner will still owe money on the home that he or she lost.

When it comes to homeowner scams, prevention is the most important. Sometimes, home owners find out they have been fooled a little too late, and it may be too late to turn back. While some scams are a hundred percent illegal, and there’s little you can do about them if you have been targeted, some can be avoided by simply documenting yourself and reading the fine print.

Even with Fixed-Rate Mortgages So Low, Don’t Overlook Adjustable Rates!

Even with Fixed-Rate Mortgages So Low, Don't Overlook Adjustable Rates- 150x150Refinancing has become very popular ever since interest rates started to fall a few years ago. Home owners who found that refinancing is the way to go in order to reduce their mortgages may even refinance multiple times in the past few years. However, most borrowers choose to refinance into a fixed-rate mortgage, not realizing that adjustable-rate mortgages also have their advantages and may even be more beneficial for them.

Adjustable-rate mortgages have gotten a bad reputation over the past few years, being blamed in part for the large number of foreclosures. This made fixed-rate mortgages more popular than ever and the go-to mortgage for most people who refinanced. Interest rates on fixed-rate mortgages are, indeed, near record lows, but home owners who are considering refinancing should take a look at adjustable-rate mortgages as well.

What Are Adjustable-Rate Mortgages and How Do They Work?

Adjustable-rate mortgage loans start out, like fixed-rate mortgages, with a fixed interest rate period, which usually lasts for one to seven years. During this fixed-rate period, adjustable-rate mortgages are essentially fixed-rate loans. After this period ends, the interest rate is adjusted according to the mortgage loan terms.

Interest rates on an adjustable-rate mortgage are lower during the fixed-rate period than home mortgage rates on a fixed rate mortgage loan, making them ideal for home buyers who don’t wish to live in their home for a long period of time. Compared to fixed-rates mortgages, an ARM can save you several thousands of dollars during the fixed-rate period.

The Advantage of Refinancing Into an Adjustable-Rate Mortgage

The largest advantage of refinancing into an adjustable-rate mortgage is that you can take advantage of some of the lowest interest rates available in the fixed-rate period. The interest rate for that initial period will be lower than the interest rate on a fixed-rate mortgage.

Adjustable-rate mortgages are especially valuable for home buyers who plan on refinancing or moving after only a few years before the fixed-rate period comes to an end. They are also a good choice for those who expect the economy to make a good recovery and their financial situation to improve.

The Risk of Refinancing Into an Adjustable-Rate Mortgage

The biggest risk of refinancing into an adjustable-rate mortgage is that the interest rates on your loan might increase dramatically once the initial period is over. Interest rates are still very low right now, and it looks like there is no place that they can go but up. But a lot can happen during the fixed-rate period, so you might end up with an even lower interest rate once the adjustable-rate period starts. Alternatively, you can refinance or pay off your loan before the adjustable-rate period begins, and you won’t have to worry about a large increase in interest rates.

Besides refinancing or paying off your mortgage loan before the fixed-rate period ends, you can also plan for an increase in interest rates. By choosing an adjustable-rate mortgage over a fixed-rate mortgage, you will have a lower interest rate for the first repayment period, meaning that you could save or invest the difference. Having savings once that adjustable-rate period begins will help you significantly if the interest rates increase, giving you time to refinance.

Adjustable-rate mortgages should not be overlooked when refinancing. Depending on several factors, they can be quite beneficial and save you money. It is up to each home buyer to take a close look at his or her financial situation and future plans and decide which type of mortgage to refinance into. Just because adjustable-rate mortgages are seen as riskier than fixed-rate mortgages doesn’t mean that you will be unable to make them work to your advantage.

Top 10 Adjustable Rate Mortgage Lenders

adjustable rate mortgage-150x150An adjustable rate mortgage is a type of loan that features an interest rate which may adjust during the course of the loan, based on a market index. In contrast to a fixed rate mortgage, where the interest rate remains unchanged for the duration of the loan, the interest rate on an adjustable rate mortgage may rise or fall, according to changes in interest rates in the marketplace. The main reason to consider an adjustable rate mortgage over a fixed rate mortgage is that you could end up paying a lower monthly payment. This type of loan may start out with a low interest rate, but your interest rate could raise in the future. Knowing what to expect from an adjustable rate mortgage and which lender you should choose is crucial.

 Adjustable Rate Mortgage Lenders- What to Pay Attention to

  • Interest rates. Adjustable rate mortgage loans have a smaller interest rate at the beginning of the repayment period, but that interest rate will be adjusted over time. Depending on changes in the market and in the economy, the interest rate could go lower or higher, meaning your overall cost of the loan will either decrease or increase.
  • Caps. While an adjustable rate can be a risky choice due to the fact that the interest rate can rise significantly, there is a way in which you can manage that risk. By adding restrictions, called “caps”, to how much the interest rate on your mortgage can adjust, you will limit the risk that your monthly payment will become a burden.
  • Attention to detail. Mortgages have many details that must be taken into consideration by the lender before you should be asked to sign a contract. Overlooking even a small detail can be very costly to the borrower, so avoid adjustable mortgage lenders who try to rush you into signing anything before every little detail is analyzed.
  • Customer service. A trustworthy lender will sit with you and tailor an adjustable rate mortgage that will fit your financial situation and your needs. He will also explain the course of action, what fees you will have to pay, and keep you informed once you have started the mortgage process.

Before choosing an adjustable rate lender, make sure that you have researched them thoroughly. You can be sure that they are going to research you before giving you a mortgage loan, so doing the same will ensure that you will be getting the best deal possible and save you a lot of trouble in the long run. Here is a list of the top 10 adjustable rate mortgage lenders that constantly strive to offer quality service to their customers:

 Top 10 Adjustable Rate Mortgage Lenders

  1. Wells Fargo. The largest bank in the U.S. by market capitalization, the fourth largest by assets, and the second largest in mortgages, deposits, and debit cards, Wells Fargo has approximately 2,000 mortgage branches in the United States. One out of three home loans originates from Wells Fargo.
  2. U.S. Bank. Owned by parent company U.S. Bancorp, the fifth largest bank in the United States employs more than 63,000 people, and has over 15 million customers. U.S. Bank provides financial services to individuals, businesses, government institutions and nonprofit organizations.
  3. HSBC. British company HSBC started offering its financial services in the United States after acquiring the Republic National Bank of New York in 1999 for 10.3 billion dollars. HSBC started offering mortgage loans online or by the phone to the U.S. public in 2005.
  4. SunTrust Banks. One of the leading financial services holding companies in the United States, SunTrust has more than 1,600 branches and around 3,000 ATMs across the Southern states. The bank was formed by the merger of SunBanks, Inc. from Florida and the Trust Company of Georgia in 1985.
  5. TD Bank. Founded in 1852 in Portland, Maine, TD Bank is a U.S. bank that offers banking, mortgage and investment banking services. It currently serves the following states: Connecticut, New Jersey, Delaware, District of Columbia, New York, Florida, Rhode Island, Maine, Massachusetts, Maryland, Vermont, New Hampshire, North Carolina, Pennsylvania, South Carolina, Virginia, and Washington.
  6. First National Bank of Omaha. A subsidiary of First National of Nebraska, the biggest privately owned bank in the United States, First National Bank of Omaha and its 5,000 employees serve the following states: Illinois, Nebraska, Colorado, Iowa, Texas and Kansas.
  7. Zions Bank. Owned by Zions Bancorporation, Zions Bank owns 106 branches and has 2,700 employees in Utah and Idaho.  Zions bank was founded in 1873 and was acquired by Keystone Insurance and Investment Company in 1960.
  8. Bank of the West. Founded in 1874, Bank of the West is a subsidiary of the French group BNP Paribas and it serves most states in the Midwest and Western U.S.
  9. Commerce Bank. The largest independent bank in the lower Midwest, Commerce Bank is a subsidiary of Commerce Bancshares, Inc. Commerce Bank offers financial services to businesses and individuals in Illinois, Missouri, Oklahoma, Kansas and Colorado.
  10. North American Savings Bank. With over 1 billion dollars in assets, North American Savings Bank offers retail financial services to customers in the United States since 1927. North American Savings Bank is one of the leading mortgage lenders in the country, with over 8 billion dollars in home loans since 2008.

Choosing between a fixed rate and an adjustable rate mortgage can be quite difficult, so discussing your concerns with a top mortgage lender is recommended. They will take all the factors, such as your financial situation and future plans, into consideration and come up with the best choice for you. An adjustable rate mortgage may look very tempting at first due to its low interest rate, but always remember that there is a chance that the interest rate will raise in the future.

Major Motivations to Refinance a Mortgage

home-mortgage-interest-rate-decrease 150x150Refinancing – Why You Should Consider It

Most perceptive homeowners know a good idea when they hear about it, especially when it involves getting the most out of their hard-pressed budget. Since the monthly payment obligations on their home take the biggest bite out of the cash flow, they will naturally opt to explore any way at all to cut those costs, and save whatever they can over the long-haul in the process. For a multitude of economic reasons, refinancing that loan is the perfect solution, and it goes well beyond just easing up on the monthly mortgage bill. The refinance option can cover quite a few strategic motivations, and each one can make a huge impact on immediate or long-term cash concerns. Here a few of the most important factors that can influence the decision.

Mortgage Interest Rate Reduction

The amount of cash a homeowner needs to pay out every month toward the house payment can be significantly reduced with a lower interest rate. Just $100 saved each and every month over a decade will allow a homeowner to put over $12,000 back into the budget. If the original loan was approved with a higher interest rate applied compared to today’s rates, the savings could be quite large. For instance, the difference on a $250,000 refinance loan at 5% over 30 years versus 4% would be roughly $148 less paid out each month. This is approximately $53,000 in interest savings over the term of the loan. In addition, a lower interest rate also builds equity far quicker.

Monthly Mortgage Payment Reduction

If a homeowner were to consider refinancing their existing loan to a new 30-year commitment, it would substantially reduce the monthly repayment amounts. There are even lending options that offer a 40-year refinancing schedule. There is a negative to this approach however. By extending the term of the refinanced loan out beyond the current loan term, there will be much more interest paid out over the long-haul as a result. This tactic would therefore be the exchange in benefit for a reduced monthly payment amount. As an example, using a $200,000 loan at 4% interest over a 20-year term versus a 30-year term would result in an additional $53,000 paid out in extra interest, but a $257 reduction in the monthly payment.

Accelerate the Mortgage Loan Payoff

The overall loan debt can be greatly reduced by cutting down on the length of the term of the loan. Generally, the shorter the term of the mortgage, the lower the mortgage interest rates, and since the termination date of the loan is far sooner, there is far less interest to pay. In this scenario, the monthly payments are usually higher. By taking a $200,000 30-year loan at 6% versus a 15-year at 5.5% would yield a $1,199 payment versus a $1,634 payment. However, the 15-year loan would reap a significant savings of over $137,520 due to its loan term being only half as long.

Alternate Mortgage Loan Types – Fixed versus ARM

If the homeowner wishes to stabilize the monthly payments, and currently has a mortgage with an adjustable rate (ARM), or one with an interest-only schedule for a certain length of time, then the fixed-rate mortgage option would be the best choice. This is very beneficial when the current rates are at their lowest. Conversely, with interest rates being as low as they are, simply opting for a new ARM might yield better rates and lower payment limits.

Cashing Out Your Mortgage Equity

Refinancing to gain access to the equity in the home can be very beneficial for a variety of reasons, such as home improvements, debt consolidation purposes, pay tuition expenses for a family member, or perhaps to start a small business or other investment opportunities. If the homeowner qualifies for refinancing, and the approval amount exceeds the value of the home, the borrower can pocket the difference. Most lenders will consider refinancing approval when there is a minimum of 20% equity in the home value.

So if the refinancing plan is to gain access to the equity, lower the monthly payments, pay off the mortgage sooner, or pay off some of the higher credit card obligations, use the online mortgage calculators and other internet resources to find the most affordable offers that meet the desired goals, and makes that budget much more manageable.