Get a Mortgage Loan for Your Condo, It’s So Easy!

Get a Mortgage Loan for Your Condo-Its So Easy- 150x150Maintaining a house can be very time consuming and expensive. The owner of a house is responsible for taking care of the whole property and its surroundings. Repairing and maintaining the various parts of a house require significantly more time and money than repairing and maintaining a condo. Condos are a great alternative for those who don’t wish to deal with the hassle of owning a house, but there are several aspects of buying a condo with a mortgage loan that are different from buying a house. The differences between buying a house and a condo with a mortgage loan are mostly related to the fees that you will have to pay and the qualification requirements.

Prices for condos have decreased back when the housing market crashed and are recovering slower than house prices, so this might be a perfect time to buy a condo. You will find cheaper condominiums, but unfortunately, lenders have tightened their lending requirements because the condo market is so weak. When buying a house, you’re the only one that has to be approved for a mortgage loan, but when buying a condo, the condominium association must be approved, too. If the association has financial problems, there is a big chance that your mortgage loan application will be denied.

What’s Different When Getting a Mortgage Loan for a Condo?

Condominium prices may be lower than house prices, but the process of buying a condo with a mortgage is a bit different than buying a house with a mortgage. There are several aspects that you should keep in mind before getting a mortgage loan for your condo:

  • The association fees. When owning a condo, you are responsible for repairing and maintaining your unit, but keep in mind that the condo is part of a larger building that needs regular maintenance and repairs from time to time. The money needed for these repairs and maintenance work is raised by the condominium association. All condo owners will have to pay a monthly fee that goes into a fund to pay for maintenance, upkeep, repairs and other expenses. When finding out your debt-to-income ratio, your lender will also include the association fees in your monthly mortgage payment. Keep in mind that, over time, these association fees can increase, depending on how many repairs need to be done and on the cost of the materials.
  • Who backs the mortgage loan. Before buying a condo, make sure that it is approved for Fannie Mae, Freddie Mac and Federal Housing Administration (FHA) mortgages. If the property is not approved, you might have to pay a much larger interest rate and down payment. The FHA allows you to buy a condo with a much smaller down payment than on a conventional mortgage loan, but the Federal Housing Administration also requires that less than 10 percent of the condos have the same owner if the building is newly built. Mortgages backed by Fannie Mae and Freddie Mac require a higher down payment than the FHA and charge extra if your down payment is less than 25 percent.
  • Buying a non-warrantable condo. Condominiums that don’t qualify for Fannie Mae, Freddie Mac or Federal Housing Administration financing are called non-warrantable. Not being backed by the government makes these condos more expensive, with a higher interest rate and down payment, and much harder to find a mortgage lender willing to finance their purchase.

A condo is a good substitute for home buyers who find that owning a house involves too much work and cost. Condos are also cheaper than most single-family houses, but buying one using a mortgage loan is a little different than buying a house with one. However, a little research can go a long way and ensure that getting a mortgage loan for a condo can be a relatively easy process with no unpleasant surprises.

Building Your Own Home? You Can Take Out a Mortgage!

Building Your Own Home-You Can Take Out a Mortgage-150x150If you are ready to become a home owner, but choose to build your own home, you can do it by taking out a type of mortgage known as a construction loan. This type of mortgage loan will allow you to use the borrowed money to build a home. The money will be paid by your lender in stages, based on what stage the construction of the home is in. The lender is involved in the building process for as long as construction takes, and will review the project at various stages.

Borrowers must also apply and get approved for a regular mortgage loan before they can be granted the construction loan. The mortgage loan and construction loan are usually bundled together in a construction to permanent loan, making applying and approval much easier, because you are essentially requesting only one loan.

Steps to Taking out a Mortgage Loan for Building a Home

Like with any other mortgage loan, there are several steps that you need to follow in order to receive a construction loan: find the best option for you, acquire the funds,  and begin building your home. Here are the most important steps to taking out a mortgage for the construction of a home:

  • Find out which type of loan works best for you. Similar to conventional mortgage loans, construction loans come with various options, like fixed-rate or adjustable-rate loans, long term or short term loans. Two popular options are taking out a short term, for example 1 year, loan which you can refinance into a regular mortgage after the construction has finished, or the construction to permanent loan which bundles the construction loan and the regular mortgage loan into a single loan. The second option seems more attractive because you’ll only be paying closing costs one time, unlike with refinancing when you will have to pay closing costs all over again.
  • Get pre-qualified. Getting pre-qualified will allow you to determine how much you can afford to borrow and what your payment will be. Also, before giving out a construction loan, your lender will most likely need to know what your intentions are, why do you want to build a home or if you plan on living in the home after the construction is finished. Depending on your plans and the lender, you may receive various interest rates, and have more or less options.
  • Shop around. Construction loans are a lot less popular than conventional mortgage loans, so you might have a hard time finding one, or finding a loan that will suit your budget and requirements. The best way to find a good construction loan is by shopping around and comparing offers from various lenders who are willing to give out this type of loan. Alternatively, you can hire a construction loan broker who works with several banks, and who can help you find what you’re looking for much easier.
  • Submit your loan application. After finding a good loan, from a lender with enough experience in construction loans, it is time to submit a loan application. Like applying for a conventional loan, you will have to meet certain criteria, and submit additional info about your construction plans. You will also be given the option of locking in the interest rate, or letting it float hoping that the interest rate will decrease before closing.
  • Sign a building contract with a home builder or contractor. The contract between you and the builder is included in something called the builder’s package, which also includes things like the builder’s resume, an item cost breakdown, and a list of all the required materials.
  • Obtain construction insurance. Builders are not required to be insured, but the whole process of obtaining the construction loan will go much faster if the builder has insurance. There are three types of insurance that a builder can have: course of construction, general liability and workman’s compensation.
  • Close on the loan and start building. If you have all the required documents and meet all the criteria, there is no reason why your lender should deny you the construction loan. The only thing left to do is pay the closing costs and start building.

Taking out a mortgage loan in order to build a home is a great opportunity for both people who want a home to their own specifications, and for investors who are looking to build a home and sell it for a profit. The amount that can be borrowed and the interest rates will probably differ between the two cases, but, with some research and proper understanding of how construction loans work, this type of loan can be a very advantageous option.

How Alternative Mortgage Loan Repayment Plans Can Help You

How Alternative Mortgage Loan Repayment Plans Can Help You-150x150For a home owner, the largest monthly bill is probably the mortgage bill. Paying off your mortgage will make this large bill go away, which will change your financial situation significantly. You will be able to spend more on other things, save more, travel, or even quit your job and pursue another career.

Alternative mortgage repayment plans can help you shorten your 30-year mortgage loan and get rid of that monthly payment in only 22 to 24 years, but they are not for everyone. The most commonly used mortgage loan repayment plan is the bi-weekly repayment plans.

The Bi-Weekly Mortgage Repayment Plans

This type of mortgage repayment plan takes advantage of the fact that most people are paid by their employee every two weeks, instead of twice a month. So, with this repayment plan, you are required to make a mortgage payment every other week. Because there are 52 weeks in a year, you will make 26 payments per year. If you compare the number of payments that you will make on a bi-weekly plan to the number of payments that you make on a bi-monthly plan, you will find out that you make 2 extra payments, which will reduce your loan repayment term significantly.

Because bi-monthly plans require you to make 24 payments per year, while bi-weekly plans require you to make 26, those extra 2 payments translate into one extra monthly payment per year. Not only will this help you pay off your mortgage loan quicker, but will also help you build home equity faster and pay less in interest rate.

Paying your mortgage bi-weekly is also advantageous because the payments will coincide with your paycheck schedule, but this type of repayment plan normally comes with some pretty expensive costs in fees and various charges. The money that you will be spending on fees could be spent to pay off your mortgage through a regular repayment plan. Another disadvantage is that the bi-weekly repayment plan is inflexible, meaning that, if your pay schedule changes to once or twice per month, this might interfere with your ability to make your mortgage payments on time.

Is the Bi-Weekly Plan a Good Choice?

The bi-weekly mortgage repayment plan is a great choice for those who don’t have the time, patience or discipline to manage their finances. The lender will provide a repayment plan that will coincide with your bi-weekly paycheck, which will make things more convenient for you.

But you should carefully look at the disadvantages, as well. The money spent on fees could be better spent somewhere else. Also make sure you know what your future plans are. If you plan on moving soon, then the extra payment you will make each year is simply not worth it. Make sure that paying off your mortgage doesn’t interfere with other future plans, like sending your children to college, pursuing a different career, or going into early retirement.

Alternatives to Bi-Weekly Repayment Plans

Not every lender offers bi-weekly mortgage repayment plans, but you can take advantage of most of the same benefits that these plans offer for free.

  • Try to simply ask your lender if they can allow you to pay half your monthly mortgage payment every two weeks. Some lenders will allow you to do that, others will charge you for this, while others will refuse.
  • Pay an extra one-twelfth of your mortgage payment every month. This amount should go towards your principal.
  • If you receive your paycheck every two weeks, start a savings account and deposit half of your mortgage payment in it every other week.

Alternative mortgage loan repayment plans are very convenient and a good way to pay off your mortgage loan earlier, but make sure that they suit your budget and future plans. With a little discipline and research, you can benefit from most of the advantages that these plans offer without having to spend more money.

Combination Mortgage Loans Could Be the Answer for You

Combination Mortgage Loans Could Be the Answer for You- 150x150Becoming a home owner is one of the main goals in every American’s life. But to achieve this goal, you will probably need to borrow money, and that can be a pretty nerve-wracking process. You want to make sure that you are getting the best deal on your mortgage loan, but that can be hard with all of the mortgage loan options that are available today. One of the ways in which you can save money is the combination mortgage loan.

A combination mortgage loan allows you to combine two loans, preferably from the same lender in order to pay off your mortgage. Typically, the first loan will represent 80% of the property’s value, while the second one will be 20% of the home’s value. The smaller loan can be used as a down payment or to finance the construction costs of your new home, while the second will be used to pay off the first loan, and will become the permanent mortgage loan on your home.

Benefits of a Combination Mortgage Loan

Combination loans feature a few benefits over regular mortgage loans, but whether this type of loan is your best choice will depend entirely on your financial situation. Here are the benefits that a combination mortgage loan has to offer:

  • You avoid paying private mortgage insurance. With conventional loans, you will be required to pay private mortgage insurance (PMI), which can increase the overall cost of the loan significantly. The cost of the mortgage insurance can sometimes even exceed the cost of the second mortgage loan.
  • You don’t have to make a down payment. Even though the terms are different from one lender to another, the two loans generally serve the same functions: the first mortgage loan will pay off the mortgage, and the second one will cover the down payment.
  • You’re able to get lower interest rates. Each one of the individual mortgage loans in the combination loan will receive a different interest rate. The interest on the larger loan will be smaller, usually making your total interest rate smaller than on a conventional loan.

Disadvantages of a Combination Mortgage Loan

Even though combination mortgage loans can be very beneficial, they are just one of the many types of loans that you should research before choosing. Combination loans might sound good at first, but if you don’t thoroughly research the disadvantages, as well, you could quickly end up regretting your decision.

When paying your mortgage through a combination loan, you will have to keep track of two separate monthly payments, to two different lenders, in some cases. This increases the chance that you will miss a mortgage payment which will hurt your credit. Also, there is a chance that the interest rate for one of the loans will be high, which could increase the overall cost of the loan.

Combination mortgage loans are generally a great choice when you are looking to avoid paying private mortgage insurance, but, as with any mortgage loan, you must exercise caution when choosing this type, and avoid making your decision based only on advantages. Your financial situation and the loan’s disadvantages should also play a big part in your decision. The only way in which you can be sure that you are making the best choice is by being fully aware of where you stand financially and doing your homework.

10, 20, 25, 40, 50: The Mortgage Loan Term Options You Don’t Always Hear About

Mortgage Loan Term Options You Don't Always Hear About- 150x150Probably the most important aspect of a mortgage is its term, or the number of years that will be needed for you to repay the loan. The mortgage loan term is very important to a home buyer, as it will influence the amount that you will have to put down as a down payment, your monthly payment, and the interest rate that you are going to receive from your lender. Of course, choosing between a short and a long term mortgage loan will be determined by your budget, financial situation and plans for the future.

The most common are the 15 and the 30-year mortgage loans. But you should know that there are many other mortgage loan options out there, such as the loans that can be repaid in 10, 20, 25, 40, or 50 years.

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Things to Consider Before Deciding Which Term to Choose

Of course, what may be the right choice, in regards to mortgage loan terms, for someone won’t be the same for you. The most important factor in determining which term is your best choice will be your financial situation. So, before even starting to shop around for a mortgage loan, you should take a close look at your budget. Here are some other important factors that should help you decide what type of loan term, short or long, you should go with:

  • The monthly payment. Because it extends over a longer period of time, longer-term mortgage loans will result in a lower monthly payment. This can make your life much easier, but, over time, you will pay more than on a short-term loan.
  • The interest rate. Short-term mortgage loans feature lower interest rates than long-term mortgage loans. In addition to that, the longer the term, the more interest you will pay over time, which will drive the overall cost of the loan much higher than of a short-term loan.
  • Your future plans. If you plan on moving a few years after taking out a mortgage loan, then the savings that you would make by paying a smaller interest rate on a short-term loan might not be too valuable for you, and a longer-term loan with a smaller monthly payment might be a better choice.

Five Uncommon Mortgage Loan Term Options

When thinking about a mortgage loan, most people automatically assume their only choices are 15-year mortgage loans and 30-year mortgage loans. Because there are so many potential home owners with different financial situations, a few other mortgage loan term options have become available over time. Let’s take a look at some of them:

  • The 10-year mortgage loan. This type of mortgage loan is tailored mostly for people with high income, who don’t mind making a much higher monthly payment, while saving money in interest. Taking out a 10-year mortgage loan is a smart move that will possibly save you a lot of money over time, but it’s also the riskiest, because 10 years is still a long time, in which a lot can happen to you financially.
  • The 20 and 25-year mortgage loans. Great for people who don’t have the available budget to make the monthly payment on a more traditional 15-year mortgage loan, or don’t want to make a monthly payment for the next 30 years, with a 30-year mortgage loan. These mortgage loans are also great for refinancing. With current mortgage rates low right now, refinancing a 30-year loan into a 20 or a 25-year loan can result in a slightly larger, or even the same monthly payment as before, but with a few years less to pay.
  • The 40-year mortgage loan. With a longer period of repayment than the traditional 30-year loan, this type of mortgage loan features a smaller monthly payment, allowing you to buy a more expensive home. Unfortunately, the 40-year loan comes with a larger interest rate, which will increase the cost of the loan over time.
  • The 50-year mortgage loan. This type of loan features the lowest monthly payment of all types of loans, so it is attractive to people with lower incomes. Considering the fact that half of all first time home buyers in the United States are around 30 years old, individuals who choose a 50-year mortgage loan will only pay off their home when they are 80 years old. In addition, the interest will be higher than on a 30 or 40-year mortgage loan, and equity will build extremely slowly.

The mortgage loans described in this article may not be so popular, but they sure have their place. It ultimately depends on each individual’s budget and plans, so you should take them into consideration, whether you are a first time home buyer, or you are looking for mortgage refinancing options.