Can You Get a Lower Mortgage Rate without Refinancing? The Answer May Surprise You

Can You Get a Lower Mortgage Rate without Refinancing- The Answer May Surprise You-150x150Over the past few years, interest rates have kept falling, reaching record lows. More than likely, you know people who have refinanced and now have much lower interest rates than you do on your mortgage. Refinancing is one way of lowering it, and it can be beneficial in most cases, especially when rates are this low. But you did your homework and came to the conclusion that refinancing will lower your monthly payment, but not enough to make up for the high closing costs. Another reason why you are not refinancing can be that you simply can’t afford it. Fortunately, there is another way in which you can lower your mortgage, without paying thousands in closing costs.

Most people are refinancing as soon as the rates fall, without taking the high closing cost and the fact that they are basically resetting their mortgage into consideration. For some, lowering their mortgage interest rate is the only way they can get some peace of mind, so current mortgage rates today seem very attractive. If you are someone who reached the conclusion that refinancing doesn’t make sense for you, but would still like to lower your mortgage rate, then you should know that there are alternatives.

Lowering Your Mortgage Rate without Refinancing

If you can’t afford to refinance because of the high closing costs, or you simply don’t want to refinance but can afford to make a larger monthly payment, then you can talk to your lender about lowering your interest rate by prepaying the mortgage principal. By making additional payments towards your principal each month, you can even save as much as you would by refinancing.

Restarting a mortgage through refinancing is time consuming and expensive, but if your monthly budget allows you to spend a little extra on your mortgage each month, then this is a great alternatives. Of course, this alternative will increase your monthly mortgage payments, but prepaying your mortgage will save you money in the long run.

Another way in which you could make paying your mortgage easier is by convincing your lender to give you a better rate. You can start by contacting your lender and explaining that you would like a better interest rate, but can’t afford to refinance, or simply choose not to because it wouldn’t make sense financially. If you have a good relationship with your lender, they might agree without giving you too much trouble.

Talk to your lender about your financial trouble, so that they can make sure that you deserve to have your loan modified. The lender could modify the loan, or he could help you go through the government’s Home Affordable Modification Program, which is designed to help home owners who are facing financial difficulties keep their homes.

In many cases, refinancing is the best choice when looking to reduce your mortgage payments. Unfortunately, being an expensive process with plenty of drawbacks, it is not for everyone. So, if you do the proper research and find out that refinancing is not an option for you, then you are better off trying to get a lower mortgage rate without refinancing, through one of the alternatives described in this article.

5 Tips to Protect Your Mortgage from Default or Worse

5 Tips to Protect Your Mortgage from Default or Worse- 150x150Becoming a home owner is expensive and takes a lot of work, but most people don’t realize that, once you have bought a home, you will, most likely, have to work even harder to keep it. Owning a home is significantly different than renting and, while it brings a lot more satisfaction, it is also more expensive. The habits that allowed you to transition from renting to owning will have to be kept up if you want to avoid default and losing your home.

Many times, things that will be out of your control will happen, and you will be in danger of losing your home, but there are also plenty of things that you can do to avoid that. Giving up your home is a nightmare and downright depressing, and you will want to avoid that at all cost. The good news is that, even when you are in danger of losing your home, you have options. Following the tips listed in this article will save you from having to endure a painful mortgage default.

What is a Mortgage Default and What Does it Entail?

Mortgage default happens when a borrower is late on a monthly mortgage loan payment or is unable to make mortgage payments anymore. Other actions which break the mortgage agreement, such as not paying property taxes, may also lead to mortgage default. The default allows the lender to foreclose on the mortgage home, in which case the home owner will most likely lose the ownership.

Mortgage default normally happens after the borrower is 30 to 60 days late on his mortgage payments, or when the borrower fails to pay the property taxes within 30 days after he or she was notified by the lender and asked to remedy the situation. In order to better understand when default happens in your case, you should carefully examine your mortgage documents, because the rules will be different from one lender to another.

Tips to Protect Yourself from a Mortgage Default

Trouble with your mortgage can start with just one missed payment, but it’s usually all downhill from there. The best way to avoid this kind of trouble is to plan ahead. Mortgage payments are, most likely, your largest monthly bill, so recovering after one missed payment is really hard. Here are a few tips that will help you avoid being late or missing mortgage payments:

  1. Keep savings. Saving when you have to pay off a mortgage loan is very difficult, but it is not impossible. Examining your monthly budget and cutting out unnecessary expenses, such as going out to eat or impulsive spending, can go a long way when it comes to saving money. Having even a few thousands saved up can be a real blessing if you have trouble making a monthly mortgage payment.
  2. Make the monthly payments. Having a plan in place and making timely monthly mortgage payments is the easiest way of avoiding mortgage default, but that might not always be possible. If something unforeseen happens and you are not able to make that month’s payment, pay what you can and call your lender to explain the situation and discuss options. You would be amazed at what a simple phone call can do to help you avoid getting into more trouble with your lender.
  3. Talk to your lender as soon as you have a problem paying your mortgage. Don’t wait until the monthly payment is due, you receive a notice or, even worse, go into foreclosure. Call your lender as soon as you see signs of financial trouble, explain the situation, and work with them to find a solution. As long as you are able to recover, your lender will most likely present you with a few alternatives, which will save you from default. Default and foreclosure are complicated and expensive processes for your lender, as well, and he will prefer to have you get back on track with your mortgage, than spend more money getting you out of your home.
  4. Understand the process. It may take up to 6 months until you will actually have to leave your home, so that gives you plenty of time to examine your options and take action. Panicking is the worst thing you can do, so the best thing to do is to talk to a professional and try to work something out, so your home won’t have to go into foreclosure.
  5. Consider refinancing. By refinancing, you will be paying your remaining mortgage loan by taking out a new loan. Refinancing is a good way of avoiding mortgage default, but you can also end up with higher monthly payments, so do your homework before you consider this option. Mortgage refinancing can also be an expensive process, a fact which must be taken into consideration when comparing the amount that you have left on your original loan to the new loan.

Mortgage default and losing your home can best be avoided by planning ahead and saving some money. Unfortunately, that is not an option for many home owners, so following these steps and acting before it is too late can protect you and your family from the risk of default and ending up having to give up your home.

Is a No-Fee Mortgage Suddenly Ok? Ask the Experts!

Is a No Fee Mortgage Suddenly Ok- 150x150One of the reasons that may be keeping you from becoming a home owner is the large closing cost that comes with taking out a mortgage loan. Between all the fees that you have to pay when closing on a mortgage loan, you will end up paying several thousand before you even start making monthly mortgage payments. Add the required down payment to that, and you have a reason not to take out a mortgage loan.

Lately, many lenders have been pushing a no-fee mortgage loan, which may be the answer for someone who can’t afford to pay for the closing costs all at once. But, as with all the types of loans that are designed to help people who can’t take out a conventional loan, there are aspects of the no-fee mortgage which, depending on your situation, can make the overall cost of your loan much higher.

What is a No-Fee Mortgage?

Like its name implies, the no-fee mortgage is a type of mortgage loan that doesn’t require the borrower to pay any closing costs or fees. Fees for appraisals, processing, applications and many others are all waived, at the cost of paying a higher interest rate. Depending on each borrower’s situation, this might be the perfect solution, or something that will come back to haunt them later.

Closing costs can total over $5,000, so having these costs waived sounds really good for a borrower who also has to make a hefty 20 percent down payment when taking out a mortgage. This type of mortgage has its pros, but it also has serious cons. The decision of whether to apply for this loan should be based on each borrower’s individual budget and financial situation, not on the fact that you get to save several thousands in the beginning.

Pros and Cons of the No-Fee Mortgage

One of the pros of choosing this type of mortgage is that you will be protected against being overcharged on fees and closing costs. Usually, when a borrower shops for a mortgage loan, he or she only looks at the interest rates when comparing loans. Then, when the closing time comes, they are taken by surprise by all the fees that have to be paid. Lenders usually add several junk fees to the closing costs, driving the cost a lot higher than the borrower would expect. Because a no-fee mortgage requires the borrower to pay a higher interest rate and no closing costs, the borrower can easily compare loans from different lenders by just looking at the interest rate.

Another advantage of no-fee mortgages is that, even though the interest rate is larger, the rate that you are paying is tax deductible.

The largest disadvantage of a no-fee mortgage is that that borrower will have to pay a higher interest rate than he or she normally would, if they paid the closing costs. The higher interest rate is calculated by estimating the closing costs and finding the right interest rate that will cover them. The high interest rate can become burdensome over time, so it’s important to consider all aspects before taking out a no-fee mortgage loan.

Alternatives to the No-Fee Mortgage

The easiest alternative to the no-fee mortgage is to pay for the closing costs when the time comes. This is the best and probably cheapest choice, but it requires you to come up with a fairly large amount of money on top of the already expensive down payment.

Adding the costs to your loan amount is another alternative to the no-fee mortgage. With this option, your lender will roll your closing costs and loan amount together, and you will have to pay the entire amount, with interest, over time. The advantage is that you won’t have to pay all those fees at closing, but the disadvantage is that this means you will take on more debt.

No-fee mortgages are a good choice for borrowers who can’t pay the closing costs upfront. By waving those fees, more people can afford to become home owners, but it is very important to understand that the fees will still be paid through the higher interest rate. Because closing costs take a long time to recuperate with a conventional loan, the no-fee mortgage is also a great option for those who don’t plan on living in a home for a long time. Proper knowledge of your financial situation and plans can help you better determine if this type of mortgage is for you, or if you should take a more traditional route to becoming a home owner.

3 Quick Steps for Negotiating Mortgage Forbearance

3 Quick Steps for Negotiating Mortgage Forbearance- 150x150Money trouble can occur at any time and can make the repayment of a mortgage loan very difficult. Especially during and after an economic recession, the chances of losing your home are much greater. One way in which a borrower can save himself from losing his home is by making an agreement with his lender, in which the lender agrees to not foreclose on the borrower’s mortgage, if the borrower agrees to start making payments that will bring him up to date on his mortgage repayment.

This agreement is called mortgage forbearance and it’s designed to help borrowers who are going through tough financial times. Borrowers can stop making mortgage payments or even postpone them for a period of time, after which they can catch up and resume making regular monthly payments. Mortgage forbearance also allows the borrower to negotiate some of the default amount with their lender.

Is Mortgage Forbearance the Right Option for You?

Mortgage forbearance is a good option for those who experience temporary financial hardships, such as changes in employment, an expensive divorce, a death in the borrower’s family, having to temporarily pay two mortgages due to a job relocation, military service, or being jailed. If you consider that your financial troubles are only temporary and you will be able to recover shortly, then mortgage forbearance is worth taking into account.

If your financial hardship is of a more permanent nature, your lender may still agree to a mortgage forbearance if they consider that you have enough equity in your home and will be able to refinance with another lending institution. Either way, you will need to go through the necessary steps in order to obtain a mortgage forbearance agreement.

Obtaining Mortgage Forbearance

  1. Analyze your financial situation and call your lender. Carefully analyze not only the unexpected decrease in income or increased expenses, but also every source of monthly income and all expenses. Your lender will want to know all these aspects of your financial situation in detail, so researching them thoroughly will help you and your lender both better determine if your financial crisis is temporary or permanent, and how long will it take you to recover. Your income sources may include salaries, child support, financial aid, pension or veteran’s benefits, home rental income and others. Expenses may include loan and rental payments, food, utilities and many others. Having every source of income and expense laid out in front of you can also help you determine where improvements can be made in order to get out of this situation quicker.
  2. Write a hardship letter. After writing down all your sources of income and expenses, and determining that even after making changes, your expenses are still greater than your income, it is time to document your financial situation to your lending institution through a hardship letter. Lenders have great resources for finding out information about your income and expenses, so it’s recommended to be completely honest and provide all of the necessary information in your hardship letter.
  3. Sign the mortgage forbearance agreement. After receiving your hardship letter, if your lender approves your request for mortgage forbearance, the last step is for you to read the agreement and sign it. The lender agrees to not file for foreclosure for the duration of the agreement, and you agree to catch up on your mortgage payments. Mortgage forbearance will not waive the interest that you must pay, or the late fees.

Mortgage forbearance is a great way of getting back on track with your mortgage repayment and avoid losing your home to foreclosure. But before committing yourself to this agreement, make sure that you fully understand what it involves, and that you will be able to recover from your financial hardship in a short time. Also, make sure that the mortgage forbearance is the right choice for your financial needs and not just a tool that will help postpone the inevitable mortgage default.


Top 10 Tips for Mortgage Modification Success

Top Ten Tips for Mortgage Modification Success- 150x150

Mortgage modification can be a saving grace for many people, but others are thoroughly disappointed when a seemingly sure thing is denied to them. Lenders may appear to render assistance to all of their customers, but statistics indicate that the cry of homeowners for mortgage modification has fell on deaf ears. However, if you start the process well-informed and a few steps ahead, you have a much better chance for your mortgage modification request to be successful.

Reasons for Denial of Mortgage Modification Requests

  • Ineligibility. The Federal National Mortgage Association (FNMA) cites several requirements for the eligibility of an applicant. One of them is that the loan should have originated before 1st January, 2009. The modification is allowed only once under the program. If it has been modified before, you are disqualified.
  • Insufficient documentation. FNMA provides a list of all the documents that you should present along with your application forms. This includes your detailed credit report, all of your income sources, and a fully signed IRS 4506-T as proof of income. If you fail to provide all of the documents you will not qualify.
  • Type of mortgage. Both fixed rate and adjustable mortgages qualify for modification but interest-only mortgages do not qualify. In an interest-only mortgage, you pay back the interest first within a given period of time after which you start paying the principal.
  • Level of mortgage expense on the first lien. The FNMA has placed a special cap on the level of mortgage expense, given the household income. If it is already below 31% of your total household income, you will not qualify.
  • Payment defaults. Some mortgagors are very strict with mortgage modifications. As a measure of ensuring that you will not land the firm in financial loss, they will look at your credit report to ensure that you have no default or missed payments. The presence of a late payment or missed payment in some cases will warrant a direct disqualification for mortgage modification.

Tips for Mortgage Modification Success

  1. Ask questions. Before striking a deal with the lender, know exactly what that mortgagor provides. There could be a misunderstanding in the deal that may lead to future problems. Mistakes can be avoided by asking questions to ensure clarity.
  2. Remain persistent. Many homeowners usually become frustrated when their mortgagor asks them to resubmit their documents once again. If you really need the mortgage modification, you should cooperate with the lender as much as possible and remain persistent throughout the process.
  3. Seek professional financial help. Are you an amateur in the mortgage modification process? If you are not mortgage savvy, it is better to seek professional help from a loan modification firm or an attorney. However, you should avoid revealing your private information such as credit card details to anyone except your lender. The firm or attorney should be approved by HUD. Do not pay any upfront fees.
  4. Know your lender. Knowing enough information about your selected mortgage modifier can help you to obtain a better modification. If you find out that the bank actually owns the loan then you stand a higher chance of enjoying more flexible terms. This you can do by directly asking the mortgagor or by visiting Fannie Mae and Freddie Mac online, then inputting your address to find out whether the loan is with Fannie Mae or Freddie Mac.
  5. Be very honest. Along with your application forms, the lender requires a significant amount of financial information about you. To streamline the process, give the lender all of the details that they require. Don’t fudge any numbers on the forms in order to make yourself eligible- that could catch up with you in the form of foreclosure. Some of the details that may be required of you include your monthly gross income, recent income tax return, savings, other assets, details of your first mortgage, account balances from your credit cards, minimum monthly payments due on all your credit cards and an explanation as to why your income has been reduced.
  6. Present an ideal financial hardship letter. This is a polite and detailed explanation about how you found yourself in a deep financial mess. The letter is very important because if your mortgage modification servicer is not convinced with your openness they will have questions as to how straightforward you will ever be. Do not leave any important point out. Be sure to include exact numbers and dates.
  7. Be realistic. Your job in the loan modification process ends once you submit all of the required paperwork. Then you will wait until you receive the interest rate offer. In case it is too high for you to repay, don’t sign the deal. Explain to the loan sales executive about the constraints on your budget so that you can manage repaying with relative ease. This is not desperation but realism.
  8. Document everything. Keep a record of everything discussed and determined each time you speak to a lender or receive some correspondence. The importance of having a track record of all these details is that you can use them to your defense when a foreclosure knocks at your door. You should also use only certified shipping companies so that some lenders won’t claim that they sent you some documents that you never received.
  9. Be flexible and patient. Don’t apply for a mortgage modification and be dead-set on how you expect the process to go. The whole process may take 30 to 90 days before approval. Even if you were told to wait for a call, if by the end of the agreed period there is no response, then you can courteously follow up to find out what the status is on the process. Patience pays at the end of the day.
  10. Proof of income. Lenders require all homeowners to provide proof of their income. This you should do not only by providing valid income documents but also a duly signed IRS Form 4506-T that allows the mortgage servicer to access your federal tax returns. In many institutions, this is the leading reason why many applicants are denied mortgage modifications. Learn more about the documentation process for mortgage loans.

Mortgage modification enables you to enjoy lower interest rates and manageable monthly repayments. If you have suffered a financial setback through injury, a natural disaster, divorce or any other misfortune, mortgage modification may provide the relief you are looking for to move forward positively with your finances.

How a Short Sale Works

ShortSale-150x150If you owe more on your mortgage than the current value of your house, then you may want to look into a short sale as an option. When you are having financial problems and you want to try avoiding a foreclosure, the alternative is a short sale. Unfortunately for either option, the consequences are grave: destruction of your credit score, loss of personal dignity, and possibly embarrassment for your family members. Sometimes this is your only option so you just have to proceed and push through the discomfort of the situation.

All About Short Sales

Many realtors are reporting that they are having more short sales compared to any other sales in the last 5 years. This sad fact highlights the depressed economy and the many Americans struggling with debt. Even non-delinquent sellers are qualifying for short sales these days.

When a lender agrees to a real estate short sale, the lender is basically accepting an amount less than the total due. But not all lenders accept discounted payoffs or short sales, especially when a foreclosure will mean more financial recovery for them. It is also important to note that not all properties or sellers qualify for a short sale arrangement.

Honestly speaking, there are some drawbacks to short sales with the parties involved. All borrowers are advised to:

  • Know the type of loan involved. This influences flexibility in negotiating for an offer.
  • Seek legal advice. Find a competent and registered real estate lawyer in your state.
  • Find out about taxes. Ask an accountant about taxes associated with short sale transactions.
  • Meet deadlines. Be aware of all of the deadlines and stay on top of them. Not following the timeline could potentially ruin a short sale, so it is important to stick to dates throughout the process.

According to the Mortgage Forgiveness Act of 2007, the IRS will not consider debt forgiveness as income per se. There is no guarantee as to whether a lender that accepts a short sale will legally pursue the borrower for the difference unpaid. This amount is referred to as a deficiency in some states. Given the prevailing laws, a lawyer may be required to determine whether you actually qualify for a claim or deficiency judgment.

Steps to a Short Sale

1.    Contact the lender.
Before finding a short sale specialist, you will have to make several calls in order to find the right person. You will hopefully be able to establish rapport with the lender and make sure that the lender has you in their best interest.
2.    Submit a letter of authorization.
Lender etiquette says not to disclose any personal information about their clients unless there is express permission to do so in writing. It would be much better if you directly speak to the lender and endorse the lawyer or agent representing you. This letter contains your name, the loan reference number, the property address, the date, the name of your agent and their contact details.
3.    Prepare the net sheet.
A net sheet is an estimated closing statement which indicates the selling price that is expected along with the costs of sale, outstanding payments, unpaid balances, and any real estate commissions. You don’t have to stress remembering every detail in preparing this because your lawyer or agent should be able to do this on your behalf. If the net figure indicates some cash then you may discover that you don’t really need a short sale.
4.    Obtain a hardship letter.
This letter is meant to hit the nail on the head. It clearly describes what happened that led you to your financial disability. In this letter, you are pleading with the lender to accept less than the amount due. You need to explain that you were ill, lost your job or had your family involved in an accident. However, you must be honest because criminal behavior and dishonesty may only lead to prosecution.
5.    Provide proof of assets and income
Honesty about your income and assets is paramount in one’s attempt at a successful short sale. You should clearly relay information pertaining to your negotiable instruments, real estate property, money market accounts, savings accounts, and stocks to the lender. This is considered assurance that you will not be able to repay.
6.    Provide bank statements.
The lender wants to be convinced of your financial misfortunes by all means. That’s why you need to explain any unaccountable deposits, unusual number of checks or huge cash withdrawals on your bank statement. This will enable the lender to determine whether any deposits will actually continue.
7.    Conduct a comparative market analysis.
A comparative market analysis enables you to substantiate that the value of your property has dropped because of a market decline. It should indicate the prices of similar homes that have been sold in the past 6 months, the ones being sold currently and any pending sales. Your agent can prepare this document on your behalf.
8.    Strike a purchase agreement.
If you come to an agreement for selling, then you should provide the lender with a copy of that offer. If you had listed it, then the listing agreement should be there too. However, the lender may refuse to make certain payments such as home protection claims and the cost of inspection on the property.

If all goes well, the lender will most likely approve your bid. You may also request that the lender not report adverse details about you to credit agencies given your present financial difficulty.



Tips for First Time Home Buyers

first-time-home-buyers-150x150The new year is still young and many people have not lived up to their resolutions yet. Are you one of those Americans whose resolution is to buy a house this year? Well, depending on how the market is, it could be the right or wrong decision. However, if you read up on basic knowledge and go in as an  informed buyer, you’ll be able to get the best home deal. Read on to learn about the benefits of having your own home and questions to ask yourself before buying a home.

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Benefits of Having Your Own Home

You might be very nervous or anxious about owning your own home in the near future. While nervousness is normal, you can make yourself feel more prepared and ready to embark on your home buying journey by acquainting yourself with some of the potential benefits of having your own home.

  • Pride. Just imagine the satisfaction you’ll feel walking around your own home. When you are finally able to enjoy your own home, it will make you feel better about all of the expensive monthly payments you’ll be making for a long time. You can paint it the way you feel and make the home your own.
  • Appreciation in value. Even though the value of property keeps fluctuating sometimes, it is advantageous to have your own home because it generally rises. This has been established from the values of homes provided by the Office of Federal Housing Enterprise Oversight. This is an important tool against economic downturns like inflation.
  • Privacy. If you are used to renting a home or apartment life, you may be used less privacy, dealing with noisy neighbors, and property managers. Owning your own home will allow you to have significantly more privacy as well as security with alarm systems, deterrents and extra locks.
  • Tax incentives. Our taxation system encourages every person to have their own home. If you have taken out a mortgage loan to purchase a home then you can claim mortgage interest and property tax deductions as you file your tax returns at the end of each year. This is a double advantage: pay less and claim ownership.

Golden Tips for First Time Home Buyers

Buying a home is a long term to lifetime investment that requires serious dedication on your part.  Here are some tips that will make you decision savvy as you look forward to becoming a homeowner.

  1. Which type of home suits your needs? Imagine your family in a home- what kind of home is it? This will guide you a long way in deciding which type of home you need: a condo, townhouse, single-family home or multi-family home. Selecting the type of home you need in advance will help you save time in you search for the perfect house.
  2. Where is the home located? A home may have everything you need but the location could be unappealing. Do you love a reserved area in the outskirts of the city or do you love staying close to town? What about the neighborhood? The location and the surrounding environment should be critical factors you need to consider.
  3. Which features do you want in a home? Money can buy a house but not a home. And to build a happy home, you need to check for the features you want. These may include the size and nature of the house and neighborhood, layout, number of bedrooms, roof type and general aesthetics.
  4. What is the average market price of such a home? Establishing the average selling price for a home in your area is very important. The local listings for your area and an online search will help you to know the price beforehand. The market price value will help you to avoid paying too much for a home you could have owned for a lower price.
  5. How much can you afford? Check the average market interest rate and the individual rates charged by various lenders. Using a mortgage calculator, determine the cost of the home and compare it to what you can afford with all of your income sources that you intend to commit to the mortgage. Fannie Mae has recommended that a home shouldn’t cost you more than 28% of your overall income. Once it exceeds this value, you may not meet other household expenses.
  6. How much are closing costs? The price of the home (excluding the closing costs) may appear ideal. That’s why you need to inquire about the overall closing costs so that you make an informed decision after knowing the real total of the house. Closing costs may comprise of settlement fees, lender’s fees, title fees and homeowner association fees.
  7. Who will guide you through the purchase? If you aren’t a real estate guru then you may consider hiring the services of a real estate agent or mortgage broker to assist you in finding the right home. They will also help you with all the paperwork from the lender to the lawyer.
  8.  Bargain on the price offer. The US market is friendly and you can always bargain on the price offer quoted by the seller. You will often have the best luck bargaining on the price in the first three months of a new year when the market is still dormant. During these times you will enjoy some fringe benefits.
  9. Weigh the financing options available. A first time buyer has a wide range of financing options, ranging from loans backed by Freddie Mac and Fannie Mae to loans which don’t require you to meet the minimum standard down payment of 20% of the value of the home. Use a mortgage calculator to determine the monthly repayment and determine the impact that each option would have on your financial peace.
  10. Look at the bigger financial picture. While owning a house gives you a title of prestige and pride, keeping up with your home ownership can be expensive and labor-intensive. Remember you will not have a landlord to turn to when costs for roof repairs, new appliances and utility connection issues arise. You should be very sure that you will be able to manage these expenses to avoid breaking the bank.

These tips may not exhaust all that you need to know before becoming a homeowner. Overall, the more you know about what you expect as a potential homeowner, the more you avoid disillusionment and regret. This is the key to being a successful homeowner.

When to Buy and Sell a House

buy-sell-image1-150x150The ability to sell a home within a few weeks or months is determined by several variables. Some factors are hard to clue into, but the market conditions play the biggest role in your house’s turnover time on the market. In an attempt to ensure that both the buyer and the seller close a house deal without losses, strive to buy or sell a house in the best season possible. Read on to know what to look for when you’re buying or selling and what the best seasons are for both.

What to Look for When You’re Buying or Selling

  • Interest rates. The prevailing interest rates in the market are always a force to reckon with. A buyer will always want to strike a deal when the interest rates are very low so that they can have a good lock-rate deal. On the other hand, a seller markets their house most when the interest rates are high in order to make larger gains.
  • Demand and supply. The higher the demand for homes, the higher the price. Sellers will bump up their house price and buyers won’t get nearly as good of a deal. On the other hand, a high supply means lower house prices and buyers will get better deals.

The Best Season to Sell a Home

Perhaps the real estate market has indicated signs of progress and the value of homes is rising steadily! If you own a house, then you might be tempted to sell right away. But is this when you can set the best price? Not necessarily! The best price for your house will entirely depend on the time when you sell it.

The new year is always ushered in by winter—the most difficult time to sell a house. The real estate market is always slow with some buyers returning to the market after a long holiday break. So instead of selling, this time is the best for building/renovating a new home or improving your existing home. It’s best to wait to put your house on the market until May or so- this has been established as the best time to sell.

Why You Should Sell Your Home in Spring

  1. Great weather. Most buyers prefer to stay in their houses during winter. People are often caught up with holidays during the first part of the season. But the situation takes a U-turn in spring as buyers rush to buy homes so they can settle in over the summer while kids are out of school.
  2. A buying hustle and bustle. As the snow melts away in spring, many buyers are more willing to drive out to see a house. As buyers hunt for houses during this time, real estate agents begin to advertise houses heavily. This creates a bidding atmosphere with some buyers quoting more than the seller’s asking price. This means more profit for the seller.
  3. Low inventory. Spring is always a time when demand exceeds the supply. This means that there are fewer homes for the buyers to choose from. A potential seller with a quality house will definitely stand out from the crowd.
  4. Rising prices. Owing to the low inventory of houses on the market, the forces of demand and supply dictate that buyers don’t have an option but to accept buying at the ruling price. The prices can get even higher as buyers outdo one another through competitive bidding.
  5. Low mortgage rates. Spring is always characterized by the lowest mortgage interest rates. As real estate experts and economists generally agree, this is the best time to sell a home because buyers are anxious to purchase during this season.

Buyers, on the other hand, are always looking for convenience and low market prices when purchasing a home. If summer is approaching and you haven’t bought a house then you shouldn’t be in a hurry as you may want to wait for a better buying season. Winter has been established as the best time to buy a home for several reasons.

Why You Should Buy A Home In Winter

  1. Desperate sellers. With many people holed up in their houses, on vacation, and focusing on holidays, the real estate market is very dormant during winter. Since house-hunting rates are low, many sellers are desperate to close a sale. This desperation cushioned with low demand from buyers means that you can land a lucrative home deal with a low price offer.
  2. Few buyers. There are much fewer buyers in winter compared to the number of spring buyers. This means that there is often no bidding war for buyers. A house will most likely cost less during the winter season.
  3. Low moving costs. The relocation expense is not usually factored by many buyers but it can be quite high. Movers ask a low price during winter because there are fewer people moving. So relocation costs in winter will be much lower than your cost during spring or summer.
  4. Making school transitions. If you have children, then the best time to buy a home is winter. This season favors the school calendar because they can comfortably move to new schools and start again in the new year.

While you can buy or sell a house anytime, if you are looking to get the most out of your money you should seriously consider these seasons. These factors also vary from one state to the other in conjunction with the law. But before you opt to buy or sell a home, you must know what you expect and the driving force behind your decision. To make an informed decision as a buyer, be sure to read “How Much Home Can I Afford?” and take a look at our list of the “Top 10 Lenders for First Time Home Buyers”.

Deciding Between Fixed-Rate FHA or Adjustable-Rate FHA

FHA- fixed and adjustable- 150x150There are many good reasons why you should choose a mortgage loan insured by the Federal Housing Administration over a conventional loan. The FHA has been helping people buy homes since 1934 and it’s a great alternative to other lending options for families who want to buy their first home, people who have less than perfect credit score, or someone who doesn’t have a large amount of money to use as a down payment. FHA mortgage loans can be obtained with a credit score as low as 500, and by making a minimum of 3.5 percent down payment. However, you should remember that FHA loans come with a fairly large disadvantage. You will be required to pay mortgage insurance for at least 5 years.

Once you have taken into consideration all of the advantages and disadvantages of a Federal Housing Administration backed mortgage loan, and decided that this type of loan is your best choice, it is time to decide between a fixed-rate FHA loan and an adjustable-rate FHA loan.

The Fixed-Rate FHA Loan

The fixed-rate mortgage loan is the most popular type of FHA loan. Also known as the 203(b) mortgage loan insurance program, the fixed-rate FHA loan is a very good choice for first time home buyers. Some very important advantages that the fixed-rate FHA mortgage loan has are:

  • The interest rate remains the same for the duration of the loan. If you are comfortable with the interest rate that you received from the lender, then the fixed-rate FHA mortgage loan will give you peace of mind for the years to come.
  • The fixed-rate FHA loan allows financing for up to 96.5 percent of the loan amount. As a result of this, you will be able to make a low down payment, and your total closing costs will also be low.
  • This is the only type of loan that allows 100 percent of the closing costs to be a gift from family, or funding from a government agency or a non-profit organization. Many of the closing cost charges can be financed, as opposed to conventional loans, where the borrower must pay 2-3 percent of the loan amount at the time of purchase.
  • It’s easy to qualify for a fixed-rate FHA loan. If you have a low credit score, a bad credit history, your debt-to-income ratio is high, or if you have a bankruptcy that is more than 2 years old.

The Adjustable-Rate FHA Loan

Designed for people or families with low and moderate income, the adjustable-rate FHA mortgage loan (ARM) is a type of loan that features low initial costs. If interest rates are high, the adjustable-rate loan will keep the initial interest rate on your mortgage low, so you can qualify for the financing that you need. While, with this kind of loan, there is always the risk that the interest rates will increase, here are a few advantages that you should take into consideration before deciding:

  • The interest rate may rise over the duration of the loan, but it may also decrease. Also, the interest rate cannot fluctuate more than 1 percent per year, and cannot increase by more than 5 percent of the initial rate.
  • 25-day notice for increased interest rate. In case the interest rate on your adjustable-rate FHA mortgage loan increases, you will have to be notified at least 25 days before.
  • Many of the closing costs can be rolled into the cost of the mortgage. This will therefore reduce the initial expense that will be involved in purchasing a home.
  • Option of refinancing. You have the option of refinancing your adjustable-rate FHA loan to a fixed-rate FHA loan at any time through FHA’s streamline refinance program.

Both fixed-rate FHA loans and adjustable-rate FHA loans have their advantages, but choosing one over the other depends entirely on your situation. Understanding all the requirements, advantages and disadvantages is very important when considering any type of FHA loan.

FHA Loan vs. Conventional Loan

FHA vs. Conventional- 150x150In terms of monthly payments, some conventional loans seem very similar to FHA loans, variables such as qualification requirements, mortgage insurance, down payment, or closing costs can make a big difference when choosing between the two types of loans. In recent years, because of low down payments and credit score requirements, Federal Housing Administration (FHA) loans have increased in popularity. Which option is right for you depends entirely on your particular financial situation. Both FHA and conventional loans have their advantages and drawbacks.

Put Down 3.5% on Your New Home.

FHA Loan – Pros and Cons

An FHA loan is a type of loan that is insured by the Federal Housing Administration. For many years, this type of mortgage loan has allowed Americans with a lower income to borrow money for the purchase of a home. An FHA loan has a few clear advantages over a conventional loan. Here are the most important ones:

  • Easier to qualify for a loan. As opposed to a conventional loan, requirements for an FHA loan are not as strict. People with low incomes and low credit scores have a much better chance of qualifying for an FHA loan. You can qualify for an FHA loan even if your credit score is as low as 500.
  • Lower down payment. FHA mortgage loans are very appealing to borrowers because the minimum down payment is only 3.5 percent. With down payments for conventional mortgage loans usually in the 10 to 20 percent range, an FHA loan becomes a great choice if you don’t have a lot of savings to make a bigger down payment.
  • Lower interest rate. Because the loan is backed by the government through the Federal Housing Administration, you could qualify for a lower interest rate than you would on a conventional loan. This could save you thousands of dollars over time.

This all sounds good, but FHA loans have a few disadvantages as well and are not designed to replace conventional mortgage loans. The most important ones are:

  • Mortgage insurance. If you choose an FHA loan, you will have to pay a minimum of 1.5 percent upfront mortgage insurance premium and a 0.5 percent monthly insurance. The mortgage insurance must be paid for a minimum of 5 years, and that will increase the overall cost of the loan.
  • Lower credit scores mean higher down payment. The minimum down payment amount may be as low as 3.5 percent, but only someone with a minimum credit score of 580 can qualify for that low amount. If you have a credit score between the minimum allowed for 500 and 579, you will have to make a 10 percent down payment.
  • Longer to process. Because the Federal Housing Administration mortgage loan is insured by the government, processing the loan will most likely take longer than with a conventional loan.

Conventional Loan – Pros and Cons

A conventional loan is a type of mortgage loan that is not insured or guaranteed by the government. Conventional loans are typically obtained from a financial institution, such as a bank or credit union. This type of loan can be a great choice for you, depending on your budget and situation. Here are some of the advantages of a conventional loan:

  • Better terms for people with good credit scores. A credit score minimum of 620 is required by the National Association of Mortgage Brokers in order to qualify for a mortgage loan. If your credit score is higher than 760, you will qualify for the best rates available, meaning that you will save a lot of money compared to someone with a less than perfect score.
  • No upfront mortgage insurance premium. Unlike with an F HA loan, you won’t have to pay a mortgage insurance premium, which can be as high as 2.25 percent of the total loan amount.
  • More flexible terms. With a conventional mortgage loan, you will have more repayment period term options than with an FHA loan. This can also help you save money, as interest rates will be lower if you choose a faster term, such as a 10 or 15 year repayment period.

Conventional loans can be a great option for someone who meets certain requirements, but they can also become very costly unless you exercise caution when choosing a loan type. Some of the drawbacks of conventional loans are:

  • Harder to qualify. Unless you have a really high or perfect score, the lender will either give you high interest rates and fees, which will increase the cost of the loan, or will even deny your loan application.
  • Higher down payment. The minimum down payment amount for a conventional mortgage loan may be as low as 5 percent with some lenders, but only if strict requirements are met. Typically, the down payment for a conventional loan is between 10 and 20 percent.
  • Private mortgage insurance. Borrowers who made a down payment of less than 20 percent of the total loan amount will be required to pay private mortgage ,insurance which will protect lenders in case of a default.

The conclusion is this: if you are looking for a mortgage loan that requires a low down payment and your credit score is less than good, then you should choose an FHA mortgage loan. If your credit score is perfect or close to perfect and you can afford a larger down payment, the best choice for you is a conventional loan. Before deciding what type of loan to choose, you should always educate yourself and never be afraid to shop around until you find the best type of program that suits you.