Go Big or Go Home – 7 Reasons Why Jumbo Mortgages are Currently Your Best Option

Jumbo Mortgages Current Best OptionIntroduced in the 70’s, jumbo mortgages are available for home buyers who need a larger-than-average mortgage. Jumbo loans, or jumbo mortgages, allow people to take out mortgage loans for larger amounts than the traditional conforming limits. Jumbo loans were very popular before the recent economic crisis because prices were very high in some areas even for modest homes (Read: Everything You Need to Know About Jumbo Mortgage Loans).

Mortgage loans have conforming limits that are set by Fannie Mae and Freddie Mac. These limits represent the maximum amount that these two government backed organizations are willing to pay in order to buy the loan from a lender. If Fannie Mae and Freddie Mac do not cover the full amount, the mortgage loan is considered a jumbo loan. Not being backed by these two organizations means that jumbo loans will have higher interest rates than conventional mortgage loans. Also, giving out a jumbo loan is considered high risk by lenders, so the qualification requirements will be stricter than for a conventional mortgage.

Conforming limits vary from one area to another and are usually higher in expensive housing markets. Once you start looking for a home, you may be surprised that you may have to take out a jumbo loan in order to buy a $500,000 home in some areas, while you can buy a house with the same value by taking out a conventional loan in other areas.

Who is a Jumbo Mortgage Designed For?

Jumbo mortgages are designed for people who can afford a more expensive home that can’t be bought with a regular mortgage. Right now, the borrower is not necessarily the one who decides that he or she needs a jumbo mortgage. After the housing market crashed recently, many lenders found themselves having large financial issues due to giving out jumbo loans too easily, so now they are the ones who decide if you need a jumbo loan. If a borrower can’t pay off the jumbo loan quickly, the interest charges will add up to a small fortune over time.

Jumbo mortgages are considered very high-risk by lenders, so they won’t give them out to anyone. In order to qualify for a jumbo mortgage loan, borrowers must have an excellent credit score, typically over 720 (Read: What Credit Score Do I Need to Qualify for a Mortgage?). Their debt-to-income ratio must also satisfy the lender’s requirements. To minimize risk, the lender will probably ask for a larger down payment, usually 30 percent of the total loan amount.

Reasons Why You Should Get a Jumbo Mortgage

Jumbo mortgages may be more expensive than traditional mortgages, but can also be very advantageous to those who need such a mortgage. Here are the top reasons why you should get a jumbo mortgage.

  1. You need the extra money that a jumbo mortgage provides. The largest reason why you should get this type of loan is that you need more money to buy a larger home or a home situated in an expensive area. A jumbo loan will also help you avoid spending all your savings in order to buy a home (Read: Need Help Keeping Up With Mortgage Payments?).
  2. You avoid taking out two or more mortgages. Sometimes, purchasing a home requires taking out two, or even more, mortgage loans. Taking out and paying off two loans instead of one can be overwhelming and more expensive. Jumbo mortgages simplify the process of buying a home by allowing you to make the purchase with a single mortgage loan.
  3. Jumbo loans come in several shapes and sizes. Like traditional mortgages, jumbo loans come with various terms and options, depending on what you look for. You can choose to take out a short-term or a long-term jumbo mortgage, with an adjustable or fixed interest rate. The type of jumbo loan that you can get depends on what your qualifications and requirements are.
  4. Interest rates on jumbo mortgages have started decreasing. The government introduced a stimulus package back in 2009 in an effort to stimulate home sales and the growth of the economy. Interest rates on jumbo loans are actually lower than the rates on conventional loans in many cases, and they have dropped to record lows as a result of the government’s involvement. Read more about their low interest rates here.
  5. Applying for a jumbo mortgage has become easier. Applying for this type of loan is still more difficult than applying for a traditional mortgage loan, but recent developments in the housing industry have made it easier than before. The main reason is the competition between lenders, who have lessened their requirements in order to attract more home buyers.
  6. Refinancing a jumbo mortgage can yield bigger savings than refinancing a traditional mortgage. Refinancing a traditional mortgage at the right time can bring thousands in savings (Read: Quick Tips on Mortgage Refinancing). Because jumbo mortgages are much larger, refinancing them can bring even larger savings, which can be used for a number of other things, like paying off other debt or living expenses.
  7. Jumbo mortgage offers are more attractive than ever. In order to attract those who qualify, most lenders are offering special offers for taking out a jumbo loan. These offers include reduced closing costs and fees, faster processing and many others. Lenders can afford to reduce or even waive some fees, because jumbo loans yield more profit for them than conventional mortgage loans since they have higher interest rate. To read about the bank’s latest interest in jumbo mortgages click here.

Determining your budget and knowing exactly what kind of mortgage loan you are looking for is very important when deciding to get a jumbo mortgage. While jumbo mortgages are more attractive than ever right now, you should also remember that they are more difficult to get, and come with higher interest rates than traditional mortgage loans. Jumbo mortgages are a great option for those who need larger mortgages and want to avoid having to take out two or more mortgage loans in order to become home owners.

5 Important Reasons Why You Should Pay Off Your Mortgage Sooner Than Later

Pay Off Mortgage EarlyPaying off a mortgage loan takes a very long time, especially if it’s a 30 year or longer loan, so you might want to pay it off earlier than that. While paying off a mortgage sooner than its term has its disadvantages, like being left without savings or not being able to invest the money instead, it can also be very beneficial for most borrowers. The peace of mind and savings in interest that paying off your loan sooner bring can far outweigh the negatives (Read: Should You Pay for You Home In Cash Upfront?).

A mortgage payment is most people’s highest monthly bill, so getting rid of it will free up a significant amount of money each month. That money can make your life a lot easier. You can afford to pay off other debt, take out another loan, or use it to live better. Unfortunately, in order to pay off a mortgage earlier, you will have to come up with a large sum of money if you want to pay everything all at once, or more money each month if you decide to pay it off by making extra mortgage payments. Unless you have significant savings, inherit a large sum of money, or receive a pay increase from work, you are facing some difficult financial times until the debt is paid.

Ways to Pay Off Your Mortgage Early

There are several ways in which you can take care of a mortgage loan earlier than its term. Some methods are quicker than others, or require a larger sacrifice, but all of them will help you get rid of your mortgage quicker than the loan’s original term. Here are the most popular ways of paying off your mortgage early.

  • Pay more each month or make extra payments. You can add an extra amount to each monthly payment each month in order to pay off the loan early. Alternatively, you can choose to make a mortgage payment every two weeks instead of each month, which will result in 26 mortgage payments made each year, instead of only 12.
  • Pay a large part or your entire mortgage at once. You can use money from your savings, investments, bonuses or an inheritance to pay off a portion of your mortgage or even all of it.
  • Refinance into a shorter term. Refinancing your mortgage loan into a loan with a shorter term will make your monthly payments larger, but, if you can afford it, it will help you save significantly in interest (Read: Things to Remember Before Refinancing a Mortgage).

Reasons Why Paying off a Mortgage Sooner is Beneficial

Depending on several factors, paying off your mortgage sooner than later can be to your advantage (read more here). Generally, the benefits outweigh the downsides, but taking this step is not something that many home owners can afford to do. Unless your interest rate is really low, you should do your best to try and pay off your mortgage loan early. Here are some of the reasons why this is a good choice.

  1. Peace of mind. Like most people, you probably have a lot on your mind. Taking care of your largest monthly bill will surely relieve a significant amount of stress, and make your life and your family’s life much easier. Truly owning a home is a great feeling, and you shouldn’t wait until you are old to experience it (Read: Are You a Twenty-Something Wanting to Buy a Home? Here’s What to Know). Not having to pay a mortgage anymore also means that you have other possibilities of investing and you are more in charge of your financial life.
  2. Savings in interest. With a 30-year mortgage loan you pay almost as much on interest as you do on the principal. Paying the principal early means that you will save tens of thousands in interest. Making just an extra mortgage payment per year can save you thousands of dollars.
  3. Improve your credit score. As long as you have a large debt, you are considered a large risk, and your credit score will reflect that. Once you get rid of your mortgage, your credit score improves, and you will be able to qualify for more credit. You can get new loans, for buying a car or even a new home, because your cash flow will be larger (Read: Top 10 Components for Maintaining a Good Credit Score).
  4. Avoid the risk of losing the home. Investing money while you still have a mortgage is riskier because, if something goes wrong with your investments, you risk losing your home as well. Also, losing a job or having large medical bills will increase the risk of losing your home. If your mortgage is paid off, the home is yours and you don’t risk losing it to foreclosure anymore.
  5. Most times it makes sense financially. Some people will argue that you lose the tax break, or you could earn more if you invest the money. That may be true is some cases, but the tax deduction argument is often exaggerated, and you are probably saving more in interest than you would make on an investment. To read more click here.

Even though there are reasons why paying off a mortgage early is not recommended, most of the times the benefits of doing it are far greater than the alternative. Sure, having cash on hand for emergencies and making other investments makes sense, but so does avoiding paying tens of thousands in interest. But probably the biggest advantage of paying off your debt sooner is the peace of mind that it gives you. Living with the knowledge that you can lose your home if you come across financial problems is very stressful, so paying off your mortgage early not only saves you money, but also allows you to enjoy life better.

The Sooner You Know About Hybrid Mortgage Loans, the Better

Hybrid Mortgage LoansThe large majority of people who are purchasing a home do it by taking out a mortgage loan. Buying a home with cash is something that very few people can afford, and it’s not always a good investment (Read: Should You Pay for Your Home in Cash Upfront?). But mortgages come with interest rates, closing fees and many other costs, so finding a cheap mortgage becomes the number one priority when buying a home. Fortunately, there are many options out there when it comes to mortgages, and each are designed for certain categories of people.

The most popular mortgage loans feature fixed or adjustable interest rates. A fixed interest rate means that you will be paying the same interest rate for the duration of the loan, which means that you won’t have any surprises down the road. Adjustable interest rates fluctuate during the life of the loan, which means that you might have to pay either more or less in interest during the course of the repayment period.

The fixed-rate mortgage is considered safer than the adjustable-rate mortgage because the interest rate will remain the same, so you will always know how much your monthly payment will be, but sometimes an adjustable-rate mortgage may be a better deal (Read: Even With Fixed-Rate Mortgages So Low, Don’t Overlook Adjustable Rates!). Another type of mortgage is a combination of the fixed-rate and the adjustable-rate mortgages, and it is called a hybrid mortgage.

What is a Hybrid Mortgage Loan?

A hybrid mortgage loan is both a fixed-rate mortgage loan and an adjustable-rate mortgage loan. The hybrid mortgage starts off as a fixed-rate mortgage, and then converts to an adjustable-rate mortgage. During the fixed rate period, which can be up to 10 years, the interest rate remains unchanged. When the initial period ends and the mortgage is converted to an adjustable-rate mortgage, the interest will increase or decrease, based on several indices, annually until the end of the repayment period.

Hybrids are normally referred to as a 5/1 mortgage, for example. The first number represents the fixed interest rate period of the mortgage. In this example, the hybrid mortgage will have a fixed-rate period of 5 years. The second number represents the adjustment interval that will be applied once the fixed-rate period is over. In our example the interest is adjusted once every year.

Pros and Cons of the Hybrid Mortgage Loan

Like most mortgage loans, the hybrid mortgage is also designed to accommodate the need of a particular group of home buyers. Here are the benefits of such a mortgage:

  • Compared to 1 year adjustable-rate mortgages, hybrid mortgages have lower risk, and a lower interest rate when compared to most fixed rate mortgages.
  • Hybrid mortgages are a great choice for home buyers who only wish to live in the home for a predetermined period of time.
  • The interest during the fixed-rate period will be lower than the interest on a 30-year fixed-rate mortgage, making this type of mortgage a great choice for those who don’t plan on living in the home for a long time (Read: Is Flipping Houses for You?) .
  • There is always a chance that the interest will decrease during the adjustable-rate period, making the monthly payments and overall loan value lower.

The largest downside of hybrid mortgage loans is that once the initial period is finished, there is a large risk that your interest rate will increase significantly, making it hard for you to pay your mortgage on time each month (Read: Do You Recognize the Early Warning Signs for Increasing Home Interest Rates?). Most hybrid mortgages have a maximum interest increase set, usually 2 percent per year, but that 2 percent can mean a lot of money, depending on how much you have borrowed.

Hybrid mortgages are great for those who wish to remain in the home for less than 10 years, and they can work for some others as well. But before you start shopping around for any mortgage, be sure that you know what your budget is and how long you plan on living in the home. If it’s a short while, then you will actually save money with a hybrid mortgage, but if you plan on living for a long while, you should look at other types of mortgages.

Everything You Need to Know About Jumbo Mortgage Loans

Jumbo Mortgage LoansA mortgage loan is a very important product because it gives the majority of Americans access to home ownership. It would be quite difficult for most people to purchase a home without the help of a mortgage loan. Mortgages come in various shapes and sizes and are designed to accommodate the needs of most people, whether they are first time home buyers or real estate investors. Mortgages have several characteristics that differ based on the borrower’s needs and qualifications (Read: Are You Applying for a Mortgage? These Things Might Ruin Your Chances of Approval!) . One of these characteristics is the size of the mortgage loan.

Regular mortgage loans usually require a 10 to 20 percent down payment, certain debt-to-income ratios, and a good credit score. Depending on these factors, your interest rate might be higher or lower, and you may be able to borrow more or less. In some areas you won’t be able to buy a home valued at over $400,000 with a regular mortgage, while in others you can buy homes that cost over $700,000 by using a regular mortgage. That amount is more than enough for most people and families, but not enough for others. If you have the means to keep a large mortgage, you may want to borrow more than the maximum limit of regular mortgage. In that case, you should take a look at jumbo mortgages.

What is a Jumbo Mortgage Loans

A jumbo mortgage loan is nothing more than a regular mortgage loan that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. The limit varies from one area to another, so you can expect to have to take out a jumbo loan for a home that is worth a lot less than other homes in better areas. Generally, the maximum limit is significantly higher in more expensive housing markets.

Lenders take a larger risk when giving out jumbo loans, so they will be more careful when giving out this type of mortgage loan. A default on a jumbo loan would hurt the lender financially much harder than a regular loan. Jumbo loans typically require a 20 percent down payment, which means that the borrowers have a larger investment in their homes, making them less of a default risk. Lenders require a very high credit score, which means that the borrower has a good history of repaying his or her debt, giving the lender more peace of mind (Read: How to Get a Great First Mortgage).

The Advantages and Disadvantages of Jumbo Mortgage Loans

Jumbo mortgages are a perfect choice for those who need larger mortgages, but they also have other advantages. Here are the most important advantages of a jumbo mortgage loan:

  • Just One Loan. By taking out a jumbo loan you won’t have to take out two or more different loans. Jumbo loans provide the money that you need to make a home purchase, and allow you to avoid having to take out multiple loans, which can be pretty complicated (Read: Taking Out a Third Mortgage – Is That Possible?).
  • Low Rates. Interest rates on jumbo loans are low. Interest rates on jumbo loans have started to decrease in 2009 when the federal stimulus package was introduced.
  • Big Savings. Refinancing a jumbo loan can bring large savings. Refinancing any mortgage loan will usually bring savings, so refinancing a loan that is larger than usual can bring even greater savings.

Jumbo mortgage loans bring great advantages, but also have a few downsides. Here’s what you need to keep in mind when taking out a jumbo loan:

  • Higher Rates in Comparison. The larger the risk the lender is taking, the larger the interest rate will be. While interest rates on jumbo loans are lower than ever, they are still high when compared to interest rates on conventional loans (Read: Jumbo Loan Rates vs. Conventional Home Loan Interest Rates).
  • Less Approval. Qualifying for a jumbo mortgage loan is more difficult. You must have a great credit score and a large income to qualify for a jumbo mortgage loan. While you can get away with having a less than perfect credit score when applying for a regular mortgage loan, jumbo loans require a prefect or near perfect credit score (Read: Boost Your Credit Quickly With These Simple Tips).

Jumbo mortgage loans, like any other loan, are designed for borrowers with certain needs, and will not be a great choice for everyone. Knowing what type of mortgage you need is very helpful when buying a home. It can make the difference between a great purchase and one that will give you nothing but trouble along the way.

Simple Interest Mortgages vs. Traditional Interest Mortgages

Simple Interest Mortgages vs. Traditional Interest Mortgages-150x150When they buy a home, most home buyers take out a traditional mortgage to pay for their purchase. Traditional mortgages are recommended for most borrowers, but you should be aware that there is another, very similar, type of mortgage that may be to your advantage. The simple interest mortgage uses a different method of calculating interest due on your mortgage loan. If this type of mortgage is used correctly, it can help you pay off your mortgage faster.

How is the Interest Calculated?

The interest on a traditional mortgage is calculated monthly. The annual interest rate is divided by 12 and the monthly rate is used to determine the interest on each monthly payment. For example, on a 30 year fixed-rate mortgage with an interest rate of 3.6 percent, the 3.6 is divided by 12. The resulting 0.3 percent is multiplied by the loan balance in order to find out the interest that has to be paid.

The interest on a simple interest mortgage is calculated daily, by dividing the annual interest rate by 365, then multiplying the result with the loan balance. If we use this formula for the example above, the interest on a 30 year fixed-rate mortgage with a 3.6 percent interest rate would be calculated by dividing 3.6 by 365. The result, 0.00986, will be then multiplied by the loan balance in order to calculate the daily interest that must be paid. These daily charges will be then added up every month in order to determine your monthly interest payment.

Which One is Better?

The answer to that question is yes and no, depending on how you plan on using the mortgage. If you make your monthly mortgage payment on its due date each month, without being late or missing a payment, then both simple interest and traditional interest mortgages will cost almost the same. However, if you are late with your monthly payment, the difference between the costs of the two types of mortgages will become much larger.

When making payments on your mortgage, you are typically allowed a “grace period” of 10-15 days after the due date, in which you can still make the payment with no repercussions. Traditional interest mortgages calculate the interest once per month, so you can take full advantage of this grace period. However, being late on a monthly payment when you have a simple interest mortgage means that you will be paying a slightly higher interest for the days that you were late, because the interest is calculated daily. This interest can accumulate over the life of the loan costing you several thousands of dollars.

You can turn having a simple interest mortgage to your advantage by making your monthly mortgage payments before the due date each month. This strategy will result in interest savings, which can also accumulate over the life of a loan, making a simple interest mortgage cheaper than a traditional one.

There is no simple answer when comparing simple interest mortgages to traditional interest mortgages. The best thing to do is research both of them, figure out what your possibilities and future plans are, and find out which one of these two types of mortgages would suit you better.

Stop Losing Home Equity!

Stop Losing Home Equity-150x150Losing home equity can and probably will result in a series of serious problems for home owners. The equity in your home represents the part of your home that you actually own. If you lose equity in your home, you can recover it, but it will be more difficult than it was to build it in the first place.

When making monthly mortgage payments, a part of that payment goes towards the loan balance, increasing the equity in your home. At first, a large part of your payment will go towards the interest, but, as time passes, the portion of the payment that goes towards the principal increases, making your equity increase much faster. Home equity is considered an asset, it’s a part of your net worth, and you can use it if you need. Home equity can be used to pay for a second home, medical bills, education, or even retirement.

How Are You Losing Home Equity? What Can You Do About It?

Losing equity can be the result of a bad decision or the result of something that you can’t control. Either way, losing the equity in your home can even result in having to sell your home. Home equity is a powerful financial resource as long as it is used properly. Here’s how you risk equity in your home and a few ways of dealing with these issues:

  • Making major changes to the structure of your home. Transforming a basement into one or two rooms, two bedrooms into one bedroom, the garage into a room, or other major changes might seem like good ideas at the time, and you probably have a good reason for making these changes. Unfortunately, major modifications to a home’s structure or layout can possibly lead to a decrease in your home equity. Home improvement projects must be chosen very carefully if you wish to avoid a sudden decrease in the equity in your home.
  • Doing a cash-out refinance. This type of refinancing will increase the amount that you owe, and you risk ending up owing more than your home is worth. This means that the equity in your home will be reduced drastically, plus you will be paying interest for the cash that you took out.
  • Taking out a home equity loan. Home equity loans use the equity in your home as collateral. The upside is that, if you take out a home equity loan to remodel a kitchen or the bathrooms, the equity in your home may be replaced. Otherwise, your equity will decrease, while the amount that you need to pay back with interest will increase.
  • Not taking care of your home. Parts of your home like the roof and even appliances such as your air conditioner and heater don’t last forever. Not repairing them or replacing them, if needed, will result in a home equity decrease. Part of being a home owner means that you have to maintain your home and make necessary repairs, not only to live comfortably, but to also avoid damaging the equity in your home.
  • Economic crisis. This reason for losing equity is out of your hands and hard to predict, but, even if you are not affected by an economic crisis, the equity in your home will be. The recent housing market crash has resulted in millions of foreclosures, so if you live in a neighborhood where a lot of homes go into foreclosure, the value of your home will have to suffer.
  • Your neighborhood changes. Neighborhoods change all the time, especially after a recession. Your neighborhood might become more accessible to criminals, which will determine many people to move to different areas, and home prices to drop. Unfortunately, there is little you can do in this situation, and the equity in your home will most likely drop, as a result.

Losing home equity can be avoided by not making bad decisions and by resolving the issues that you have power over. In certain situations, there is little that you can do to avoid a drop in your home equity, but even these situations are somewhat preventable. You can recover from a loss in home equity, but it’s always better to prevent a loss than having to build equity again.

Underwater Mortgages: Is Walking Away or Doing a Short Sale Your Best Option?

Underwater Mortgages-Is Walking Away or Doing a Short Sale Your Best Option-150x150After the recent housing market meltdown, many home owners have found themselves underwater on their mortgages. Being underwater means that they owe more on their homes than the homes are worth, making it difficult to keep making mortgage payments. Knowing that you are paying significantly more for your home than what the home is worth feels like throwing money away and the majority of home owners will probably choose to get rid of the home instead of making payments for several more years. Having to abandon the home that you have created memories in can be very unpleasant for the whole family, but it is probably a better choice than throwing money out the window.

The problem with being underwater is that you practically have two choices that will get you out of this situation: you can either walk away from your home, in which case the lender will foreclose on it, or sell it for less than it was originally worth at a short sale. Both of these options have serious consequences, and there is no way around them, but you probably want to know which one is the better choice, which one will create less problems for you than the other.

Differences Between Walking Away and Doing a Short Sale

Several parts of your financial life will have to suffer as a consequence of both walking away from a home and doing a short sale. The most affected will be your credit score, and this is where doing a short sale seems to beat walking away from a home and having it go into foreclosure. With a short sale, the lender hopes to recuperate most of the amount that you owe him, and to avoid going through the lengthy and expensive process of foreclosing. Here are two main differences between walking away from a home and doing a short sale, and how they will affect you.

  • Your credit score. Walking away from your home will result in foreclosure, which will have a large negative effect on your credit score. Foreclosures typically remain on a credit report for up to 7 years, making it next to impossible for you to take out another mortgage loan and buy a new home. Short sales will also be added to your credit report, but worded as “settled for less” or something similar. Lenders prefer to recover some of the debt by doing a short sale instead of foreclosure, which takes a long time and is expensive. Your credit score has less to suffer when doing a short sale and it will be easier to recover, in only a couple of years.
  • Your ability to buy a new home. When walking away from your home, you can buy a new home after 5 years have passed, but with several restrictions, like making a larger down payment and paying a larger interest rate. After 7 years, the black spot on your credit report goes away and you are able to buy a new home without these restrictions, as long as everything else is in order. You can buy a new home right away after doing a short sale, as long as you haven’t missed any payments on your previous mortgage and the lender doesn’t require that you pay back the remaining amount. However, finding a lender that will give you a mortgage loan in this situation is very difficult.

Doing a short sale seems to be the better choice between the two, but there are many factors to take into consideration before you can decide. However, your credit score is probably the most important factor, so choosing to do a short sale over walking away from your home is probably the best option in most situations.

Mortgage Counseling Services You Need

Mortgage Counseling Services You Need- 150x150Many people wouldn’t be able to afford a home without mortgage loans. Mortgages might come with some disadvantages, but are a great way of making sure that you have a roof over your head, and something to leave your kids. Paying off a mortgage is a great feeling, the feeling that you are truly a home owner, but getting there requires some careful budgeting, because there will always be the risk of not being able to afford paying your mortgage anymore and losing the home.

Being a responsible home owner is mostly up to you, but looking for help when you think you need it is nothing to be ashamed about. Just like marriage counseling can save a marriage, mortgage counseling can help you make the best decision regarding what type of loan to take out and what you can do to make sure that paying off your mortgage goes smoothly and with no major problems. Home buyers who receive mortgage counseling prior to making a home purchase are less likely to default on their mortgage, and less likely to even be late or miss mortgage payments.

Mortgage Counseling Services

You have many mortgage counselors to choose from if you need help understanding your mortgage or making sure that you make the right choice, but it is recommended that you visit a counselor that is government approved. By doing this you are making sure that you receive the most up to date and complete information.

Before setting up an appointment with a mortgage counselor, make sure that you gather as much information as possible about your mortgage, account balances and debt, income, and find your most recent tax return. Being able to show all this info to your counselor will ensure that your paperwork will be filled out much easily. These documents will also help your counselor work with you to determine a budget that accommodates your financial situation and needs. Here are the most important services that mortgage counseling organizations are offering.

  • Pre-purchase mortgage counseling. Many home buyers need help in deciding which type of mortgage loan to choose. Making sure that you pick the right one, with the right terms, is probably the most important thing you can do when shopping around for a mortgage loan. The down payment that you will have to make, the interest rate that you will be paying, the length of the repayment period, and all the fees that you will be paying must be discussed before you decide on a loan, in order to find out if that type of mortgage will be right for you.
  • Post-purchase mortgage counseling. A large part of your income will go towards paying your mortgage each month, and some home buyers might find that a little overwhelming. Post-purchase counseling can help you better manage your monthly expenses as well as give you advice regarding mortgage refinancing and other loans that you can take out. This type of counseling is also very important, and can make a big difference if you are struggling, or are unable to make a decision regarding your mortgage loan.
  • Mortgage refinance counseling. Refinancing is a great way of lowering your monthly mortgage payments by taking out a new mortgage loan to replace your current one. Unfortunately, refinancing is an expensive process which can actually end up costing you more than you expected if you are not sure what you are doing. A refinance counselor will work with you to determine if refinancing is the right step, and how much you will be saving over your current mortgage rate.
  • Mortgage default counseling. At one point during your life, you may encounter some problems that will make paying your mortgage difficult. In order to avoid foreclosure, you can hire a mortgage default counselor, who will help you address the problem in the best way possible. When faced with losing your home, it would be better to get professional help than to try to do things yourself. Receiving the proper help in this situation can make a big difference and your chances of keeping your home will be much higher.

Unless you feel that you have good knowledge on the subject, mortgage counseling services can be very helpful and save you money and trouble in the long run. Being prepared when the time comes to take out a mortgage loan or refinance your mortgage makes a large difference over going in blindly and ending up losing money, or even your home. Mortgage counseling services are designed to help you become a home owner, and deal with the problems that may arise in the life of a home owner.

Financing Home Improvement- Which Ways are Best?

Financing Home Improvement-Which Ways are Best- 150x150Nowadays, financing a home improvement project can be done in several ways, all of which have their advantages and disadvantages. Which one is the best for you usually depends on several factors, such as the project’s cost, how much time the project will take, how much equity you have in your home and many more. Deciding which type of financing is best is entirely up to you. This article will describe several ways in which you can do it and give insight into which ways are often the best for most situations.

First of all, when starting an improvement project, the first thing that you need to do is create a realistic budget that you should strictly follow. Everything that you are planning for your home improvement projects should be stuck to once the budget is set. Changing your plans half way through can get very expensive and you may find yourself unable to finish your project. Also, when setting a budget, always overestimate costs. In very rare cases, you can end up having to spend less than you planned, but most of the time you will actually have to spend more. Having a budget will help you find out exactly how much money you need and ensure that the project is finished on time and without any major issues.

Whether you are building a garage or a pool, installing new appliances, or simply remodeling a kitchen or a bathroom, unless you have a large amount of money saved up, you are going to need financing. Find out what your budget is and how long the improvement project will take before looking at financing options. Here are the most commonly used methods of financing a home improvement project.

Cash

The most obvious choice is also the cheapest choice. Taking out a loan means that you will be paying interest and fees, making your home improvement project much more expensive. Whether you have it saved up, borrowed it from a friend or family member, cash will always be the cheapest way to finance a remodeling project. Also, because you are not using your home as collateral, you also avoid the risk of losing your home to foreclosure.

Credit Cards

With credit cards you avoid paying closing costs, as you would if you took out a loan, but interest rates will be much higher. Home improvement projects that only cost a few thousands of dollars are easy to finance with one or more credit cards, but you should only use this option when you are able to repay the borrowed money in a few months.

Personal Loans

Unlike mortgage loans, personal loans that are unsecured do not use your home as collateral. This means that, if you fail to repay what you have borrowed, your home won’t be at risk for foreclosure. Banks only offer unsecured personal loans for small amounts of money and the qualification guidelines are strict. Other lenders offer payday loans, which have very high interest rates.

Home Equity Loan

With a home equity loan you use your house as collateral, just like you would on a primary mortgage. The interest rate on a home equity loan is fixed and also tax deductible. Another downside besides having to pay an interest is that home equity loans require you to pay closing costs. Failing to repay the money, you risk losing your home to foreclosure.

Finding the perfect solution when it comes to financing a home improvement project can be difficult. Your best bet is to carefully assess your financial situation, determine how much money you have to spend, and take it from there. The best option would be finding cash for the project, but, if that’s not possible, there are a number of other ways in which you can finance your home improvement project.

At Last, The Secrets of Rent-to-Own Homes

At Last The Secrets of Rent-to-Own Homes- 150x150The real estate market has several solutions for both home buyers and home sellers. One solution for those who wish to buy a home, but don’t have the money for such a large purchase yet, is renting-to-own, also known as a lease option. People who choose this option will pay rent for the home that they live in, but are given the possibility of purchasing the home at a later date. The rent that people who choose the lease option will have to pay is higher than a regular rent, but the advantage is that part of the rent will be credited to the buyer if he or she decides to purchase the home.

A rent-to-own agreement allows the buyer to purchase the home that he is currently renting at any time before the agreement expires. The length of time in which the home can be purchased can be a few months or even years. Because the rent is higher than usual, sellers can afford to take their property off the market and rent it. However, if the renter decides to buy the property, he or she will be credited with a portion of the rent. This sum of money can be put toward a down payment and closing fees, or simply used for something else. If the buyer is unable to or decides not to buy the property during the lease option period, the entire amount that was paid as rent over the past months or years will remain with the seller.

Advantages and Disadvantages of Rent-to-Own Homes

The rent-to-own option is advantageous to sellers because it gives them an alternative to lowering the price of a home that they are having problems selling. By making a rent-to-own agreement with a buyer, sellers know exactly how much money they will be making if the buyer decides to go ahead and make the purchase. If home prices go down during the lease option period, the asking price for the seller’s home will remain unchanged, and the buyer might still want to buy the property because he or she has already invested money in it by paying a higher rent. The seller is also at an advantage because the rent money can be used to pay the mortgage, property taxes and insurance. Also, a renter who signs a rent-to-own agreement will most likely take better care of the property, because they are planning on buying it in the near future.

Buyers are advantaged by the rent-to-own option because it allows them to buy a home if they don’t have the money for the down payment, or their income is not sufficient. If a buyer believes that his or her income will increase in the near future, renting-to-own allows them to have a roof over their heads while having the option of buying the home at a later date, when their financial situation improves. Buyers are also protected from a home price increase during the lease option period, because the price of the home will be locked in.

Buyers also have almost all the advantages that regular renters have, like not having to worry about repairs, property taxes, and homeowners insurance. Another advantage of renting-to-own that the buyer has is that, by living in the home for a long period of time, he can find out if there is anything wrong with it. If buyers decide to walk away from the deal, they only lose the extra amount of money that they paid over regular rent, but if they decide to buy the home, they will be credited with a portion of the rent that they paid.

Like everything in the real estate world, renting-to-own also has its disadvantages. Most disadvantages are things that could go wrong with the rent-to-own agreement. Here’s what you should keep in mind and look out for:

  • The seller’s financial situation. Try to find out if the seller is in any financial trouble. Red flags can be spots on his credit report, phone calls from debt collectors, or letters sent to the house. If the seller is in trouble, he can lose the home while you are still renting it. Meaning that you will lose the extra money paid as rent and you will have to find a new place to live.
  • Repairs and maintenance. The rent-to-own agreement between you and the seller should clearly mention which party is responsible in case of damage to the property, and who is responsible with maintaining the property. During the renting period, you should have the same rights as any renter, meaning that the owner should take care of repairs and maintenance.
  • The end of the rent-to-own period. If home prices have increased, the seller might not want to sell anymore. Unless you have the money to hire a lawyer and sue the seller, there is little you can do, so this is one of the risks that you are taking when renting-to-own. Also, if home prices go down and you want to buy the home, you will still have to pay the price that you and the seller agreed upon.

Renting-to-own is a good alternative for home buyers who expect their financial situation to improve in the near future, but not such a good option for those who are unsure of their income in the following months or years. Renting and saving money for the down payment can be a better choice than paying more for rent than having to abandon a home because you don’t have enough money to buy it.