Are Medical Loans The Answer to Affordable Medical Treatment?

March 1st, 2010

What happens when you need medical treatment that is not covered under health insurance? Many times, people do not have adequate medial insurance coverage to take care of medically necessary procedures. Often medical treatment is needed immediately to have any chance of success, so it really isn’t viable to try to save up the money for treatment. When you can’t afford medical treatment that you need, and there isn’t an acceptable alternative treatment, getting a medical loan might be your best option.

There are a number of lenders who are willing to make loans for both medically necessary and elective medical procedures. Medical loans are funds that are advanced to a person for the specific purpose of being used for medical treatment. They are typically unsecured loans that are basted on creditworthiness. The interest rate usually reflects the going rate in the market. Additionally, many medical loans have a built-in grace period, allowing patient recovery time before repayment is required to begin.

Medical loans are often the only hope for getting needed medical treatment for those who either don’t have health insurance or do not have the funds available to pay their deductible. People with chronic illnesses often need medical loans to be able to continue treatment once their coverage is depleted.

Many people seek medical loans for elective medical procedures as well. As a rule, health insurance will not pay for any type of treatment considered to be medically unnecessary. For example, procedures such as liposuction, gastric bypass, dental cosmetic surgery, cosmetic surgery, breast enhancement, breast reduction, and other similar procedures are typically not covered by health insurance.

These types of medical procedures that are in most cases required for mental satisfaction rather than physical well-being. While no doctor would recommend these procedures as a must-have for a healthy life in most cases, most are of the opinion that such procedures can improve the morale of the person to a great extent. Hence, from a psychological point of view, such procedures do improve the quality of life of the patient.

Many special clinics have been set up with the specific purpose of providing elective medical procedures services to people who want or need them. These clinics, knowing full well that such procedures are not likely to be covered by patients’ health insurance, often provide resources for medical loans to their patients. This enables patients to find a way to afford the services they desire without having to research funding options on their own.

Credit Medical offers dental financing loans for general dentistry, cosmetic dentistry, cosmetic surgery, laser vision surgery and a variety of other elective procedures.
http://www.creditmedical.com/

Medical Loans FAQ:

Question: Can you deduct medical finance loans?
Say I had laser eye surgery done that cost $5,000 and got a loan to finance. Can I count a $5,000 amount into factoring a medical deduction ($5,000 – 7.5%*income) on my taxes? Or can I only count the amount that I’ve payed back on the loan? Or can I not even count anything towards a deduction since I took out the loan?

Answer: You should list your total unreimbursed medical expenses for the year. The fact that you had to borrow the money is of no consequence. If the surgery cost you $6,100, then that is the amount you use for the deduction. Be sure you saved receipts in case you are audited.

Question: Are there home loans that do not look at medical bills on credit?
We are wanting to buy a house but my past medical bills is lowering my credit alot. I heard that there are loans that don’t look at medical bills. Which ones?

Answer: Yes and plenty of lenders that do that exact type of loan. Medical bills are the lowest on the scale of important things to look at when deciding to loan money. Depending on which state you live, unpaid medical bills may be reported to the credit bureau but should not affect your credit score. Try to know what is the credit law in your state and ask your loan officer on how he or she can facilitate your home loan. Also there is a statute of limitation on unpaid debts set by each state.

Question: What is the best place to get dental/medical office loans?

Answer: Care Credit is the best thing to finance your loan. Don’t think of an office to finance your work. With times as bad as they are, most offices cannot afford the risk of nonpayment. People will pay their mortgage, cell phone bill, electric and water bills before paying the doctor. Many have been burned too many times now to finance much. Care credit can help you out. It’s the same thing as a credit card.

Question: Medical Loans for teens/young adults with Eating Disorder?
My friend desperately needs to go into a residential treatment facility for an Eating Disorder. The problem is her parents won’t pay for it. Is there any type of medical loan, etc. that she can take out to cover the other 20% her insurance won’t? This is vital for her recovery.

Answer: If you are having issues with her parents not being willing to pay, does this mean she is a minor or young adult? She would need to be an adult and have a cosigner with good credit if she has not established credit herself in order to get any kind of loan. Minors cannot enter a contract, so they cannot get loans to my knowledge.

I would check around for local non-profits that might offer rehabilitation services for people with eating disorders, or who might help her pay for it. Also see if your state’s Department of Rehabilitation will help out. They are there for those with disabilities. Also, your State may have a Youth and Family Services. They often help with this also.

Question: What help is out there for ones who have been laid off longer than a year, have medical bills, student loans?
You also have other bills like Insurance to pay because you have to have it. Labor Board is wanting you to go back to school, you have to pay for tuition. What you suppose to do?

Answer: Actually if you’re laid off and categorized as a displaced worker you will get a break on financial aid if you do go back to school. You should be eligible for the full amount of Pell grant and Stafford loans and since July 1, 2009, unemployment no longer needs to be counted as income on the FAFSA form. There may be worker re-training programs in your state that will also help out.

Question: What is the interest rate usually on a medical loan?
I am being charged 9% interest on a hospital/ medical debt. I thought that interest for medical debts were low like student loans? 1% to 4%?

Answer: Even Student Loans are not that low any longer (boy do I wish they were). While they attempt to keep the rates “decent” to get people to pay, there is nothing that says that a hospital can not charge you any rate that they choose to. And should it go to collection, it would be almost guaranteed to go higher, like 18% to 22%.

Question: True/False: Medical bills and student loans don’t look as bad on your credit as consumer debt?
This is what I’ve been told, but I was wondering if you know if that’s true or not.

Answer: False they still get counted when a potential lender is calculating how much you can borrow for a car, mortgage or other loan you might try to get because they take your income and look at in relation to your total monthly payment obligations, no matter what the source of those obligations might be.

Question: Medical Loans?
I am unemployed and have been struggling for a long time now to get a job but have recently lost one because of the recession. I am now 19. I have been so depressed and have wanted cosmetic surgery for such a long time and have tried everything and can’t get a loan. I just wondered if anyone new if there was any way I could get some sort of a loan or medical loan being an unemployed student who is looking for work.

I don’t know what else to do because I am so unhappy and have no one to speak to about it, I am so unhappy with myself and feel like there is no way out. I am not a home-owner, but live with my mother and she doesn’t take it seriously at all but isn’t even in a position to help me even if she did. It seems like no one cares and I am getting worse. Is there anyone who can help me with a loan?

Answer: It doesn’t sound like you need a loan, you need to see a doctor or psychiatrist. Medical loans for cosmetic surgery (to make you happy) are reserved for folks who have full time jobs with great credit and can afford it. At 19 years old and unemployed, you are neither.

Talk to the Dr about your self esteem and possible other issues. In the mean time, formulate an educational and career goal and work towards that. It will help give you direction, purpose, and eventually allow you to be able to afford cosmetic surgery and live the life you want.

Its great being a self supporting adult, it just takes a bit of gumption, blood, sweat and even a bit of tears to get there!

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What Exactly is a Home Improvement Loan?

March 1st, 2010

A home improvement loan is actually one of the simplest ways in which you can live in your dream home. This is because it is the prime option for someone wanting to enhance the appearance of their home and also add to the value. In other words, a home improvement loan pays off in many ways. First of all, your home looks great and, second of all, the investment pays for itself because the home goes up in value.

As for how you get a home improvement loan, there are a couple of ways. The first is that you can simply go to your bank and request the money. You can do an assessment of how much work you would like to do and request that amount. The second way is to refinance your mortgage and use the equity in your home to fund your home improvement project. How you do this is you refinance for the worth of your home, you pay off our mortgage, and you then take the difference between the worth of your home and your mortgage and use that money to fund your home improvement project.

Types of home improvement

You can use your loan to fund any improvement to your home. You may want to simply improve the appearance of your home or you may have worn and broken areas that must be fixed or replace. However, the loan must make sure that the improvements that are done to the home are right with the borrower’s needs and don’t exceed the amount that the borrower is borrowing. This means you need to make sure you cover all of your improvements by not deviating from your initial plan.

For example, you may wish to add rooms onto your home. Maybe you need an extra bathroom or an extra bedroom. Perhaps you want a sun porch or a sitting room where you can sit and relax for a while. It is really up to you. Maybe your plumbing needs an overhaul or you need to put more siding on your house.

Here is a more detailed idea of what you can achieve with a home improvement loan:

- Installation of central heat and air

- Installing a fire place

- Swimming pool installation

- Rewiring the home

- Remodeling any room in the house

Loan details

There are certain details of the loan that you must be mindful of. The first thing you must keep in mind is that the interest rate of your home improvement loan is going to depend on your credit rating. If you are credit challenged, you may find that getting a competitive rate is somewhat difficult.

However, there has been an increased amount of competition between financial institutions because more and more people are looking for home improvement loans. Because of this competition, there are more options for borrowers to take advantage of. There are a number of online lending services that have added to this competition, which also increases the chances of getting an approval on a home improvement loan. The process has been simplified by these entities.

But before getting the loan, make sure you get quotes on how much it would cost you. You can assess the work yourself, but you can have a professional do it even if you do decide that it is a project you want to do all on your own. This increases your chances of being able to stay within the amount the loan is for. If you exceed your loan amount, you may not be able to pay for the remainder of your improvements. But know that if you need a home improvement loan, different lenders have different options for you.

How you can save money on home improvements and get estimates from local contractors in the Toronto’s area. They offer Home Improvement Help, Contractor Referral, Drafting Service.

Home Improvement Loan FAQ:

Question: How to get a home improvement loan?
My parents and I own 2 homes on the same lot. We haven’t had home owners insurance for over 10 years. I want to get a home improvement loan, so I can qualify for home owners insurance and improve my living situation. What can I do? I need the electric, plumbing, and the outside of my house done. No, I don’t qualify for hud.

Answer: Contact an insurance company directly, try to avoid an agent. Anyone can get property insurance. You just have to own property.

Banks will require you to have property insurance. They want the loan to be paid off if the house burns down. While a lender would usually require insurance, having insurance doesn’t imply that you can get a home improvement loan.

Question: Should I get home improvement loan or refinance with cash out?
I want to refinance my home to take advantage of lower interests rates. I also want to renovate my house since it has severe structural problems.

Should I refinance and get cash out to use for home improvement or should I refinance without cash out and get a separate home improvement loan?

What is the difference between the two scenarios?

Answer: A refinance with cash out would save you money in the long run. The interest rate would be lower for a 1st mortgage.

If you refinanced for a lower interest rate, you would be required to pay for the refinance and other closing cost.

Now if you turned around immediately and got a second mortgage or a Home Equity Line of Credit (HELOC) you would once again be required to pay for the loan as well as any related closing cost. On this 2nd mortgage the interest rate would be 2%-3% higher.

For any legal or tax matters you should consult with your attorney or tax consultant.

Question: Is there really a no interest government loan for home improvements?
I heard there is a no interest government loan for home improvements and you don’t have to pay it off until you sell your house. Is this true? If so, how do I apply for the loan?

Answer: Not that I’ve heard of. The only thing you can do, is certain improvements can be taken off your taxes next year at half the price you paid for them. They have to be energy efficient projects like new windows, doors, sealing up cracks, new heating system. Putting a new deck on doesn’t cut it.

Question: Can you use part of a home loan for immediate repairs?
I’m in the preliminary phases of purchasing a home. I’m researching and learning as I go. My question is, if I qualified for a $150k, would I be able to find a home that say, is $100k and use $50k for repairs/improvements? I’m finding a lot of homes that need renovations and are listed for a low price. I was just wondering if I could take out a larger loan (one that I’m still qualified for) to do improvements.

Answer: Only if the house appraises for more than the selling house. For example, if the $100K house in your example appraises for say $110,000, I would assume you would put down $10,000 and the bank will lend you the $100,000 (bringing your LTV to90%). Now, if the house appraises for say $150,000 and sells for $100,000, assuming the same 90% LTV, you would be able to borrow about $135,000, pay the house off and have $35,000 left for repairs (LTV being “Loan to Value” which is amount of mortgage compared to appraised value of the home). At best, you can only borrow up to 96.5% of the appraised value of the home (using an FHA mortgage), so you can never borrow more than it is worth.

Question: Is interest paid on Personal Loan used for Home Improvements tax deductible in US?

Answer: No. To be deductible the loan must be secured by the property. By definition a personal loan has no security other than the borrower’s word so the interest is not deductible.

Question: What is a “bid and draw schedule”?
I need to have the foundation repaired on my house and decided to take out a loan. Since I was doing that, I decided I’d repair a few more things. The problem is the only loan I could get is a home improvement loan where the bank directly pays only one contractor. The foundation company has agree to play “contractor” (no license is required in my state) and referred me to some people willing to work as subs. The loan papers ask for a “bid and draw schedule” and I don’t know what it is or what it should look like and neither does the foundation company.

Answer: The bid and draw schedule are two different things. The bid is just that, the contractors proposal in writing for the entire scope of the project. It should also state expected time of completion and warranty statement. This is your bible document in contracting someone to do a job for you.

A draw schedule is a statement in writing that your primary contractor provides to you and the bank stating the duration of the project and a list of the draws that he will expect the bank to pay, usually stated in percentages and by month. I have seen some banks that expect a very detailed draw schedule that includes any subcontractors and the amount and time frame in the project that they will expect to be paid. Your bank should have clued you in as to what exactly they wanted so I would ask your contractor for a basic schedule of payment that he expects and see if that will fly. The bank will tell you if they want more detail.

Question: Where would you find a list of government grants on the internet?
I’m looking for a site, preferably made by a reputable organization, that will tell you what government grant (not a loan, a grant) you would qualify for, given the information entered. Fastweb.com does it for scholarships, but is there any out there that would do it for grants like to start a new business or for home improvement?

Answer: No Government grants for personal use. All grants are reserved for municipalities or nonprofits. You can check with your municipality and see if they were given any for neighborhood revitalization. This could be for home improvements and or business start up.

Question: First time homebuyer and FHA 203k loan?
As a first time homebuyer should I pursue this property that requires FHA 203k financing? It is a foreclosure – I haven’t seen the house yet (going to see it this afternoon) but it is being sold ‘as is’ so I know it needs some work. We are on a strict budget – we absolutely can’t afford payments on a mortgage any higher than $140k. The listing price is $119,900 so as long as the improvements do not go over $20k we are ok. The assessed value of the home is $142k. Is this a lot to be getting into for a first time home buyer?

Answer: 20k isn’t going to go very far, the repairs would have to be extremely minor. Have a contractor give you an estimate before you commit. I have a feeling you have no idea what materials, labor and permits costs.

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How to Obtain Home Improvement Financing

February 26th, 2010

Whether you are renovating a bedroom or adding a patio deck, you are going to have to plan for the costs associated with the renovation. When planning a home renovation project, it is important to choose the right home financing plan that meets your needs.

Choosing the right home financing plan depends on the length of the project and how much you can afford to pay for the project, When you take on longer repayment terms, you will have to pay more because of the interest rates, however your monthly repayment fee will be lower. By determining the length and costs of the project first, you will have an easier time choosing one of the following home improvement finance plans:

1. Unsecured Loan: Often referred to as a personal loan, an unsecured loan is a loan that is not secured against your property, but against your credit rating. This type of loan is usually taken out for smaller projects. You can obtain a personal loan from a bank or lender. .The interest rates usually vary according to market conditions.

2. Secured loan: A secured loan is a loan that uses the assets of the borrower to ensure repayment of the loan. When you borrow money against your house or vehicle, the lender is guaranteed to retrieve its money if you fail to make the repayments.

3. Home Improvement Mortgage Refinance: Refinancing your mortgage at a fixed rate allows you to use extra money for your renovation project. The repayment schedule is usually for 20 or 30 years, or the term of your mortgage

4. Home Equity Loans: A home equity loan involves borrowing against the equity in your home. You can receive a lump sum to pay for your renovation project. Obtaining a fixed rate will make repaying the loan much easier. If you fail to make your payments, you are at risk of losing your home.

5. Home Equity Line of Credit: This type of loan works by giving you an open line of credit. This type of loan does not usually have a fixed rate so interest rates depend on market conditions. This type of loan is good for “pay as you go” renovation projects.

6. Bank Loans: Bank loans are usually taken out for small renovation projects as they have to be repaid within a few years. Make sure you check to see if you have a fixed rate loan so you will not be dependant on fluctuations in the market.

The following is a list of tips to help you obtain the best home improvement financing plan:

Know Your Final Costs: Before seeking home improvement financing, add up all the costs associated with the renovation project. Make sure you allow for unexpected costs.

Affordability: Make sure you can afford the repayments. Make a list of monthly expenses including your mortgage to make sure you have enough money to repay the loan. Determine the amount you can actually pay each month.

Compare Financing Plans. Don’t settle on the first renovation financing plan. Check with three or four different lenders to see if you can get a better deal. It pays to shop around.

Find a Reputable Lender: Make sure you obtain a loan from a lender that is known for its fair rates and honesty. Read the fine print for any home improvement financing plan. Make sure you know if you have a fixed or variable interest rate.

Because home improvement projects vary from person to person, there are many types of home improvement plans available. To acquire the best home improvement loan, it is important to do your research. No one wants to mistakenly add debt from a project that was supposed to add value to a home.

How you can save money on home improvement help in Toronto and get estimates from local contractors in the GTA area. They offer Home Improvement Help, Contractor Referral, Drafting Service.

Home Improvement Financing FAQ:

Question: Whats my best option to get finance for home improvement?
I’m thinking of renovating my cellar in my house and am wondering what would be my best option to gain funds to do the work. My mortgage company do advances on your mortgage that you pay off over the remaining time left which in my case would be twenty years. Would it be a good idea to do this or would I be better getting a separate home improvement loan from another company. The work has been quoted at roughly 5/6 thousand pounds. Has anyone got any advice?

Answer: Do you need the space? If not, hold off. You don’t want to take on additional debt at this point if you can avoid it. If you have to renovate because you really need the space, or to fix problems with the basement, then your best bet is to put your savings in a CD and get a secured loan (lowest interest rate, easiest loan to obtain now). Or get a second loan for a much shorter term than re-jiggering the mortgage for a 20-year term. That, too, will cost you less in the long run. For such a small amount, you probably shouldn’t go more than 3 – 5 years.

Question: Home Improvement Financing Bank?
I have a small business in Miami, FL, it is a hurricane (impact) windows and doors dealer, and I also do the installation and repairs. I’m searching for a bank that financing my customers. Can someone help me?

Answer: Many big banks offer that. You will have to introduce yourself in person. You will be assigned a contact person who will take the calls from your customers. She will tell you what information your customers must have ready when they call.

Question: Where to find Help to finance home improvement?
Is there help for citizens to fiance home improvement?

Answer: It’s called a second mortgage or home equity loan. Sometimes there are community grants available for low-income families. You should check with your city’s planning commission.

Question: What is the best way to finance home improvements?
I’m just wondering if we should do a home improvement loan, refinance our mortgage, do a home equity loan, etc.

Answer: If the home improvement is one that will up the value of the home considerably (redo kitchen, finish basement) use a home equity loan, just make sure you don’t over exert yourself financially.
For minor home improvements (paint, moulding) save up to do the repairs or do them in small steps.
The best way to finance home improvement is to not finance them but to pay for them up front. This isn’t always an option so go over yours carefully and if you use your house as collateral be sure to justify the extra costs (construction costs and insurance costs).

Question: Financing for a mobile home made in 1976?
I own a mobile home that was built in 1976. I own it out right, no mortgage. I am trying to find a company that does financing or refinance I guess on a model this old, to do some very much needed home improvements. Do you know of any or recommend any?

Answer: I don’t know of any that would do that. I would think a personal loan from a bank would be more beneficial and likely.

Question: Best way to get financed for home improvement of 50k to your house?

Answer: There are lots of variables here that you do not address in your question. What is the home worth now, what will it be worth post improvement? What is your credit situation? What is your first mortgage on the house and how old is that mortgage? What is the rate on your first mortgage. You may want to re-finance the first mortgage with 50K cash out to do the improvements. You will get a longer term and a fixed rate. Most seconds are adjustable rate and shorter term. You need to sit down and speak to a knowledgeable expert about all of your options. You are borrowing a good sum and the variables can add up to thousands.

Question: Can I cancel a contract to have a home improvement company install cabinet door?
I have signed a contract to have a home improvement company install cabinet doors, they gave me 3 days to break the contract which I did not do. Now my finances have been destroyed, and I cannot proceed with the project. I cancelled the project before they gave me an installation date. They say that I HAVE TO proceed. Do I have to? I can’t. I have paid no money so far.

Answer: You can cancel, and that would give them the right to sue you for breach of contract. You would then be responsible for the damages they incurred up to that point (i.e. costs of specialty materials that can’t be used for other projects, etc.), or loss of profit if the contractor hasn’t made any expenditures yet.

Try to settle this before it goes any further. You may be able to talk with the company and pay any material and labor fees they have already incurred or perhaps ask if you can arrange payments for the installation. Otherwise, you are bound by the contract.

Question: If you have a lien on your house can you get a home improvement loan on the property?
The property is financed through a private party, not a bank or mortgage co. Can you get a home equity loan to fix it up? Or a home improvement loan even though there is a lien on the property?

Answer: Yes. The mortgage company will want to get the home appraised to make sure it is worth how much you are trying to take from it. But as long as you have enough it should not be a problem. You can either keep your current mortgage and also get a second mortgage for however much you are looking to get. You also have the option of refinancing and paying off the original lien and receiving the rest of the money from the loan payed out to you so that you can use it for home improvements.

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What is a Demand Loan?

February 26th, 2010

The world of bank loans can be incredibly confusing and incredibly complex. There are a seemingly endless amount of loans that people can choose from when they need a loan. There are certain types of separate loans, such as personal loans, car loans, and home loans. There are also specific types of loans within each type of loan. One of these types of loans is the demand loan. For some, the demand loan may be the perfect loan for their needs. For others, the demand advance could easily be too risky.

A demand lend is simple. Also known as a call loan, a demand lend can be called for at any time. There is no specific timetable that the person receiving the loan should follow for payment. They are allowed to make payments on a regular basis. The lender can actually call for the loan at any time, however. This means that the person who has given the advance can tell the person who was leant the money that they want it paid back in full. The person who took out the loan must pay back the loan in full within a given amount of time once the credit is ‘called’.

For some, the demand loan is perfect. Those who have the money stowed away but would rather not spend it are perfect for a demand lend. They have the financial security of still having that money saved. They can make payments over time, and will have the money ready and available when the credit is actually called. While it may still be slightly risky, it can be the best-case scenario for those who need to keep money in their savings accounts, but need to make a large purchase.

For some, the demand lend is far too risky to be considered. The demand loan can call for the money at any time. If you do not have the money available, you will be followed by debt collectors. A collection agency may take the steps to file charges for an unpaid credit. This could result in you losing valuable assets, including your car and your home. If you do not have the money to back up a demand loan, you are not going to want to venture into one. The idea of making payments whenever you want may be intriguing. The results of you being called on for the loan when unprepared can be devastating.

A demand loan is still a viable loan option. For some, the demand loan is going to be a perfect loan type. For others, the demand loan is going to be too much to handle. If you are thinking about going into a demand loan, you need to seriously understand your options. You need to plan for the worst case scenario. What happens to you if they call for the loan when you are unprepared? Knowing the answer to this question can easily help you to decide whether or not the credit type is right for you.

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Demand Loan FAQ:

Question: As the bank recovered the amount twice for the same demand loan, what is the remedy available as the bank is not acknowledging the e-mails ,fax & speed post?
The only reply is “matter reported to head office” after the gap of 33 months for which no reply or report made available to the complainant till date.

Answer: You may be having record of payment. You may be having a No due certificate. Fax it to the Managing Director of the Bank along with your claims letter and a copy to the Reserve Bank. You will get your money back if it is recovered twice. Claim interest and compensation also. Normally, a complaint is supposed to be squared off within a month.

Question: How do I calculated the imputed interest on a short-term loan?
I know to use the applicable federal rates to find the imputed interest, but I’m not sure if there if there is a specific way to calculate. Assume a $20,000 short-term (1-3 year) demand loan.

Answer: Date of deposit to date of deposit. If no payments are made, do it with the annual rate on 12/31.

Question: Help calculating compound interest in this question?
A demand loan of $3000.00 is repaid by payments of $1500 after two years, $1500 after four years, and a final payment after seven years. Interest is 9% compounded quarterly for the first year, 10% compounded semi-annually for the next three years, and 10% compounded monthly for the remaining time. What was the size of the final payment?

I’m having trouble setting it up. I’m especially unsure on how to start as a payment as made after two years yet the interest changed the first year?

Answer: 1st year – 9% of balance once every 3 months. Don’t forget to add the interest onto the balance due once every three months, and multiply the whole number (principal plus interest) by 0.09 each time.
Year 2, 3, 4 (next 3 years) – do the same multiplication of principal and interest at 0.10 but only twice each year. Don’t forget to subtract the $1,500 payment at the end of year 2 and 4.
Year 5, 6, and 7 – multiply the balance by 0.10 every month of each of these years, adding the interest each time to the balance due.
End of year 7 – total due of interest plus principal.

Question: Loan to child?
I understand that there is a $100,000 rule for avoiding taxation on demand loans. Would it be legal for me to make a $100,000 interest-free demand loan to my daughter and son-in-law, for my wife to make another $100,000 interest-free demand loan to them and perhaps my brother to make a third interest-free $25,000 demand loan to them, securing these loans against their home, recording the loans and signing an agreement with them to give us up to $12,000 in gifts per year, rather than interest, along with their principle payments, with no itemized deductions by them and no income tax by us?

Answer: Form over substance is an issue. You want to make $225K in loans and pretend that it’s below $100K.

You are also telling us that your daughter and son-in-law are going to share their tax returns with you–because the $100K rule doesn’t say these are interest free loans, only that the amount of interest is limited to the net investment income for the year. If they’ve got checking account interest, savings account interest, CDS, bonds, capital gains of any sort, you would have interest income.

The gifts aren’t gifts if you spell them out in the loan. They would clearly be interest.

Question: What is a demand loan?

Answer: A loan that must be repaid in full, on demand

Question: Will this action hurt my credit score?
I currently have good credit. I have a Cash on Demand loan-type card that I’m already paying high interest on. I recently received a notice from my bank telling me that the interest rate will increase in August.

I can either close the card/account and keep my current interest rate, or take no action and keep the account while the rate increases in August. I have NO desire to keep using this account once it is paid off, but my balance is too high at the moment for me to pay it off before August.

Will closing this account now, while it still holds a balance, harm my credit in any way?

Answer: Yes it will lower your score. The reason being, if the account is closed (no matter who closes it) you loose the credit limit which is used to determine your debt utilization ratio. This is the amount owed compared to your total available credit line.

If that account has a credit limit of lets say $5000 and you loose that line of credit, your current balances owed will increase your debt utilization ratio.

You should never exceed 30% of your total debt utilization, and if possible keep it under 10% for a higher score.

Once you have paid them off, then go ahead and close the account because once paid your debt utilization will be 0% on that account and will not affect your score providing your remaining accounts are close to being paid off or are paid off.

Question: Question for loan officers or attorneys?
My husband and I have been divorced since September of 2007. Back in 2005 my ex husband cashed a draft check that came through the mail for 3500.00. Both of our names were on this draft loan because it was through our mortgage company. As of December the amount left on this draft loan was 367.85. I took out a cash and demand loan through the mortgage company. This is a different loan that is solely in my name. However the 367.85 was transfered to my loan because it also had my name on the draft loan. My problem is I never corrected them about my marriage status and I was divorced at that time. We were still living together as we were trying to sell the house. It is listed in the divorce decree that he is to pay this loan off. He is refusing to pay because during the move (we sold the house), he is missing a camera that he said he thought I stole, so he is withholding the 367.85. Can I get in trouble for the loan I took out because I didn’t say we were divorced?

Answer: As long as his name is no where near it, you should be fine. Cut your ties and move on. You owe the $367 because it is in your name, You don’t want a court case because of a few hundred dollars so make sure it gets paid off. The bank does not care about your divorce, all they want is the money. Think of your own credit, it will be damaged if you don’t repay it and that is the only real trouble you are in.

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How Long Will Mortgage Rates Be Low?

February 26th, 2010

In an effort to keep people in their homes and encourage more home purchases, the Federal Reserve’s actions to reduce interest rates have been a success. Many homeowners have taken advantage of low rates and have purchased homes or refinanced their current mortgage. However, prospective homeowners who have not taken advantage of the savings should consider acting soon because many industry analysts say the low interest rates may soon end.

Mortgage rates have seen an astounding drop to as low as 4.5 percent after President Obama’s mortgage refinance stimulus plan was announced as well as the Federal Reserve announcement last November about their plan “to buy as much as $500 billion of securities backed by Fannie Mae (FNM.P), Freddie Mac (FRE.P) and Ginnie Mae.” Mortgage experts are now warning that the low interest rates for mortgages are not going to last. Celia Chen, senior director of housing economics at Moody’s Economy.com in West Chester, Pennsylvania says, “The downward trend we have seen in mortgage rates will not last beyond the first half of this year.” She continued to say, “By then, the Federal Reserve’s program will have run its course and other issues will move to the forefront that could push mortgage rates higher.” Chen also said, “By the first quarter of 2010, rates should be at 5.87 percent.”

The reasons the interest rates will start to increase include an increase in government debt and a positive outlook that the economy is beginning to rebound. This may be the perfect time to secure a mortgage or refinance an existing mortgage because as the economy begins to recover, interest rates will begin to rise. For instance, economic analysts have recently reported that “last year, the yield on the 10-year treasury was only about 2%. Recently, there has been an increase to over 3.5%.” The result will be that interest rates on loans and mortgages will start increasing again. As well, 30-year loan rates have seen a jump. Recently, the average interest rate rose to 5.27%. This is up from about 4.75%.

Greg McBride, senior financial analyst at Bankrate, Inc, in North Palm Beach, Florida, says, “Expectations of a 30-year fixed-rate mortgage at 4.50 percent are too ambitious. Inflation worries may begin to spook investors and that could send Treasury yields higher, which would cause a corresponding move in higher mortgage rates.”

Cameron Findlay, chief economist at online loan broker LendingTree.com in Charlotte, North Carolina, says “mortgage rates at 4.50 percent remained possible, but not probable.” As well, Moody’s Economy.com has forecasted interest rates at “4.5% by mid 2009 after dipping to a low of 4.37% in the second quarter. In the third and fourth quarter, rates are expected to rise to 4.57% and 5.18 %.”

If the increase in rates continues, people who are considering refinancing an existing mortgage, buying a new home, or selling their new home, may miss out on a great deal if they wait too long. This may be the best time to lock into a low interest rate mortgage.

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Mortgage Rates FAQ:

Question: How do current mortgage rates help new home builders?
I’d like to buy new construction as a result of the great mortgage rates right now. However, by the time I’d close on my house in December, it could be a totally different ballgame and rates could go through the roof. It seems to me, then, that low mortgage rates only help people refinancing or buying an existing house.

Answer: Most economists predict that interest rates and home mortgage rates will remain low for some time to come. There may be some slight increases later in the year as the economy and the housing market improve but the rates are at record lows and now is the perfect time to buy a new home.

Have you spoken with a lender? It is possible to lock-in a rate for a small fee and thereby guarantee that you will not see substantial increases.

Question: What is the best way to shop for mortgage rates?
I have been pre-approved by a local very large bank known for their mortgages of which I am a customer. I know the lender. Once my short sale is approved I will get my first rate & points from him. Then is it best to shop on the internet or go in person to other banks? Do credit unions or online mortgage companies offer better rates and less points than nationally known banks?

Answer: Good luck getting your short sale to the closing table, about 10% get there, which is pathetic. Do not go to internet lenders, they promise all sorts of stuff up front, but the final package is usually much different than originally discussed. Go to different mortgage brokers and compare fees. Make sure they don’t run your credit every time. Just tell them you are shopping for a loan and see what they have to offer. Banks like Bank of America will only have one way to give you money and that is their way. Mortgage brokers work with a lot of different banks. Keep that in mind when shopping around.

Question: What are the current mortgage rates like and are there any signs of the mortgage rates changing soon?
I’m looking to get the best current mortgage rates available because me and my wife are looking for our first home purchase. Can anyone point me in the right direction?

Answer: There is no such thing as a standard rate as there was 20 and 30 years ago. The rate you get depends on your credit rating, the type of loan you want, the down payment you put down, the points you pay up front to buy the rate down and other things.

The very best thing you can do is ask friends and family that have gotten mortgages recently and is happy with the service. Even large mortgage companies have crooks working for them- use someone local, competent, and recommended. The rates are very similar between companies because they are all getting their money form the same source.

I think that rates will remain low for a while. But when we start recovering from this recession I think inflation will jump quickly and the mortgage rates will also.

Question: What are mortgage interest rates based on and how do I estimate what my ARM rate will be when it adjusts?
My 5-1 ARM adjusted last year and went to 6.25%. It will adjust again this November. Are mortgage rates based on the feds fund rate? Or something else? How can I estimate what my new rate will be?

Answer: There are multiple indices that are used by mortgage holders to adjust a mortgage rate. Some are tied to t treasury bills, some are tied to the LIBOR rate. You will need to check with the mortgage holder, (or just check your original mortgage contract) and find out what index your mortgage is tied to, and what the”spread” is. (The spread is the additional % added to the index).

Question: What caused the home mortgage rates to sky rocket, causing people being unable to pay their monthly mortgages?
The recession was caused by people being unable to pay back their home mortgages because the mortgage rates were too high? Banks were not getting their money back from home owners, causing a credit crunch, thus they were unable to lend money to big businesses. Big businesses then had to cut back on expenses and began to lay people off the the thousands. So what caused the mortgage rates to go up so high that started this financial mess in the first place?

Answer: A simplified answer is that during the Clinton admin, there was a Dem push for making banks loan money to underqualified minorities, called the Community Development Act. Barney Frank and Chuck Shumer, both dems pushed Fannie Mae and Fannie Mac to underwrite these types of extremely risky loans. Eventually, the financially underqualified loans resulted in the foreseeable; you shouldn’t loan money to people who you know thru history will not be willing or able to repay it..and the bubble burst.

Question: Why do mortgage rates go up when the term goes up?
I’m looking at mortgage rates for closed term, ranging from 6 months to 10 years, and I’ve noticed that the rates actually increase as the length of the term gets higher. Why is this the case?

Answer: The general “rule” in banking and in finance is that the longer the loan, the higher the interest rate. The reason is that the lender takes on more risk with longer term loans. For example, if the lender commits to a fixed rate 10 year loan to you, but rates rise sharply within 3 years, they lose out on getting that higher interest rate. (conversely, if rates fall, then the bank wins on that fixed 10-year loan to you).

Question: Is it true that Mortgage rates go up usually in summer and come down during the end of the year?
I am planning to get a home in Bay Area. Is it true that Mortgage Rates usually go up in summer and eventually calm down during the end of the year?

Answer: I suppose in theory the demand for housing may be heavier in spring and summer in some areas, and someone is trying to say that housing demand influences mortgage rate in some way, but I doubt it’s true. Certainly not everywhere and at all times.

Mortgage rates fluctuate according to the bond market — supply and demand of money and credit. Predicting the Bond Market is almost as impossible as predicting the Stock Market. Professionally, baring unforeseen circumstances (a HUGE qualification, BTW) , I would hazard to guess that tomorrows market will look a lot like to days market. Beyond that, only a fool would make a prediction backed by serious money..

Question: How does the unemployment rate affect mortgage rates?
From regression analysis I found that there is a strong positive relationship between the unemployment rate and mortgage rates. I can’t figure out why. Any thoughts?

Answer: You need to be careful, mortgage rates are prospective rates and unemployment data is retrospective data. Data collected at time t may in fact reflect time t-1 and forward rates at time t+359. Further, the mortgage market has itself changed over time being deposit funded and insurance reserve funded twenty years ago and mutual fund owned today. That creates different owners with different liabilities.

Finally, time series regressions are very difficult to do correctly. It is an entire field in itself.

Unemployment is related to bond prices because higher unemployment levels tend to result in lower inflation, which makes bonds safer and permits higher bond prices, so there should be a positive relationship with prices but a negative relation with rates. However, a mortgage could be thought of as 360 forward obligations and the current unemployment level does not reflect future beliefs about the economy in a direct manner.

If you find a positive correlation that is very strong, there is also a possibility that you have a unit root problem and your t-tests are misspecified. The significance could be spurious. It partly depends upon whether the relationship is stationary or not. If you are running your tests using an ordinary statistics package, it is likely your correlation method is invalid.

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Get Your Mortgage Rate As Low As 2%

February 25th, 2010

Yes, it’s true. Due to the economy and the general decrease in income in the American household, the feds have a program that can cut your mortgage rate to 2% in order to make your payment 31% of your gross income. However, it seems that qualifying for this program will take some pretty fancy maneuvering. Here are some tips to give you a general idea if you can qualify, and what to do to get the loan to the closed and funded status.

The program that I am speaking of is the Making Home Affordable program. This program only applies to the mortgages held by Freddie Mac and Fannie Mae. These are the giant mortgage holders that were taken over by the government about one year ago. They are cutting rates on mortgages to as low as 2% in an attempt to get the payment at or below 31 % of borrowers gross income.

First, you need to know if one of these two agencies owns your mortgage. Even if you got your home loan at a bank, it may be owned by one of these lenders now. These two large companies buy loans from commercial banks; they own a major portion of the nation’s home loans.

To find out if Freddie or Fannie owns your mortgage, you will need to visit both the lenders web sites and fill in the requested information about your residence and yourself. Remember, you may not know if either of the two agencies owns your loan. The bank that you received the loan from may still be servicing the loan even though Freddie or Fannie may own the loan. So you need to check no matter what you think. If they don’t own your mortgage, well, you don’t qualify.

To estimate if you qualify, figure the amount of your mortgage payment (including principle, interest, taxes and insurance) and figure what percentage this amount is of your gross income. There are two reasons you know that you have and excellent chance to qualify.

You may have taken out an adjustable rate mortgage that has skyrocketed in interest and the payment has gotten almost twice what it was in the beginning. The second would be that one of the two of you as income earners has either lost their job or has had hours worked cut back considerably.

There is a trick to qualifying, you have to convince the bank that your are in dire straights but with the help of the mortgage payment reduction, you will be stable financially. You will not qualify with a large savings account, this is the biggest dis qualifier. You cannot spend 45% of your income on private schools or golf club dues.

You cannot be in to bad of position ether, for example, you won’t qualify on unemployment income that is considered a 6 month income, and the requirement of employment is a strong chance of continued employment for 9 months or more.

You get the picture, the window for qualification is small, and one Lender stated “it would not hurt to go delinquent by 1 or 2 months, I feel terrible saying that but that will get the banks attention”.

There is help on the inter net to see if your qualify, contact HUD, or another non-profit, Homeowner’s toolbox who claim they can estimate the probability of approval for you.

It’s a great time to be shopping for a house with exceptional mortgage loan rates available from reputable credit unions. For extra financial security, have a look at fixed GIC rate products.

Mortgage Rate FAQ:

Question: For a 100k home loan, would you pick Wells Fargo or Bank of America? Considering Mortgage Rates, Closing Costs, etc.

Answer: Wells Fargo for sure, they are wonderful to work with and easier to get a loan through them.

Question: New mortgage applications had their lowest week since 1997?
Sounds like not even the 8,000 dollar tax credit and 5% interest rates are making a difference? Have we hit bottom in real estate?

Answer: The housing business will probably be one of the last parts of the economy to return to normal. I wouldn’t expect it for another 2-3 years, regardless of what happens now. There is no easy way for a working class with no capital to save up the down payments now that savings accounts are running dry.

Question: What are my mortgage options?
I have a mortgage that has a ridiculous interest rate. The amount I owe on the loan is MORE than what my house is worth now, and I have no idea what I can do because I am having trouble making payments. Do I have any options at all? I’ve been turned down for refinancing numerous times, including one from the VA.

Answer: Depending on the type of loan you have now, you may be eligible for one of the mortgage relief programs designed to lower rates on homes that are worth less than the amount owed. eg. Hope for Homeowners, HARP, etc.

Otherwise many people in your situation are walking away from the mortgages. I don’t recommend it. Many borrowers were tricked into accepting ARMs for mortgages. Sure, they could afford the payments in the first 2-3 years, but not a chance after that. Everyone was betting against the market – they lost. Borrowers, lenders, investors.

I would offer my lender an option. Refinance my balance to a 30 yr fixed at 6%, or I’ll walk away. If you don’t have the money, what’s the difference?

Question: Where can I get a £75,000 mortgage in the UK when I earn £13,500?
Basically I just need a mortgage that allows me to have up to £75K on a wage of £13.5K .I didn’t think it would be that difficult when interest rates in some banks aren’t so high and you can have them for up to 25-35 years but no one is offering what I need on there sites. I fall short by 10 to 16 grand.

Answer: Try for an interest only mortgage over 20-25 years, and say in about 5 years look for a fixed mortgage. Financial Advisors will shop around for you, but will charge you £1000 plus upfront.

Question: Can I get a mortgage loan with a poor credit score rating?

Answer: Sometimes, but it depends on the specific loan. Usually because of the low credit score, your interest rates will be higher.

Question: What does an interest rate mean on your mortgage payment?
I have a conventional loan of 218,400 at 6.375. My monthly payment is 1904.99. On my last statement, $239.66 went to principal, while the rest to interest. We are at year 4 of our mortgage. I get the whole pay more interest at the beginning and at the end you pay more to principal. My main question is what does that 6.375 mean? How does that affect my payment. For instance, on a credit card the lower the interest rate, the lower you give to the company. But right now about 12-15 percent is going towards principals.

Answer: You are paying 6.375% interest per year (divided by 12 months) on the current balance {recomputed every month} of what you owe the bank. That is why so much of your fixed payment goes to interest, and a smaller amount to principal in the first few years. But as the loan balance comes down over time, you will be paying less interest and applying more of the payment to the loan (which means your balance will come down faster, less interest, more principle,……repeat until loan paid off.)

If you refinanced to a lower rate, you would have a smaller monthly payment. But unlike variable credit card interest rates and payments those amounts are fixed/set with a mortgage (but you can pay more principal; which is like investing your $ at 6.375% for the life of the loan while building up equity, and the payback period will be shortened, and you will pay less in overall interest.)

Question: What is the least amount of time you need to build credit to buy a house?
I have lived in an apartment for the past 6 years and my lease is up in 5 months. I have never had a credit card, and i show up on credit reports as having NO credit. I am getting a credit card this weekend, and I’m wondering if 4-5 months is enough time to get a good interest rate for my mortgage?

Answer: 4 or 5 months is not going to be great. You will have what’s called a “thin file” and it may get declined. Unless you have a nice down payment lets say 25% to 35%. You will need 5 to 7 years of SOLID credit history to get a good rate.

Question: What is so bad about being “under water” on your mortgage?
I know that 1 in 4 people owe more on their house then what it’s worth but I don’t understand how that can be bad if you have a regular mortgage payment (fixed) and you haven’t lost your job.

I understand why people who have adjustable rates are upset about it being worth less then they paid but I don’t understand what it affects if your still in ok shape financially. I mean, other then not being able to sell your house any time soon, I don’t understand.

Answer: The problem with that is that even when you sell the house for what it’s worth you still owe money on it and will continue to make payments on something that you don’t even own anymore.

It really only becomes a problem when the bank forecloses on it or if the homeowner has to sell. If the homeowner likes the house and keeps up on the payments it means nothing, the value should increase eventually. Over time, real estate always increases because of inflation.

And it’s incredibly silly to expect that you will always have a job and that the bank will be stable enough to not call up your loan. Stuff happens to everyone.

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Finding the Best Mortgage Loan

February 18th, 2010

Taking out a mortgage on a new home is a very big step in your life. If you are obtaining a mortgage loan for the first time, there are a few things you should consider.

Before you search for a new mortgage loan, you first need to know what type of loan is best for you. There are many types of loans available on the market to choose from. Some mortgages are very traditional and straightforward, while others might be a little more difficult to complete understand.

If you are buying a home for the first time, an FHA loan might be just right for you. FHA loans are obtained through a regular mortgage lender, but they are backed by the U. S. Government. Qualifying for an FHA loan is easier than other loans because lenders know that the loan is secured by government funding.

The most traditional loan on the market is the fixed rate mortgage. With a fixed rate mortgage, you choose the length of time you want to pay off the mortgage, as well as the interest rate. Fixed rate mortgages usually have a payback period of 10 to 30 years. During the life of the loan, the interest rate will remain the same.

Adjustable rate mortgages are similar to fixed rate mortgages in that you choose the length of time you want to pay on the loan, as well as the interest rate. The difference with this type of loan is that the interest rate will change during the life of the loan. As the prime lending rate goes up and down, the lender has the option to raise or lower the interest rate on your loan.

Veterans of the U. S. Military have an option that other borrowers do not have. Many veterans will be able to qualify for a V. A. Loan. Most mortgages require the borrower to have a down payment to purchase a home. The V. A. Loan is different in that no down payment is required for qualified borrowers.

There are a number of newer loan types on the market today that look very attractive to borrowers. Many loans look like there is a lot of flexibility in the way they can be paid. Watch out! If you take the time to read the fine print on some of these mortgages you will see the hidden truth. Some of these loans require a balloon payment. Balloon payments require the borrower to come up with a very large amount of money to finish paying off the loan.

If you find the loan you want, but the interest rate is not as low as you would like, you can change the rate. Lenders allow you to pay points to lower the interest rate. A point is a percentage of the loan amount, usually 1%. By paying points, you will be able to lower the interest rate. This is a particularly good option for fixed rate loans.

Finding a good mortgage loan is easy these days. If you search the Internet, you will find many mortgage lenders doing business online. Do a little research first, decide what type of mortgage is right for you and you will have no trouble finding the mortgage loan that is right for you.

When you’re deciding to buy a house, some of the factors that you have to take into account are mortgage rates. As mortgage rates are important for home-buyers, GIC rates are important for investors. If you’re interested in a customized financial plan, remember to visit us.

Mortgage Loan FAQ:

Question: How do I calculate the principal into the mortgage loan?
If I put $3500 a year to the principal payment of my mortgage. How do I calculate the rest of the time in loan if I dump the allotted amount to the principal only? How many years would I knock off the total mortgage? I have about 24 years left at a little over 7% interest on $224,000.

Answer: You need an amortization calculator. It requires the original mortgage amount and original term but If you assume the mortgage is starting now, say it is 25 year mortgage for $224000, an extra $292/month ($3504/year) will save almost 8 years.

Question: Can I get a mortgage loan with less than 2 years of employment history?
I have been employed for 8 months, and a full time student for 14 months, unemployed before that. I want to know if I could get a mortgage loan? Will a down payment help?

Answer: If you have been in school or trade training immediately prior to entering your employment, and get can verification of such, then it is a possibility. The lender will probably require a written verification of employment from your current employer, to verify hours you work and rate of pay. Down payments always help. 20% would be phenomenal.

Question: I have a 360 month $80k mortgage loan with Bank of America. I have about 340 months payments left?
My grandma died and I inherited $20k. Can I pay $20k towards the mortgage and have BOA re-adjust my mortgage payments to a 340 month pace? What is that process called? What do I tell the Loan Officer?

Answer: You can find any number of mortgage calculators on line or use an excel spreadsheet to determine what impact of paying down your principal. Your mortgage papers will say if there is any prepayment penalty or not. You send in the check with the instructions to apply it to the principal.

But if I were you, I would talk with a independent financial planner. What is best to do with the money depends on your financial situation. Do you have adequate cash savings? (3 months of income minimum). Do you have retirement savings? You might have a better investment result and tax reduction by setting up an IRA.

Question: If you have bad credit but a first time buyer is it possible to obtain a decent interest rate with fixed mortgage if you have a bad credit history?

Answer: The only way to purchase with dinged credit and still have a decent interest rate is via FHA. You need a 640 credit score and will get a very good interest rate, in the 5% range for a 30 yr fixed.

If you don’t have a 640 then you need to begin working on your credit via credit repair and credit improvement.

Question: Using VA Loan for house mortgage, but how to get by the company’s refusal to qualify me?
I’m approved for VA loan on the mortgage. The owner and myself are trying to keep it from foreclosing. But the mortgage company has been difficult to deal with and might just say I don’t qualify. How do I know that isn’t BS and fight for my rights to refinance and continue payments?

Answer: If you’ve been approved for the amount of money that the home seller wants, then the only one who will disqualify you will be the Veterans Administration – the homeowners mortgage company wants to get their money, they don’t care from where.

Question: If I want to add my own name as the primary account holder to my mortgage loan, is it possible?
I want to take my deceased husband’s name off and make me the primary holder. I know I probably need to mail in the death cert. but what else will the mortgage company do?

Answer: If it was a joint mortgage, the death certificate should be enough in the US. If it was his sole mortgage, it will probably need to be refinanced. Start with a call to your loan officer.

Question: What reasons would a mortgage company have for calling a loan?
Is it the mortgage company or the bank that calls the loan?

Answer: The death of the primary borrower, default on payments, balloon payment, loan fraud are some reasons. Typically any breach of the contract terms or severe loss of the property. (say it burns down, they can demand payment) Additionally, problems with the local government may initiate this, such as not paying your property taxes or health and safety issues for the community.

Question: If your mortgage loan states that you’re using your home as a primary residence are you allowed to rent it out if you move out of the house?

Answer: No that could void your loan and the lender can demand payment in full. You need not get permission from the lender. Most people do not notify their mortgage company and just keep paying. Also your home owners insurance policy would be void so you need to buy a commercial policy.

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Getting a Business Loan – Your Step by Step Guide

February 6th, 2010

All businesses need a steady flow of cash to ensure smooth operations that will in turn improve the profitability of the business. If you find that your business is in need of additional funds for a steady cash flow, here is your step by step guide in getting a business loan.

1. In getting a business loan, it is important to gather all the information that you can about the loan. This is where you will be grateful to the internet as it offers valuable and rich sources of information that will help in making sound and prudent decisions.

2. Don’t just grab the first financial company that you may come across with no matter how viable and practical the terms are. You must evaluate at least three to five financial companies and see how their services compare with one another.

You also have to make sure that you understand their terms and conditions especially and particularly the fine prints. Don’t hesitate to ask if something is not clear to you. It is your right as a prospective client to clear all gray areas and financial companies are duty bound to tell you how they will be able to meet your needs and wants as their prospective client.

3. If you are already considering one or two financial companies in getting a business loan, you must also be ready with the essentials such as your business documents. If you are just starting your business, you may need to present your business plan on top of other documentation requirements. For existing businesses, you may need to submit your business permit as well as other pertinent documents required by the financial company of your choice.

4. Depending on the type of business loan that you are getting, you may need to present or submit guarantee or collateral so you have to make sure to have it ready and easily available.

5. You may also want to upgrade the standards of your business or add some prestige to it to up its value and secure better loan from the effort. Building a website is a good way to do so and you may earn even more with your website up and running. Besides, what business on this age does not have a website?

6. Increase the chances of profitability of your business. This is crucial in getting a business loan it shows the financial companies of your repayment capabilities. The higher your capabilities are, the higher the amount of business loan you can get from these companies.

Getting a business loan this day doesn’t have to be complicated. You can now quickly avail of the necessary funds in the form of a business loan either to start up your business or to use it for steady cash flow to expand your business.

With the ready accessibility that the internet provides, getting a business loan can almost be instantaneous as there are several online services you can avail of the loan. As easy and as simple as a few clicks, you can get your business running or grow it bigger and better. The choice is yours.

Business Loan FAQ:

Question: I need a small loan for business?
I only need a loan of about $2000 to start off a small business. This seems like a very small amount to what the SBA is willing to offer; is there a way to borrow this amount without a collateral, especially if I am pioneering this new business where most have not chartered?

Answer: For my at home business I borrowed around $1200 and just applied for a personal loan instead of a business loan. Try that route. Always go through a reputable bank and watch out for those weird websites or emails. If it sounds too good to be true: It Is!!

Question: I need a loan to start a business and I’m a felon.
I’m a female, on probation, never been to prison. But I would like to start a business. How do I get a loan?

Answer: The SBA is a good place to start. Contact banks near where you live who are SBA lenders. I believe the other poster is correct that you must wait until you are off probation. It will be virtually impossible to get any type of conventional loan while you are subject to being violated.

There should be a chapter of SCORE near you. I’d also suggest you pay them a visit, have a mentor assigned, and discuss your plans.

You will have to prepare and submit a business plan. Depending on what type of business you will start and how much you want to borrow the plan need not be more than a few pages long, but it does need to convincingly show that your idea will make enough money to pay the loan back and that you are capable of successfully running a small business. It can’t simply be “I thought I’d like to give this a try”.

Question: If you claim bankruptcy does it make it hard to get a business loan or loans in the future 10 years after?

Answer: Bankruptcy does make obtaining credit more difficult immediately after the bankruptcy. By the time it ‘drops off’ your credit report after 10 years, it will have ZERO impact on your score. If your history AFTER the bankruptcy is clean, you should be able to obtain a loan within 4 to 5 years.

Question: Need to find someone to loan me $500,000.00 (US Dollars) for a start up restaurant deli business?
Repayment would be over a 10 yr period

Answer: Find an investor. 99.99% of investors just won’t lend you the money though. They will want to see that you actually know what you’re doing and they will want to know your business plan and how much they’ll profit off of lending you the money.

As for a loan, if you try to get a business loan, banks are gonna require that you have established credit and an established job so you can repay the loan. No one will lend you the money straight up w/o you having an already decent income as well as assets(items/stocks/bonds that you own that can be turned into cash) in case you default. The business venture isn’t a “to have a business is to make money” kind of thing. You already have to have money to back yourself up.

Question: Need Help Starting My Own Business?
I am wanting to start my own business. I have everything planned out and ready to start, have an office to use and have got a work van organized. The only problem is I don’t have money to fund it. If I want a business loan from the bank for 10k they want me to put 3k of my own money down which I don’t have. I have got a meeting about a small business grant with business gateway next week but does anyone have any other ideas about getting money?

Answer: At 30% investment on your part, the bank is offering you a reasonable deal. Most investors expect you to put up at least 50%. If you have an office and a van, what do you need money for? Is it possible to ask customers for a deposit before you start working for them so that they fund your materials for your first few jobs?

You mention business gateway. Have you also spoken to Business Link? They’re very helpful on funding, too.

If you really need the funding and have to find $3k for the bank, try asking friends and family. If 6 of them put up $500 each, you’d have the money. Make sure you let them know when they can expect repayment.

Question: Has anyone had any experience with a business cash advance?
I need cash for my business and cannot get approved for a loan. I found bankcardfunding.com on google. Does anyone know about this company?

Answer: Well to answer your first question… Yes, I’ve had 2 merchant cash advances with my company. They are very good if you need money now and cannot get a bank loan. What they did was take 20% of my credit card sales until the balance was paid off. So if I made no money one day, they didn’t get paid that day (with is another plus). The down side is that you are going to pay more money than getting a loan, but another plus is that you pay it back much faster. I think my last advance was paid back in 6 months.

As for your second question… Yes, I do know about bankcard funding. I used them both times for my business cash advance and I recommend them.

Question: Do I have any chance of getting a business loan?
My husband and I are thinking about purchasing a small business. We have no business experience. Our only major debt at this time is a mortgage on our home. I estimate we’d need a loan of approximately $15,000 for the business. Do we have any chance of getting a loan? I don’t know how likely it is that a bank will be willing to lend us money for a business with no prior business experience.

Answer: Yes, it is possible to get a loan without previous business experience. I would really advise for you to create a business plan and present that to the bank. A business plan will show the bank or investor that you have fully though out the process and researched your potential expenses, as well as the competition. You can include the previous owner’s financial statements and include forecasting for what you expect in the upcoming years. The more evidence that you can provide that you know what you are doing and that you have solid plans, the more likely you will get the loan.

With the current economic climate, it is a bit harder to get funding so there are alternative ways to receive a loan. You can try prosper.com if you or your husband has a good credit history. I have personally been a lender on prosper.com for about 2 years now – it is a reputable peer-to-peer lending site. If your credit is not very good, then you will end up spending more on interest than a bank but it is a great backup plan.

Question: I am a ex felon. I was in prison for theft. How can I get a business loan?
I already have an established business. I just need the money to expand. I don’t have bad credit. I just have no credit. Is there any programs, grants, or loans that I can get to help me?

Answer: The past felony conviction won’t get in the way of your right to apply for a business loan. Once you have served your time, then you are free to apply for grants or loans just like anyone else.

Posted in Business Loans | No Comments »

FHA Versus Conventional Loans – Pointing Out the Differences

January 31st, 2010

When people buy a house, they usually get mortgage, as it is more convenient to pay back rather than shelling out thousands and thousands of cash. Besides, mortgage helps you to use your money cleverly. Like the concept of investment, debt helps you use your instant cash for other financial opportunities because with debt, you get to make a purchase or avail of services without having to shell out the whole amount now. That’s why mortgage is a popular concept in home buying. Besides, in the absence mortgage, it would be impossible for people to afford buying a home.

However, mortgage may help you afford home buying but the overall cost of getting it may be sorely expensive. If you are not aware of the different kinds of mortgage and their rates, you may end getting a plan that is going to give you problems in the future.

Yes, it is indeed true. There are different kinds of mortgage in the industry and they have different terms and conditions. The rates are also lower for some, especially those that are government-backed.

One of the loans that you could enjoy is the FHA loans. FHA stands for Federal Housing Authority. It is a kind of loan created by the government in order to provide low financing cost to the American borrowers.

This kind of financing is highly appraised for not being strict in qualifying for credit. For you to see the difference of FHA loans from traditional loans here is a comparison:

1. Down payment. As to upfront down payment, the minimum for FHA loan is at 3.5%. As for the conventional loan, the minimum falls at 20% (after which you will be required to obtain private mortgage insurance). It can also be in a form gift fund.

2. With regard to closing cost, it is lower compared to conventional loans. FHA closing cost is highly regulated by the HUD; compared to conventional that could be go higher depending on the rates and services of the loan obtained.

3. The mortgage insurance is lower compared to traditional loans.

4. The reserve requirement is eliminated. There is no need to pay in advance the principal, interest, taxes and insurance upon closing.

5. If you decide to pay off your loans in advance, you won’t have to pay for penalties.

6. Underwriting is not so strict. It can be given to anyone just as long as they can afford the loan and just along as the house brought will be used as primary residence. They are more concerned with the borrower’s ability to repay rather than spending time investigating on credit worthiness.

7. FHA limits is identified using your monthly income, which are lower than the conventional loan. If amount you borrow exceeds the limit set, you will then have to shell out additional funds. On the other hand, you can take out another loan for the excess.

So take not of these things and weigh the advantages and disadvantages. Know that traditional loan isn’t just the only loan you can get. You can avail of the FHA loan as well just as long as you can afford it.

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FHA Loan FAQ:

Question: Is there any state where I can apply for an FHA loan when contracting?
We currently reside in AZ and our loan officer is telling us that we can’t apply for an FHA loan if we are contractors. I know you can apply for a loan in a different state from the one you reside at, are there any states where I can apply for an FHA loan when on 1099?

Answer: It’s more a matter of qualifying because you are independent contractors. It may be FHA guidelines and has nothing to do with the state you are working in. You may have to go another financing route, have you thought about Contract for Deed?

Question: Considering an FHA Loan through Chase Bank in San Diego. Any complaints about Chase?
My wife and I have been in contact with Chase Bank in San Diego regarding an FHA Loan as first time home buyers. We are a little hesitant going through Chase as we don’t know much about this bank. Would it be better to try and get a mortgage through a local San Diego Credit Union? My credit is excellent, no problems on the credit report.

Answer: I’d go with a smaller lender if you can. But not all lenders offer FHA loans. That’s the first question you’ll need to ask.

Question: FHA loan in 1998 – Seller purchased from builder with builder buy down. How much do they owe today?
A seller comes to you who purchased a home in August of 1998 with an FHA loan. The seller purchased the home from a builder with a builder buy down. The original loan amount was 77500. It was a 2 year 1 point per year buy down Starting at 6% on a 30 year loan. How much do they owe today?

Answer: If the interest rate were 5% in 1998 and 1999 and then jumping to 6% thereafter with the payments adjusting the answer would be $64,147. However if the interest rate were 6% in 1998 and 1999 and increasing to 7% thereafter the answer would be $65,859. However you should check with the lender to be sure.

Question: How soon can I refinance a new FHA loan?
I’m in the process of buying my first home, and the bank won’t finance it using a conventional loan. How soon can I refinance to get rid of the mortgage insurance and switch over to a conventional loan? I think I’ve heard an owner has to carry MI for 5 years? Is this true? Do I have to wait 5 years to refinance?

Answer: They do have restrictions. Your deed will tell you or you can ask your agent. If you are unable to qualify for anything but FHA, you won’t qualify to refinance anytime soon. They use the same rules.

To get rid of mortgage insurance, you need at least 20% equity. Why not just pay that up front? If you refi with less than 20% equity, you still have PMI.

Question: What is the best way to get a low interest fha loan in ohio?
Would it be better to deal with mortgage broker or individual banks or would a realtor be a help?

Answer: The realtor is no help as they will send you to their lender of choice. The mortgage banker or broker can find the best rates.

Question: Is a gas-burning fireplace a reason NOT to get an FHA loan?
How about a regular fireplace?

Answer: No and No. But you will have to pay a chimney sweep to certify the fireplace is installed correctly and operating at 100%.

Question: Do I qualify for an FHA loan or FHA grant?
I’m married and wife has had her parents house under her name for the last 3.5 years. If I apply for an FHA loan just under my name, do I qualify? Or does the fact that my wife has the house under her name deny me. I have never been a home owner, never bankrupt, no foreclosures, and my credit score is around 640.

Answer: You can, BUT, since you are married, your wifes debts will count against you in regards to your income/debt ratio. If she makes good money on her job, both of you can apply for this loan and see if your ratios come out right, considering the other home is not FHA?

Question: If my husband is unemployed, but I have a steady job, can I still qualify for a FHA loan?

Answer: Sure, as long as your income and credit are OK. There is no rule that all adults in a household have to work.

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Is an FHA Loan Still a Good Deal?

December 16th, 2009

The Federal Housing Administration (FHA) is an agency that aims to assist hopeful future homeowners to successfully gain ownership of a property. For one, FHA loans are widespread among those who have difficulty in financing. However, any borrower must see both sides of this loan so a profitable venture could be expected in the end.

Basically, an FHA loan enables a buyer to give a small down payment upon purchasing a home. Say, he only has to pay 3 percent of the purchase price as the initial payment. Acquiring this type of loan may be helpful for current homeowners to finance remodeling a home, obtaining home repairs or home energy-efficient improvements. This could also be used to refinance current loans. This loan is also advantageous for sub-prime borrowers as there is no prepayment penalty involved.

All FHA insured mortgages are assumable, typically beneficial for sellers. For example, a financially capable buyer may claim responsibility of the seller’s mortgage. The buyer would take over the loan so the seller would be saved from scouting refinancing loans. Then again, there are certain restrictions on the assumability conditions of FHA loans. Only those mortgages that originated before December 1, 1986 are free from assumability limitations. The lender usually requires thorough report of the creditworthiness of the person (assumptor) assuming the loan. Private investors are not allowed to become assumptors of insured mortgages that were subjected to restrictions of the 1989 Act. To further learn about terms and conditions, the Housing and Urban Development online site has specific information about this matter.

Now here is the other side of the deal, there are some cases wherein this loan would not work for the home buyer’s benefit. Some sellers could not take the risk of receiving such loan. This is because the agency is not actually lending money to the buyer. Instead, the agency merely guarantees the lender to cover for the buyer in case delinquent payments occur. And processing the payment claims may take some time. Thus, there are fewer deals now that accept offers from buyers backed up with FHA loans.

Another disadvantage for the buyer is that there is a need to pay more for the private mortgage insurance (PMI) given that the down payment is much lower than conventional market rates. The situation here is that the buyer has to pay the one-time PMI fee and continue paying for monthly dues. The money saved from low down payment is then off set by the costly obligation every month.

The loan application process also poses some difficulties. There are a number of requirements the applicant has to accomplish for a limited period of time. There are also limitations on the type of housing units the loan might be used for and amount of money that could be borrowed. On the other hand, the limitations vary according to location.

So for the buyer, you firstly need to check out the application requirements and restrictions in your area. Weigh the pros and cons of getting this type of loan. The main advantage is that you could be given financial leniency. For the seller, you must screen your buyer if despite the attached FHA loan, you could still gain from the selling transaction. Or if you have this loan yourself, you need to evaluate whether the buyer is capable of assuming your mortgages.

There is no harm in trying out this type of loan. Both the buyers and sellers must take into consideration both the benefits and repercussions of acquiring such loan. In the end, both parties could look forward to satisfying deal.

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FHA Loans FAQ:

Question: Recent experience with FHA loans as a seller?
My realtor said that there is a good chance buyers for my house will get an FHA loan. I have heard that these loans can take considerably longer than conventional loans and the inspections are nit-picky and hard to pass. However, she also said that things aren’t as bad as they were in the past. Any recent experiences would be appreciated.

Answer: FHA is not nearly as bad as they used to be… 30 day closings are the norm now. Conventional loans require more money down & higher credit scores so there is more hope for your buyers if they go FHA.

Question: How to get FHA loan if property tax already payed for the next year?
I have already payed all of my property tax for 2010, but I understand that FHA loans will charge property tax with each payment. If I get an FHA loan do I risk having to pay property tax twice for 2010?

Answer: Your information is wrong. Prepaying your property taxes does not prevent you from getting an FHA loan nor do you have to “pay twice.”

Question: What are the minimum requirements for a fha home loan?
I have found a home I would like to buy but my credit rating is bad. The home is for 60,000 and I have about 4000.00 to put down. what’s the minimum credit rating for a fha loan and the other requirements? Also, where do I find a fha home loan at?

Answer: The minimum credit is a 620. You will need to put down at least 3.5% plus the house itself must be approved by the FHA. You “find” an FHA loan at banks….same place as all other loans.

Question: Does FHA loans finance purchase of Real Estate Owned (Bank-Owned) properties?

Answer: Well FHA doesn’t actually finance any property but yes they do. The main issue most people have is the selling bank refusing to accept offers from people who wish to purchase with FHA financing. FHA has requirements with regards to the condition of the property and the selling banks generally wont spend the money to get the property up to snuff for FHA financing.

Question: FHA loans for students?
I am a college student and I am somewhat confused on how I can get an FHA loan with my dad (co-borrower non-occupant). I don’t have an income but I can get a part time job. How should I go about getting the loan? I have no credit history, would that be a problem?

Answer: Your dad can be a non occupant co borrower for an FHA loan for you, even if you don’t have a job. Your dad would have to qualify for the entire mortgage then, and his current debt load, including his own mortgage.

Most FHA lenders do require a credit score of 620, so having no credit at all could be a problem. Your first step would be calling a bank or mortgage lender that specializes in FHA loans and have them pre qualify you. They can pull your credit to see where you stand, and run the numbers with your dad’s income to see if you’ll qualify that way.

Question: Does HUD allow FHA loans to close if tax returns have been filed, but IRS has not yet finalized?

Answer: HUD is not the problem, the lender is the one requiring tax returns to be finalized. This is a standard requirement. Every lender I know requires it. It’s not a HUD guideline, but every mortgage lender is allowed to overlay their own stricter guidelines over top the FHA guidelines, to help manage their risk. Not being able to verify a borrower’s income through the most recent tax returns is definitely a risk that most lenders are just not willing to take right now.

Question: Should I buy my own stove in an FHA loan?
I am purchasing a house with an FHA loan. This is a bank owned property. The previous owner took all of the appliances out the home. As a requirement of an FHA loan, a stove and hood must be in the property before closing. My realtor says I should get a stove and put it in there. That sounds stupid to me, because I don’t own the house yet and haven’t closed yet. Am I responsible for buying the stove if the seller (bank) hasn’t put the stove in?

Answer: It’s a requirement for your loan. If the house does not have a stove your loan will not close.
You have 3 options.
1) The seller pays to have a stove and hood put in.
2) You buy them and put them in
3) You find a different house.

Question: Do FHA loans finance short sales?
I was wondering if FHA financed “SHORT SALE” homes for sale. Considering that they are priced so low I am assuming that the buyer would have the pay the full asking asking price in cash, prior to closing; however, I am not very knowledgeable of this subject,

Answer: You can finance a short sale any way you like. Yes, you can use FHA if the home condition will pass FHA guidelines. A foreclosure is almost always going to cost the lender a LOT more than a short sale. The problem with a short sale is that they normally take a very long time to get an answer back from the lender approving the amount of the offer.

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