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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.

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.

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.

Most of us have, at one point, experienced problems with our mortgages, and the easiest solution we can think of is another loan. We opt to refinance when we are facing foreclosure and not realize that it only aggravates the situation rather than solve it.

We are burying ourselves with more debts that in the end we most probably cannot pay. Consequently we end up giving up our houses and the trauma from this can affect you for years.

When this happens, both we and our lender are at a loss. This is because when our house goes into foreclosure, the lending agency that covered us is obliged to pay for the foreclosure process. Additionally, selling a house is not easy these days as people are still recovering from the recent global economic downfall.

A better option that may prevent the situation is to apply for a home loan modification. This is done initially by submitting a mortgage hardship letter, containing an explanation of the homeowners current state and a description of an event or issue that has caused her to be incapable of paying her financial obligations.

The difference between a refinance and a loan modification is that for a loan modification your credit score is not an important factor. Lets face it, by the time many people need a loan modification program they have have already tried loans and refinancing and their credit score is shot.

It is also important that the homeowner provides supporting documents or hospital receipts to show that they have not purposefully avoided paying their mortgage and are in real financial difficulty.

The lending agency then performs a quick check to ensure the information is correct.

If the loan modification is granted, the homeowners monthly mortgage fees are then adjusted by decreasing the interest rate or by increasing the payment period. Either way, it will have alleviated the homeowners problem and give her or him a better chance of keeping their house.

The present administration is in favour of these home loan modifications and has been negotiating for lower mortgage interest rates and loan fees by subsidizing lenders who take part in this program to ensure they help bailout homeowners in need to avoid foreclosure.

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Mortgage Loan FAQ:

Question: How much money can I borrow against my home?
Our home is worth $97,000 and our current mortgage is $69,000. So that means we have about $28,000 in equity.

All we need is $14,800 cash to pay off a terrible, high interest car loan. Is the equity we have sufficient to borrow that amount? The bank is telling me they can only give us $6,000 in cash!

Answer: Most banks will only give HELOCS on up to 75% of the equity. That would be $24250 on $97k. $6,000 is quite generous considering that my numbers show you only qualify for $3750 from most banks.

Take the $6000 simply because it will make a dent in the car payments.

Question: Forclosure after a bankruptcy?
We filed bankruptcy two years ago, we reaffirmed the first mortgage loan, if we were to lose it to foreclosure can our bank come back on us for the balance of the loan after they sell it?

Answer: Yes they can. It was not in your bankruptcy and you cannot file for another 8 years. You would be better off doing your own shot sale and reducing fees.

Question: If I have a loan of $300,000 that is 90% LTV, what are the dollar amounts of my 1st and 2nd mortgages?

Answer: Normally 80% loan on the first, so $240,000 first then a $60,000 second deed of trust.

Question: If you have a mortgage where your interest accrues, but you don’t pay that interest each year (say for the first 3 years), are you able to deduct that accrued amount each year on your taxes? Or, do you only deduct when you actually pay it?

Answer: You can only deduct it in the year you actually pay it.

Question: I’ve been reading, that when you apply for a mortgage loan they will look at all your bank activity for the last couple of years. My question is that I go to the casino occasionally (I currently have no real debts) and spend some money, will any of these activities affect me getting a loan?

Answer: The bank is going to look at your assets, your liabilities, your equity, your income, and your expenses. As long as you have the equity, and as long as your income exceeds your expenses, the bank doesn’t care what you do at the casino.

They will go back for 2 – 3 years to be sure that your income has consistently exceeded your expenses.

Question: Can a judge legally cancel your mortgage loan with a bank?
I just seen a case where a judge did exactly that. Is this legal? Why? The Bank is appealing his ruling. What do you think of this?

Answer: There may be some very specific instances where the note or mortgage were not properly executed where a judge could rule that it was not a valid lien. The borrower would still be responsible for repayment, but the debt would no longer be secured by the home. It would become unsecured debt – like a credit card or personal loan.

Question: Can I convert my 2nd mortgage to an unsecured loan?
I am planning on selling my home. I have a 2nd mortgage through the same bank that holds my original mortgage. Would the bank consider converting the 2nd mortgage to a regular loan? My 2nd mortgage is only 13,000 but it does make a difference with the slow housing market.

Answer: The sale of your home cannot be completed without paying off the 2nd mortgage. No, it is not possible.

Question: Rural Housing Development mortgage loan limits?
I read that for a rural housing development mortgage you can only borrow what the home ‘assessed’ value is. I live in a state where homes are assessed quite a bit less than the actual “market” value for property tax purposes. There is a significant difference between market value and assessed. Will I not be able to borrow the full amount for the home because of this regulation?

Answer: No, that is not true. You can borrower all the way up to the Appraised value, which can sometimes be higher than the sales price, so you can even use the difference to finance closing costs, repairs, or even buy new appliances.

Mortgage refinance secrets are essential if you are looking to refinance in this low interest rate market, you need to know what to look for in order to get the sweetest part of this trend in refinancing. So many times when the bell goes off for you to act quickly, we tend to act first and think later. Please take the time to know what it is you are doing and make a wiser choice in refinancing your mortgage.

One the first secrets of getting the best deal on interest rates is waiting too long to see where the bottom will come on falling rates. Others will watch the discount points and wait for them to bottom at as well. Don’t sweat the small stuff, the time you wait could just as easily cause you to wait too long. Mortgage rates fluctuate daily and are triggered by daily news and events as well as market conditions.

Another secret to getting a great mortgage refinance rate, is by shopping around with local lenders. Your personal bank is probably one of the best places to check on mortgage interest rates and loan terms. In many cases, a local lender can sweetened the mortgage refinance deal by offering a discount if you elect to have your mortgage payment automatically deducted from your bank account monthly. Here’s a tip that may cause the banker to recognize how savvy you really are. Tell your bank mortgage loan officer that you want to have your mortgage payment deducted bi-monthly. This will help you with lower interest applied in each payment and more principle applied to the balance.

When searching for a lower mortgage interest rate, don’t let the figures fool you. You may be enticed to refinance your mortgage because the monthly payment will drop considerably and that’s fine if that is your goal to lower you monthly expenses, but if you elect to choose a much lower payment amount, you could end up actually paying a lot more for your property over the long haul.

Lastly, there is a catch phrase known as ‘junk fees ‘, you need to be aware of. When wanting to refinance your mortgage, you may be so caught up in the savings you are after that the banker or mortgage lender may slip in some additional fees to capture more money than required by law. Keep in mind the banker or mortgage loan officer is not really trying to save you money, his or her business is to make the bake as much money as possible. Ask what junk fees are being applied to the refinance deal and if they can’t remove them you may have to look for someone who can refinance you without those fees.

By applying these mortgage refinance secrets, you can avoid being charged over and above the necessary amounts to refinance your mortgage and the money you save could afford you a small splurge on being a smart homeowner.

For more tips on saving the most money when refinancing your mortgage, stop by and see what you need to know and ask when you sit down with a loan officer.

http://wealthsmith.com/mortgage-refinance.htm

Mortgage Refinance FAQ:

Question: We want to refinance our mortgage loan. An appraisal takes 1-2 weeks. How much can rates change by then?

Answer: There is little danger of rates going up in the near term. You should be able to “lock-in” a rate with the bank for the period of the paperwork. By the way, try to go for a shorter mortgage and keep paying the same amount as you currently are. You will pay off the mortgage sooner and save a lot of money. Do not increase the mortgage to take out cash!

Question: When should I refinance my mortgage?
We have a $450,000 mortgage that is currently paid down to $392,000. I was wondering if it is normal to refinance a mortgage every few years, because, if you refinance, the monthly repayments will be less? How often should a mortgage be refinanced?

Answer: Now would be a good time I think because interest rates are set to rise again. Have you considered seeing an independent mortgage broker? They have access to lots of different banks and home loans. Sounds like you are probably doing the right things if you’ve paid off your mortgage by so much already but don’t be afraid to find a better deal.

Question: Should I refinance my home mortgage?
Original loan amount was $160k over 30 years fixed. The balance is now $157.6k after 16 months. My current interest rate is 6.375%. New bank interested rate listed at 4.875%. Should I pursue refinancing my mortgage?

Answer: I would pursue it – it would likely save you $150 per month on your payment. Give a loan officer at a bank or mortgage lender/broker a call and have them run the numbers for you to see if it makes sense. You aren’t out anything on the initial phone call but a credit pull. Then, you’ll have a little more info in order to make your decision.

Question: Mortgage or Refinance?
My husband and I purchased our home a year ago and borrowed the money from a family member. Now we want to go to a bank for a loan to repay them but we’re not sure if it would be considered a mortgage or refinance. Would we get a better deal one way or another?

Answer: It sounds like it would be a home equity loan, actually. You would be borrowing the money against the equity in your home in order to pay back your relative.

Question: Is it wise to refinance mortgage every few years?
I was just thinking, our mortgage is $450k and we are paying a variable interest rate of 5.59%. We are 3 years into a 30 year loan and have paid it down to $392k. Does it make sense to refinance the mortgage every few years, ie when it gets to say, $350k, refinance & go get a new loan for $350k because the monthly minimum repayments will be much lower, and then again at say, $250k, $150k etc etc. Obviously we would keep paying as much as we could afford per month (ie more than the minimum) and get it paid off quicker.

Answer: If you have a variable interest rate of 5.59% you are way, way better off trying to refinance into a fixed rate, 30 year or 20 year mortgage. You’ll probably get a lower interest rate now, and not have to worry about your rate going up as it will in a few years in a variable rate mortgage. Interest rates are as low as they will ever be in your lifetime, so take advantage of them now. They won’t be this low for more than another few months.

Question: Cash out refinancing for another mortgage downpayment?
I want to do a cash out refinance on my mortgage in order to get a down payment for an income property. I have plenty of equity in my current mortgage. Where do I begin?
Do I do the refinance first and hope my bid on the income property is accepted? Do I put in a bid on the house first? Is there a way to roll some things together to avoid paying closing costs on the refinance and the new property purchase? Is this just a bad idea all together?

Answer: The only way to do this is to do the cash out refinance first. This allows you to season the down payment for the purchase and allows the lender to accurately calculate your debt to income ratio because the new mortgage payment should be reporting by the time you apply for the purchase.
You should also know that you will need to qualify for both mortgages without including the anticipated rental income when you apply for the investment property loan.

Question: Are there any financial instit. who will refinance our primary mortgage of 125,000 and second mortgage?
We have a primary mort. and secondary mortgage both approx 195,000. The mortgage together probably exceeds the value of the home. We put $50,000 into the home –2 3/4 garage addition, new roof, windows, furnace, extended porch, siding, etc…and then the market plunged. So we sit with this deficit. All we want to do is refinance to get lower interest. We had an ARM which ended the year the market plunged.

Answer: The issue isn’t IF some lender will, the issue is the appraisal. If the home does not appraise for the value you need to refinance, then the lender won’t refinance it. You will in effect be stuck making the payments on your current mortgages. If you bail, or walk away from the house, the impact to your ability to live on any type of credit will be severely impacted! I know, our credit card went from a limit of $30,000 to $1,300 in one card, and another jacked up the rate to 25% from 5%. So there are other complications that will impact you. I suggest you do what you have to to keep paying those mortgages.

Question: What happens if my parent dies and leaves me property that still has a mortgage left on it?
do I simply take over their mortgage? Do I refinance it? What if I can’t afford to make the payments, can I sell it?

Answer: The simplest answer I can give is that the mortgage and taxes must be paid or you will lose the home to foreclosure. Speak with an attorney and either find a way to refinance it or sell it.

For the record, I have known many people who have continued to live in a home for years after the death of the owner(s) and they just kept paying the mortgage. The lender is not going to rush to do anything if the mortgage is being paid. This logic follows for most debts. If the bill is being paid (telephone, credit card, mortgage , etc.), you are not likely to hear from the creditor.

But for anything to be official, you must take official steps.

For generations investing in real estate, whether a home or commercial property has been a fairly safe investment. Most properties have held and even enjoyed small increases in value from one year to the next. An investment in real estate sometimes offered big financial returns, sometime small but usually always “safe” returns compared to other investments.

After the financial crisis of 2008, the world of real estate and mortgage lending has changed for the near future. Some property values have decreased up to double digits. Increased unemployment has spurred record numbers of foreclosures.

There are still many people looking to buy new homes though. Whether downsizing, upgrading, relocating for jobs or just hoping to take advantage of lower interest rates, there are many people wondering, “What kind of mortgage loan debt would I qualify for?”

Some potential homebuyers have their sights set on a home before they’ve been through a loan qualification process and this can sometimes lead to less than ideal financial decisions.

It’s fun to ride around and look, research and dream but it is important to take a look at what kind of mortgage you can pre-qualify for and even then to determine is that’s really a number that you can live with comfortably.

How Lenders Determine Mortgage Loan Affordability:

Well there is the standard that has been used by most lenders for years which is called the 28/36 rule. This is still a very helpful tool as long as applicants keep in mind that under this new real estate and banking culture, things have changed a bit. Lenders may tweak these numbers a few points for added security. They may also ask to see a portfolio for collateral and many are requiring more money down. Of course all of this usually stands on an applicant having an average or above credit rating.

What is the 28/36 rule?

Mortgage payments as well as property taxes and insurance shouldn’t total more than 28% of your gross pay. Yes, that’s gross pay, as opposed to net pay. That’s the first number.

Monthly outflow including mortgage payments, property taxes, insurance and installment debt such as credit cards, student loans, personal loans or car loans the cannot equal more that 36% of your gross pay. That’s the second number.

Here’s an example for a household with an income of $84,000.

If a household making $84,000 a year also had $500.00 worth of monthly installment payments, they could qualify for a mortgage of around $1,960.00 bases on the 28/36 rule.

Is the maximum mortgage loan best for you?

Most applicants are ecstatic to find that they qualify for the loan amount desired but before you sign on the dotted line, ask yourself a few important questions.

If I take on this mortgage loan will I still have money left over for…

– Paying off other debts?

– Saving for retirement?

– Saving for college tuition?

– Travel or vacations?

Remember, a higher mortgage payment also means:

– Higher taxes

– Higher monthly maintenance

– High homeowner’s insurance

It’s important to understand how a mortgage debt loan number is estimated but even if you qualify, you may not want to take advantage of the maximum amount of debt that you qualify for. Leaving some room for emergencies as well as pleasures can help you enjoy any home more.

Jonathan Kraft is a recognized expert in helping people to understand their consumer rights and protections. Learn more about consumer protection and the secrets used by identity thieves at the Identity Theft Secrets blog.

Mortgage Loan FAQ:

Question: Why would the mortgage loan officer want my landlord’s contact information? What questions will he ask?
I am planning to break my current lease to buy the house.

Answer: They will fax/mail a verification to your landlord that will ask if you paid on time, how much the payments are, if you have had NSF’s, have damages, etc.

As far as breaking your lease, it all depends on your lease. You could tell your mortgage officer that you are going to sublet the apartment (but don’t tell apartment manager that unless you are allowed to sublease it). Some mortgage brokers don’t care if you are breaking your lease, and some will assume that you are going to have to pay rent on apartment plus a mortgage payment, which will work against you in the loan process. Read your lease to see if there is a cancellation clause or a sublet clause.

Question: Can a 5% down conventional loan go through in today’s mortgage market?
I have been told by BBVA-Compass Bank as well as by a mortgage broker that I will be fine with just putting 5% down on a new house. But, I just got off the phone with a mortgage broker who says with Fannie Mae and Freddie Mac, 10% down is the minimum amount you can put down on a new house. By the way this is a conventional loan that is more expensive than an FHA type loan.

Answer: You can still get 95% financing on a home purchase, as long as you and the home you are purchasing meets Mortgage Insurance guidelines. Those guidelines are fairly strict these days. I would suggest you sit down with a lender and go through your options.

Question: Is a loan used to build your own home considered a mortgage?
And, assuming fair to good credit, how easy or hard is it to secure such a loan?

Answer: If your loan is taken out specifically for construction of the home it is then a construction loan. At the end of construction and when you become the occupant you will have to convert to a mortgage.

Now, if you take a personal loan out to acquire financing for the building of a home, that remains a personal loan. And will continue as a personal loan. This is also true if you draw on a line of credit to finance the construction or for any other purpose. It is still not a mortgage.

In short, a mortgage will be so noted in the loan.

Question: I haven’t missed a home mortgage payment since originating the loan. Need about 3 or 4 months relief?
Since my income has been affected by the economy, I have run out of money. Historically have made very good income and have never gone this long (1 year) without making deals. Do you think the lender will work with me?

Answer: Tough spot to be in, hope it works out for you. I think your best bet is the lender. It will be difficult to re-fi with another bank given your current financial situation, but you have a track record with your current lender. They may be open to a re-write of the terms of the original note. My buddy sat down with his bank, told them he needed time or he’d hand over the keys. Couple days later he was offered a lowered rate re-write with skipped payments added onto the end of the note.

Question: How long did it take you to close on your USDA Mortgage Loan?
I am getting a USDA mortgage loan and it is taking FOREVER to close. The underwriting is in its 6th week. I assume once the underwriting has been done, it will just be appraisal and setting us escrow because the attorney is pretty much ready to close once they receive the paperwork and I have insurance already set up. I do not understand why it is taking so long!!! Survey is already done as well.

Answer: If the appraisal has not been done and submitted to underwriting, you will be waiting and waiting and waiting. The underwriter MUST have the appraisal in hand in order to give approval. I can’t see how this went so wrong. Check with your Loan Officer. It is Mortgage 101.

Question: What kind of “income” is the right kind for mortgage lenders?
When it comes to calculating my income for purposes of qualifying for a mortgage loan:

Q1) What sort of job do I need 2 years history in and what sort of job don’t I need 2 years history in?
Q2) What sort of investments DO count toward my income?
Q3) What about self employed? If I ran my own business does it also need a 2 year track record?

Answer: 1) You need a permanent income which involves a paycheck which could be verified from your employer or bank.
2) Pension Funds, investments in bonds, stocks, cash in bank, real estate all count towards potential income or net worth.
3) You need a 2 year track record even if you are self-employed.

Question: What is a “Program 69″ Mortgage? Or loan program 69?
I was led to believe that it was a better choice than a reverse mortgage.

Answer: It is but you need to be 69 years old to apply. Where a reverse mortgage you have to lived in your house for a certain amount time and pay back the loan before you move out, and own the home.

Question: I am trying to get pre-qualified for a mortgage loan and the loan officer has not called or emailed!?
I’m not sure if I should go somewhere else or keep on her. It’s been a week now. I know that every time your credit is pulled, it goes down, which is why I really don’t want to go somewhere else to get approved. What should I do?

Answer: Call her! If she told you Monday & hasn’t called it is not going to hurt to call her! She may be really busy, but she should have at least called & told you that! If you need to go elsewhere, you have plenty of time.

I also wanted to let you know that your credit will not go down every time your report is pulled when dealing with a big purchase (i.e. a home or car). You can have your credit pulled as many times as you want within a 30-day period for that purchase with it only counting once. So, feel free to shop around with lenders to get the best interest rate!

A refinance with cash back from your home’s equity is not a phrase you hear much of nowadays due to not a lot of folks or locations gaining in appreciation. It is vital to understand exactly what the term “home equity” actually means.

As an example, you own a house and it is worth $150,000 from a professional appraiser report or the local realtor ran some comparable property sales for you. The debt owed on the property is just $50,000. As a result, the cash you have available in your home is $100,000; the difference between the principal mortgage balance owed and the current value of the property. So you know you have some value in your property and now want a second loan on your home.

What is better, a Home Equity Line of Credit (LOC) or a Home Equity Loan?

The attractive part about fixed rate equity loans compared to a line of credit is that it can be used for tax write-offs, features below market interest rates and longer loan repayment periods. Therefore, equity loans which have a fixed rate have some benefits right from the get-go.

It is important to understand that it is a second mortgage or lien on your property. Similar to your first mortgage loan, when you accept an equity loan you will normally have terms that give you a fixed interest rate, and a repayment period ranging from 10 to 20 years. An equity line of credit is different in that the interest rate may vary over time and depending when you choose to use the proceeds from the credit line, the terms will begin. The choice is a difficult one when choosing a “Line of Credit” or “Home Equity Loan” due to your individual needs at that time.

In general, people pick a fixed rate home equity loan for costs and fees that are not recurring like a home improvement job on the home and a line of credit is best used for recurring expenses.

Ray Heinson is an investor in real estate and suggest these resources for Fixed Rate Home Equity Loans and to find the Lowest Rate Mortgages from trusted lenders in your area.

Home Equity Loan FAQ:

Question: Can my wife take a home equity loan for personal use on a jointly owned home without my consent?
My wife earns more money than me. The home loan is in her name but the home title is in our joint names. Can she take a home equity loan without my consent?

Answer: If your home deed is in both your names, then no, she cannot take out a loan in only her name without your consent. She can only take it out in only her name WITH your consent legally. If your mortgage company has done this then they did something incredibly illegal. You need to call the mortgage company on this.

Question: What exactly is a home equity loan and can I still get one with bad credit?
I do own my own home but am still paying off my mortgage. My son needs more money for college and we’ve tapped out on student loans and my credit cards are all maxed. I was wondering what I could do and thought that a home equity loan with bad credit might be an option. I don’t know if it’s a good idea though.

Answer: When you take out a home equity loan, you are basically borrowing money and putting up your house’s equity as collateral. It’s like any other loan but this kind states that the lender can take your home, in very plain terms, should you default on your loan.

When you’re looking for home equity loans, bad credit shouldn’t stop lenders from giving one to you. It doesn’t sound like you’re in too good financial standings so make sure that you will be able to pay back the loan because losing your home would not make your situation any better. I sincerely recommend you spend at least a day budgeting out the next few years of your life in preparation for this new loan. On the bright side, it will be a much better lending rate than other high interest rates in which only your credit is offered as collateral, but the stakes are higher for failing to pay.

Question: What is better to get a home equity loan or a line of credit and what is the difference between the two?
I’m trying to consolidate some bills and I am wondering what is a better type of loan?

Answer: A home equity loan is where the bank loans you money in a lump sum at a predetermined interest rate. You pay the back loan according to an amortization schedule. The collateral for the home equity loan is your home. This means that if you default, they can foreclose on your home.

A line of credit means you can borrow money continuously and pay it back continuously up to the limit. The collateral for the line of credit can be anything. It can be your home or it can be your car, or anything you and the bank agree to.

As far as which is better, check the interest rates for a home equity loan and any loan initiation fees. Which will likely charge less interest, fees, and points?

Question: If there are two people owning a house can just one of them sign for a home equity loan?

Answer: No. If both people are on the title to the home…both people must sign certain papers from the lender.

Question: How soon can we take out a home equity loan?
My husband and I are in the process of buying a house.. we were told by our realtor and mortgage broker that the house appraised for 30k more then what we are paying for it.
If this is true and we buy the house would we be able to take out an equity loan on the house as soon as we buy it since the house is worth more then we are paying?

Answer: Not in the least. The appraisal for your mortgage has nothing to do with another appraisal for a potential home equity loan. The appraisal values may be entirely different, and in this market, you won’t be allowed to take out anywhere near close to all of ‘your equity’. The market is simply too unstable right now.

Question: If you have a Home Equity Loan, Can you owner finance if you sell the house?
I know the loan is a lien. I know if I were to sell it out right, I could just pay off the lien. But, What about owner finance? Is this legal?

Answer: You are the equitable owner of the home so you may sell it. KEEP in mind your note may state that any sale of the home will accelerate the note; meaning it is all due and payable. Thus, it might be better to only offer a lease-option on the house-thus not changing the ownership of the home. Depending on the terms, a lease-option can be the same “in effect” as a land contract.

Question: If I take out a Home Equity loan, will it be considered as income on my taxes?

Answer: The proceeds of a loan are never included in income UNLESS you default on the loan AND the lender forgives the unpaid balance. The amount forgiven is considered Cancellation of Debt income.

Question: Would refinancing our home to a lower rate enable us to get cash out?
We just purchased our first home back in March at a 30yr fixed 5% interest rate. It is an FHA insured loan and we are eligible for a “streamline” if the interest rates drop below our 5%. If the rates do drop below 5% over the next couple of months, would we be able to get cash with the new refinance?

Answer: Usually a refinance is possible for the 80% value of the home. For example if the home is worth $200k you could refinance for $160k and cash out the amount between the current loan balance and the financed amount.
It would be easier and incur fewer fees to do a HELOC, for such a small dollar amount.
You might have only put 3.5% down if you had an FHA loan, so check with your lender for guidance on this.