Avoid Bank Foreclosure – If You Are You Falling Behind With Your Mortgage You Can Modify Your Loan

December 16th, 2009

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.

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Zero Down USDA Home Loans

December 14th, 2009

USDA Loans are becoming one of the most popular loan types in today’s mortgage market because of the favorable terms that they offer to home buyers across the nation. USDA stands for United States Department of Agriculture but USDA loans are used for much more than just farm loans. A USDA mortgage loan might be right for you if you want to buy a home with no down payment or mortgage insurance. If you’re unsure about your credit rating, or have concerns about a down payment, USDA mortgage loans can accommodate your circumstances with super low closing costs and no MI.

There are two types of USDA home loans that are commonly available for home purchases today. The first and most common type of loan is the USDA Guaranteed Rural Housing Program. USDA Guaranteed Loans allow for higher income limits and 100% financing for home purchases. USDA Guaranteed Loan applicants may have an income of up to 115% of the median household income for the area and all USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.

The second USDA program that is commonly available is the USDA Direct Rural Housing Program. USDA Direct Loans are less common than USDA Guaranteed Loans and are only available for low and very low income households to obtain home ownership, as defined by the USDA. Very low income is defined as below 50 percent of the area median income; low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI.

To be eligible for either USDA Home Loan program, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) must meet a specified percentage of your gross monthly income (29% ratio). Your credit background will be fairly considered. At least a 620 FICO credit score is commonly required to obtain an USDA approval. You must also have enough income to pay your housing costs plus all additional monthly debt (41% ratio). These ratios can be exceeded somewhat with compensating factors. Applicants for loans may have an income of up to 115% of the median income for the area. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.

The is no set maximum loan amount allowed for an USDA Home Loan. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area. The maximum USDA Rural Loan amount will be 102% of the appraised value of the home (100% plus the 2% USDA home loan guarantee fee).

If you are interested in purchasing a home with no money down and you are not a veteran of the military, there is no better mortgage option available in today’s market than a USDA Home Loan.

Please visit http://www.usdaloans-101.com for the most current information on USDA Home Loans and rural loans in today’s market.

USDA Home Loans FAQ:

Question: Does anyone know what interest rates are like for USDA home loans?
Credit score is above 750, debt to income ratio is pretty low, and we’re within the income bracket for it. We were looking at an FHA, but I saw that we might be eligible for this. I’m at work right now, and the only thing I have access to is the internet. I plan on calling someone in a little while, but I’m getting antsy and thought I would check to see if anyone had any ideas of what I could expect.

Answer: I just locked in an interest rate yesterday at 5 1/4%, but it has been fluctuating lately between 5 and 6%.

Question: Did the congress bill pass that gives more money for USDA home loans?

Answer: I found that they get money to give loans out at 100%. The government site is used to determine eligibility for certain USDA home loan programs. In order to be eligible for many USDA loans, household income must meet certain guidelines. Also, the home to be purchased must be located in an eligible rural area as defined by USDA.

Question: How do the new USDA home loans work?
I want to buy a house, but my credit score is poor, my husband’s is only 580, but my mon told me that my little sister and her husband just got a USDA loan with no money down and their scores are not good either. Is this an option for me or what should I do?

Answer: I believe USDA requires a credit score of at least 620.

Question: USDA home loans? Any recommendations of brokers/companies, what about Amerisave?
Right now my husband and I have been pre-qualified with Amerisave but I searched their name and there were some complaints about them. Also has anyone ever used Amerisave? I checked them on the better business bureau and they got an A and their rates are great but when I googled them they had some complaints about not closing in time so we’re checking out other companies/brokers.

Answer: Contact a LOCAL bank or mortgage broker, preferably one who is recommended by your real estate agent. Most mortgage brokers in rural areas are set up to do USDA loans. Home loans are too complicated to be done online, and in most cases, you will appreciate having a real person to deal with. A really excellent local loan officer will answer all your questions and even attend your closing with you.

Question: Where do you apply for a usda guaranteed home loan?

Answer: These loans are also called RD loans- (rural development)- you must have a 620 credit score but they will finance 100% plus the RD fee of 2%. Property must be in a rural location. Call any lender- ask if they do RD loans- you apply through an RD lender.

Question: If I am denied for a USDA home loan is there any other loan I can get for a home?

Answer: Sure, lots of loans out there, but those are only ones readily available with down payment assistance. If you are denied that, you’re not ready. Better that you save money for your down payment and plan ahead. Rushing into home ownership when you’re not ready for it is a large part of our economic crisis. You need good credit and savings to qualify nowadays. That’s the way it used to be, and is better operating practice than No-Docs loans. There is a first time homebuyer’s credit of up to $7500 when you file your taxes. Smart buyers put this money right on the principal of their loans, increasing their ownership stake in their home.

Question: What’s the advantage of a USDA home loan?
If I only qualify for a 100k with a conventional loan, am I still going to qualify for the same amount with a usda loan? Is the advantage that I can finance the closing cost and any other cost associated with buying a home and also I don’t need a down payment?

Answer: USDA loans are 100% loan programs. You will need to talk to your mortgage person because they have very strict guidelines on income and location (rural area).

Question: Does USDA home loan subsidize your mortgage?
Doing the math I (only) qualify for $102,000 home loan which will buy absolutely nothing in my community. If I use the USDA program will they match those funds or subsidize the loan somehow? I cannot afford to buy a home in my county because I do not qualify for enough money. Does anyone have experience with USDA?

Answer: I can guess that if you can’t buy a home under $102k then you aren’t in a rural area and that’s the only way you can get a USDA loan. You can consider moving to another lower cost area or waiting until you have a larger downpayment.

I’m not sure what “math” you’ve already done but you need to talk to a mortgage broker. You have to pay them but this is what they do. They will be the ones who prequalify you and tell you how much you can borrow. The last thing you want to do right now is get a crappy mortgage that won’t suit your needs for the entire time you plan on being in the home.

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Are There Poor Credit Home Loans Today?

December 14th, 2009

If you were wondering if poor credit home loans still exist, then you will want to read this article. Specifically, we will discuss what has happened to bad credit mortgages, where you can go to get a mortgage if your credit is bad, and the best things you can do to improve your chances of qualification. After reading this article, you should have a good understanding of where bad credit loans are today.

A few years ago, if you wanted to buy a home but did not have good credit, you had many options. Mortgage professionals used to joke that if you could fog a mirror you could get a mortgage! There were sub-prime lenders who would lend to people with scores down in the 500′. Lenders offered 100% financing at good rates to people with scores down to 620. There were others who offered no doc and stated income loans. Unfortunately, the implosion of the mortgage market has changed that.

In today’s mortgage market, people with scores below 620 have almost no options unless they have a sizable down payment or are looking to refinance and have a great deal of equity in their homes. Those with scores less than 700 but above 620 are looking to the FHA for mortgages. This is the best place to look for poor credit home loans in today’s market. The benefits of going with FHA is that they will accept lower scores than other non-insured lenders and they place more of an emphasis on your recent credit file. Once you are approved, your interest rate is not generally impacted by your credit score.

If your score is less than 620, unless you have access to a significant amount of cash, you will need to work on improving your credit score. Fortunately, there are numerous things you can do. You will want to start by getting a copy of your credit bureau. You can get this for free at http://www.annualcreditreport.com. Once you have this report, you will want to go over it carefully and notice any errors or negative credit reporting that you feel is questionable. Pay attention to accounts that are reporting late, negative accounts reporting more than seven years after the date of last activity and your credit card limits. Starting with the two or three items that will have the most impact on your credit score, you will want to dispute these items with the three credit bureaus.

Once you have completed your first round of disputes, you will want to continue the process until you have corrected any errors on your report. While you are doing this, you will want to work on paying off as much revolving debt as you can. Paying each individual credit card to down below 30% of the limit is ideal. If you lack positive good credit, you may get a parent or spouse with good credit to add you as an authorized user to an account with a low balance.

While bad credit home loans are not as prevalent today, for people with scores over 620, they still exist. Those with a score lower than this will want to take steps to improve their credit score. Hopefully, you now have an understanding of where bad credit mortgages are today, and what your options are.

Wendy Black Polisi is the founder of creditrepaircollege.com. To learn more about poor credit home loans and credit restoration please visit her on the web.

Poor Credit Home Loans FAQ:

Question: Buying new home but poor credit?
My parents are divorcing and my mom decided to move closer to family which is about 2 hours away. We’ve found several homes but the problem is that my mom’s credit score is around 550. The house we are in right now is under my dad’s name so my mom will be eligible for first time home buyer. Does anyone know a mortgage company that would give out a loan to someone with poor credit? We know the interest rate would be high. We’re just trying to find someone who would help. We have a few names such as Lending Tree, GMC, Quicken loans, And Century point. And please do not say my mom should work on her credit, we already know that but every house we’ve looked at that was for rent would cost over 900 dollars a month. Any information you can give will be greatly appreciated.

Answer: I recommend contacting a mortgage broker or direct lender (such as Bank of America or Well’s Fargo) – rather than Lending Tree or Quicken Loans. Your mom may qualify for an FHA loan, but she may have to get her credit score up a little more in order to qualify.

Question: First time homebuyer/poor credit?
I am interested in purchasing a home, but have somewhat poor credit. Plus, I am a first time homebuyer. What is the likelihood of me being approved for a home loan of $60,000? Are there lenders out there that will lend money to someone with poor credit, considering the recent mortgage crisis?

Answer: Probably not too good if you want my honest opinion. However, it can’t hurt to check out your options and the one thing that you have going for you is that $60,000 is a very small amount.

Question: Poor credit home loan for smaller than usual amount?
I have not-so-good credit- in the 600-620 range. My wife and I are disabled so we’re on a limited income- about 1300 per month combined guaranteed income (disability checks). We currently live in a trailer and pay 200 per month. We found a fix-it-up house that’s in better shape than our trailer, and the price is 15,000.

We started hitting up lending institutions, and we have found that our credit and income is NOT the problem. The problem is the small loan amount. Lenders and real estate agents say the amount is too small, and also the house won’t qualify for VA or FHA backing.

Answer: The reason mortgage companies don’t go that low is it would cost more in processing fees than we can make doing the loan. VA/FHA only allows us to charge 1% origination & 1% discount. This would be $300.00 profit. It costs us way more than that just to process the loan & get it underwritten. You might check with a finance company or credit union but they are not going to lend 100%.

Question: Do I have to have good credit to be approved for a VA home loan?
I don’t know my exact credit score but I’m sure my credit would be considered poor. I looked at the VA website FAQ page and eligibility requirements and it only talks about military requirements not credit. Has anyone gotten a VA home loan with poor credit or know of someone who has? Or does anyone have an intricate knowledge of the inner workings of VA loan approval?

Answer: The VA doesn’t loan you the money…the bank does. The VA only secures the loan. You have to find a lender who will finance it. Each creditor will have his or her own guidelines for credit scores.

Question: I need a home loan and have poor credit?

Answer: The only way to get a reasonably priced home loan is to have cleaned up credit at the time you apply. So, get your credit report for free and find out what is on there that is causing your credit to be poor, and work on fixing those things.

Also see if your community offers first time home buyer education programs. If you complete one of those, you can often qualify for a more generous loan than you would otherwise get if you apply on your own.

With all of the problems of the past year, banks are just not giving out home mortgages to people without good to great credit.

Question: Can I get a bigger home loan with bad credit?
I want to sell my home and buy a larger, more expensive home but my credit is poor. Will my debt to payment ratio help since I have few debts?

Answer: They look at debt to income ratio. If you have bad credit, you might not get another loan for a bigger house.

Question: With poor credit how do I get a loan for $40,000.00 to pay property taxes on my home and pay other bills?
The house was left to me by my deceased parents. It is paid for and must go through probate. I need a loan to pay city taxes on property and other bills to include attorney fees. I’ve been employed with the Federal Government for 19 years. I am seeking a loan for less then 10 years to pay back. I am willing to do an automatic monthly payment.

Answer: There are three choices to consider:
1. Just sell the house and use the money from the sale to pay the back taxes, and whatever is left over to set yourself up in another house or pay for a rental for a long time.
2. Take out a home equity line of credit and use that to pay back the loan. The fees to do this are much cheaper than a full refinancing mortgage, but the payback period is generally no more than 20 years, and sometimes the interest rates are not fixed.
3. Take out a regular 15 or 30 year fixed rate mortgage and pay it back that way.

If you work for the Federal government, there are a number of credit unions that will let Federal workers join, and they tend to offer better rates than regular banks.

Question: Can I get a mortgage loan with poor credit history?
We filed bankruptcy 2 years ago. And Now our dream home is finally back on the market. My (live together for 4yrs) Fiance has a really good job for our area but only been there about 4 mths. We checked his credit score a couple mths ago and it was 534. Does anyone know where we can get a loan with short time on the job and low credit score?

Answer: Not these days. Mortgage loans now are only given to people who have earned the right to have one. The days of giving out loans to anyone who applied ended about 2 years ago. You need to get that credit score up AT LEAST another 100 points PLUS be at the job for one year.

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The Pros and Cons of Loan Modification

December 11th, 2009

The number of homeowners who are facing the prospect of a foreclosure is rising at alarming rates each day. There are only three solutions for a person who finds it increasing taxing to make his monthly mortgage payments due to financial issues or a person who has missed a payment: home loan modification, refinancing and foreclosure. If one were to rule out the third option; mortgage modification stands out as the most feasible option. So let us analyze the pros and cons of getting your loan modified and how it can help you.

The Pros:

Banks are more willing to grant modification instead of opting for foreclosure simply because there are no buyers in the market.

Since mortgage modifications are designed to help home owners in financial trouble, the lending institution already knows about these issues and so the credit score of a home owner is not a constraint in the process of procuring a home loan modification.

If you are facing financial distress, your monthly mortgage payment can be brought down to an affordable figure through mortgage modification

Opting for a home loan modification does not have an adverse effect on your credit score. On the contrary your credit score will show that you are a trustworthy borrower.

Even though you will need to put in some amount of paper work to get your loan modified is it is not half as much as paperwork needed for refinancing because a home loan modification is not a new loan like refinancing

You can successfully change your adjustable rate mortgage to a low fixed interest rate with the help of mortgage modification.

Cons:

You will have to follow the lender guidelines diligently for your home loan modification application to be accepted.

You will only get one chance to apply for a mortgage modification. So it is imperative to get all the paperwork done correctly.

It takes longer, up to 180 days for a modification to be granted as opposed to the 30 to 60 days required for refinancing.

So all in all the prose of a mortgage modification far outweighs its cons and it is certainly a solution that should be considered if you are facing a foreclosure.

If you are considering mortgage modification, you should really look into 60 minute home loan modification. It is a great resource that contains a lot of important information about the process of applying for a mortgage modification. It was created by a loan modification expert who has modified numerous home loans. The kit included a professional hardship letter outline, and one on one support in case you have any questions. It is a must have for homeowners. To learn more about 60 minute loan modification click here!

Loan Modification FAQ:

Question: My home value has decreased is there a loan modification to adjust my payments to reflect market value?
I have found loan modification that will lower my interest rate, but I’d like the amount of my loan lowered or forgiven. If there are program that does this?

Answer: The make home affordable program is only for those that are delinquent in their payments. If you pay on time and are not behind in your payments then there is no help for you. To re-finance, what you owe must be 80% or less of the home’s value. So if you owe more than the home’s current value you have to wait until value’s improve. I talked to my lender and they could do nothing for me since I make my payments each month. If I stopped making payments then they could modify the loan but it would also be a bad mark on my credit record. One thing I learned that people who are in adjustable rate loans could get a much lower interest rate if the adjustable adjusted right now. Rates are low so lenders are making profit off loans that are locked into an adjustable rate. Right now loans should adjust down unless they are really badly structured loans.

Question: How do I qualify for a home loan modification?
I have a first and second mortgage that is more than the appraised value of my condo. I tried to refinance and now am asking the mortgage company for a loan modification. What is the criteria needed to receive a loan modification?

Answer: Having a both a 1st and a 2nd certainly complicates the situation, especially if the 1st and the 2nd are two different lenders.

I would speak to a law firm that specializes in loan modifications. There are many companies that claim they can help you with a loan modification, but the vast majority of these places are hucksters. If you use an attorney they have to answer to a state bar association if they screw up or mislead you.

You will probably have to show that you are not able to make the two payments on your loans without the modification. Lenders just don’t lower your payment just because the value has gone down. You must be able to prove your hardship. Normally, you have to show that you have lost income or you can’t afford to pay the increased payment due to an interest rate rise on your loan(s).

Question: Will our lender start foreclosure if we are in the midst of trying to obtain loan modification?
We can no longer make the mortgage payment and called Wells Fargo who is mailing a loan modification pkg. to us. Meantime, we will not be able to make the payment. We do not want to face foreclosure. Will Wells Fargo begin foreclosure if we are making a concerted effort to get a loan modification with them? This is very troublesome to us. we want Wells Fargo to work with us, but what happens if they refuse us? Do we have other options or will they offer other options to us?

Answer: Truly, only Wells Fargo can answer this question. Part of the problem with the big banks is that none of their departments talk to each other. Even though you are trying for a loan mod, the department that initiates foreclosures won’t know that and will likely move forward if it’s reached that point. The most important thing you can do at this point is constant communication with them. Call them and let them know you can’t make the payment and you are working on a loan mod, have them note your file in the computer system. This may or may not help. When they call you or send you letter, DO NOT ignore them. Always take their calls and respond to their correspondence, even if it’s just to tell them you don’t have the money and remind them of your loan mod application. Keeping constant touch with them will help.

How far behind are you now? Is this the first payment your are missing? If it’s the first payment, I wouldn’t worry too much about foreclosure proceedings yet, but if you are greater than 90 days behind, then you should definitely be more aggressive with your contact.

Question: How long does it take to get qualified for a loan modification?
Its been two months and they keep telling us its in process. We dont know if we have to move out or not we are two months behind. Any suggestions? Will they foreclose while we are waiting? The Co. is ASC.

Answer: I am sure it must be torture just waiting. But there is no set timeframe. In fact, every lender and every situation is different. You are fortunate your lender is even looking at you for a modification given you are only 2 months behind in payments. Some modifications take several months. Lenders have a ton of modification requests and not enough trained staff and time to handle them all in a quick fashion – so they say.

I presume you have provided the lender with all the requested paperwork? If so, all you can do is wait. But keep calling them as you have already done.

Generally, the lender will not foreclose while a modification is pending. But save your money while this is going on. Do not assume your modification will be approved.

Moving out will not happen overnight. If the lender does opt to foreclose, you will receive very official notification in the mail – regular and certified. And you will be presented with final options.

Question: What website offers a free DIY Mortgage Loan Modification Kit?

Answer: Your lender will do this for you.

Question: Do I have to be behind on my mortgage payments to get a loan modification?

Answer: If you are current on your mortgage, it is harder to get a mortgage loan modification.
However, each modification is look at by an underwriter. If the underwriter feel the borrower can paid the mortgage then they make grant you a modification. Keep in mind the lost of major income can be a big factor if your not currently behind on your payments.

Question: Loan Modification Trial Period?
I am trying to get a loan modification from WaMu (now Chase). They put me on a trial period for 5 months (only supposed to be 3 months), but now they are putting me on a second trial period for 3 more months, but significantly raised the payment price… what is Chase trying to do?

Answer: Chase is obviously looking after their own best interests. You need to get any promises they make IN WRITING, and carefully document all phone conversations with them (dates, times, names, details of discussion). Also, you might want to consider having a loan modification specialist negotiate on your behalf. If so, check them out with the Better Business Bureau before you sign an agreement.

Question: Can someone get a loan modification if a their spouse passed away?
I know someone in this situation. The husband, who brought in the majority of the income, passed away. I know people are getting their loans modified before they are even late. Does anyone know of a special program or legal type of thing that they can do to get this done?

Answer: Probably yes but the bad news is not everyone can qualify for a mortgage loan modification. Loan modifications are designed to help homeowners who can still afford to pay a slightly modified mortgage. It is not supposed resolve all troubled mortgages.

Basically there are 5 requirements to qualify for a loan modification. They are:

1. The home needs to be the homeowner’s primary residence;
2. The mortgage must be less than $729,750;
3. The homeowner is having trouble making their existing mortgage payment;
4. The mortgage was established before January 1, 2009; and
5. The homeowner payment on their first mortgage (including principal, interest, taxes, insurance and homeowner’s association dues) is more than 31% of their current gross income.

Homeowners don’t need to pay a company to obtain a loan modification. However, sometimes it can be better to have someone, such as a lawyer or credit counselor, negotiate on your behalf. A good strategy is to talk to as many experts as you can prior to contacting your bank. Many of these services will give you a free consultation.

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Mortgage Refinance Secrets

December 8th, 2009

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.

Posted in Mortgage Loans | No Comments »

Mortgage Loan 101 – How Much Mortgage Loan Debt is Right For You?

December 8th, 2009

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!

Posted in Mortgage Loans | No Comments »

Getting a Business Loan Made Simple

December 8th, 2009

A business loan is a loan taking out to help finance a companies needs. For a person who is trying to secure a loan for a start up company the process can seem daunting. Lenders know starting a business is a risk. It can be tough to start one and keep it going within those first few years. Should it fail the lender is at risk for not getting their money. It is up to the business owner to prove that their business is worth investing in.

When starting a business the owner has many hurdles to overcome. They have to prepare themselves for the process of securing financing. By being prepared they will ultimately help the lender have more confidence in offering them a loan and they will find that preparing for the loan process also will help their business out because they are going to be looking into every aspect of their future business.

Part of preparing to approach lenders for a business loan is getting together a business plan. A business plan is going to be the main selling point. The business plan should cover all aspects of the business. It is not something that can be simply put together. Developing a business plan takes time and effort.

A business plan needs to have sections that will explain and offer supporting evidence as to the financial future of the business. The business plan will outline the goals of the business. Include projected sales figures. It should also include expense figures. Putting together the business plan will require a lot of research into the local market and into the businesses target market.

The idea of the business plan is to show that the business can and will succeed based upon the research the business owner has done. By providing researched evidence, the business owner is proving to the lender that their business is going to survive and that they are well prepared to make sure it is successful. A good business plan can be the key to getting a business loan.

Besides a business plan it also helps if the owner has something to offer up as collateral. This can be property or money. The owner should be willing to make some sacrifice. This shows the lender that they are truly confident in their business venture. When a borrower secures a loan, the lender knows that they are serious. It takes away some of the risk and hesitation a lender may have in loaning money to a business.

A commercial loan is something that is often essential to staring a business or keeping one going. Lenders are often apprehensive about commercial loans, but with a professional attitude and a well prepared business plan, a companies owner should be able to convince a lender that they are worthy of their trust. Once the owner secures their first loan and honours the terms of the loan they should find getting commercial finance in the future is not as difficult.

James Copper is a writer for http://www.stop-repossession-today.co.uk where you can find information on stop home repossession

Business Loans FAQ:

Question: Can I get a small business loan or business credit card with EIN/tax id?
Also how else can i use this number for my business?

Answer: Sure, but you will have to personally guarantee it and use your ssn too. Eventually, with development of a positive credit history, it may qualify for it’s own credit. Your ein is used to report business taxes and to support your chosen form of business formation for liability purposes.

Question: Is the interest on a personal loan that I used to start a business a tax deductible expense?
Or does it have to be a business loan? I’m filling out a partnership tax return.

Answer: If the loan was used in the business, it should have been included in the partnership accounts. This would then be taken into account when calculating your share of the profits. There is no tax relief for loans against personal tax.

Question: Qualification for small business loan for new business?
Will securing a small business loan for a new business be based on my personal credit? What is the minimum a first time borrower will receive? If I am planning to purchase a house in the next three years and I secure a business loan this year will it affect applying for a home loan in the next three years?

Answer: Yes, depends on your current income and personal credit. Right now it’s extremely difficult to get any sort of business loan. I wouldn’t want to put a hard number on it, but I would venture that if your credit score is less than about 750, there’s little to no chance for a business loan. Additionally, you’re going to need something to secure the loan with, probably a house. Loans are very risky for startups, and banks aren’t lending much right now.

Question: How to get a small business loan?
I have an idea I want to expand on but I have only recent credit history, and no equity. After I get turned down by the commercial banks due to lack of business experience. Will the SBA Approve my loan with the commercial bank and take responsibility?

Answer: With a properly done business plan, an SBA 7A loan can be had and the Feds guarantee 80% of it.

Question: Small business loan/grant for people under 25?
I am looking for business loans/grants to help someone under the age of 25 start and technology based business for profit.

Answer: There are no grants to start a for-profit business. For Small Business Loans, you should see the Small Business Administration website. There is a lot of useful information there about what you need to start your own business, and how to successfully find and apply for loans to do so.

Question: Can you get approved for a business loan if you have a high debt to income ratio?
Should this matter since the loan will be paid back by the business and not the individual? I have good credit I just have a high debt to income ratio, should I be able to get approved for a $20,000 business loan?

Answer: If the business folds, the bank will contact you for repayment. Therefore, your credit rating will matter because banks will always assess the risk when handing out loans.

Question: How hard is it to get a business loan?
I have worked for a company for two years which has now been in business for 21 years. It is a family owned company and they are wanting to sell it now. They have given me first option to take it over because they know that I will take care of it and don’t want to sell it to someone random. I am only 24 years old and don’t own a home. My credit is good but I still thought it would be hard for me to get a loan.

Answer: You would generally be required to guarantee any business loan to purchase and/or operate the business, unless it has substantial capital assets (machinery etc) that can be pledged as collateral.

If your relationship with the owners is really good, you might discuss their extending you the credit. That is, you pay them over time out of operating revenue.

A third option, particularly if the business could be grown substantially, is to find an investor. There are plenty of “angels” out there…wealthy individuals that invest in such enterprises to beat market returns.

Question: Can a Small Business loan be used to purchase investment properties?
I’m entertaining the idea of using a small business loan to purchase investment properties for rental income and to renovate certain properties for resale down the road. Anybody have any opinions on this or know anything about it? Is this even allowed? What other options would I have?

Answer: I doubt it. But it is likely that the interest rate on a mortgage will be cheaper money than a SBA loan anyway. You could use the SBA loan to get your business started for operational expenses then get the mortgage to buy the first property.

Posted in Business Loans | No Comments »

Small Business Loans? – Opt For Better Options!

December 3rd, 2009

Irrespective of their size and nature most businesses face financial crunch sometime or the other in its lifecycle. These crisis situations become all the more important for small businesses because the banks and financial organizations are often ready to lend money to big business houses but not to the smaller ones. Besides, small businesses with their limited capabilities often find it overburdening to repay a bank loan.

Small business owners have been trying various options and various types of loans to see which suits their needs better, however, a point that is often missed out by them is that they can probably manage these situations often without any outside help. Sounds surprising? But its true, and here are some of the ways you can do it.

  • Try to Base Your Business at Home: This is not possible for all but if you can have a home-based business you can actually save a fortune. You save on expensive commercial rent, which is a recurring expense. As you are based out of your home, you don’t need to commute, so you save on transportation. In addition, your business use of home expenses would qualify for income tax deduction. So just one-step and you have three fold savings.

  • Credit Cards: If you are a business that doesn’t accept credit cards, you are actually saying NO to a big segment of your prospective customers. People hate to see cash going out of their pocket and that is why they love credit cards. Accept credit cards, your sale is bound to increase. Not just that, you might be offering credit to your customers and if so, you must have faced the hardship of collecting your receivables and bad debts are just a part of this game. With credit cards your customers can pay easily and you don’t have to think about bad debts. What more, if you have a steady flow of credit card sales, you can qualify for a business cash advance against your future credit card sales receipts. These business cash advances do not have any fixed repayment schedule and are paid off from your credit card sales receipts.

  • Don’t Block Your Money in Inventory: Businesses often have a large part of their capital blocked in inventory, not just that if you are maintaining your inventory, you need to store them somewhere; so there is a cost for warehousing / stocking them as well. Avoid this process and try drop shipping. When you make a sale contact, the manufacturer who would ship the product to the customer under your invoice and shipping label. You save on your shipping and warehousing cost and also more money available for other operations.

  • Get Your Customer’s to Pay Upfront: Offer special discounts, subscriptions, coupons, gift certificates to customers who pay upfront or customers who purchase for a pre determined amount within a stipulated period. Your sales will increase and people would be more inclined to pay in cash – result: You have more cash at your disposal. Obtaining advance and retainer fees can also be a good way to accumulate cash from your customers.

  • Debtors and Creditors: If you can manage your debtors and creditors properly that would probably solve more than 50% of your fund crunches. Try to get extended credit periods and higher credit limits from your creditors. The longer your credit period, the better it is for you. Maintain a strict credit line and systematic collection procedure. You should be able to get more cash from your debtors and hold more cash from your creditors resulting in increased availability of cash and better cash flow.

In addition to the above-mentioned points, there are numerous other ways that can help you to get more cash without having to opt for business loan. Control your costs in every possible way, try to avoid buying expensive equipments and use them on rent or lease, participate in charities to generate free publicity; these are just some options and there must be hundreds of other options that would help you to run and grow your business without opting for an expensive business loan.

This article is written by Ray Smith, a marketing expert with years of experience in different industries and specialized knowledge on SEO and Internet marketing. Business Cash Advance

Business Loans FAQ:

Question: Are there any ways beside taking a loan out to get money to improve my business, so that profits will enlarge?

Answer: I think basically you have two options. First, you can find someone who will agree to give your business some money in exchange of a share of your business. I think this is the best way, certainly you will have to give away a part of your business but you will get cash to develop it! Second, you may have a look around and apply for a business grant. There are many of them currently available, so why not to give it a try?

Question: I am 22 & looking to start a new community beneficial business in the UK. What grants (not loans) can I go for?

Answer: If you are unemployed and register your new business with the job centre there are financial benefits (including grants ), which ‘may’ include £500 towards costs for your new business. Obviously you have to give them a robust Business Plan and show them evidence that you are operating. If you start your business under ‘New deal’ there are other financial grants available. Ask to see a business advisor at your local job centre.

Question: Why do small business still have trouble getting loans?
Why when interest rates are low and the federal government allocated money to help struggling banks, do we still hear stories that small businesses are having trouble getting loans?

Answer: As with most people, small businesses apply for a loan when they need it and from a bank’s perspective, the best time to give a loan is when someone doesn’t need it. Also, banks view small business as “high risk” and in this economy, banks are going to be ultra conservative (think securitized loans).

Question: Business Loans For Poor Credit?
I’m looking for a low interest business loan to start a company. I need around 90,000 to start. This will buy the truck, help hire another driver and a dispatcher and help with operating cost. I have poor credit and am living on 654.00 a month minus 300 for rent and 120 utilities and 50 for phone. can anyone tell me where I can get a loan with poor credit? I cannot pay any upfront fees.

Answer: Sorry but you will not get a loan without a co-signer.

Question: Does Anyone know Where I Can Get Loan Help Info?
I don’t have the best of credit but I have a co-signer and my own business. (That’s what the loan will be used for) but all I get online is payday lenders and I can’t find a serious lender. Any ideas?

Answer: I would advise that you contact your local financial institution and they should be able to help you with the matter at hand.

Question: I would like to start a business out of my home?
I don’t have any real capital to work with at this point so I can’t even consider something big. I don’t want a loan at this point because I am not sure that it would even do very well. Is it legal for me to start off under the table, or how much profit am I allowed to make before I have to file taxes on it? The business would be making alterations, baby clothes and maternity.

Answer: The good news is that you only have to report the income from self-employment with your regular taxes (until you start making enough to hit quarterly reporting). That means that although you have to report all your revenue, it is offset by your business expenses. The key is to get the appropriate business license and tax ID numbers for your jurisdiction, keep good records, and file your taxes on time. You can start off as a sole proprietor (no cost) and later incorporate if the business takes off.

Question: Has anyone used “Recession Loan Firm”? Are they a legitimate business?

Answer: If they ask for ANY CASH upfront, they are scam and you should scram.

Question: Is it possible to find a $20K-$30K loan 48 month term for a Pool Route business?
I have small business experience and have been servicing residential pools, spas, fountains and equipment for over 1 year. I have equipment, a reliable truck, supplies and access to supplies. I also used to be a buyer. I don’t have the financial ability to buy an established route. I have little to no equity in my house, very little in savings and a slightly above average credit score.

Answer: I would suggest looking for someone who wants to sell their business and might be willing to carry financing for you. You would have to sell yourself and probably agree to a higher purchase price, but if you can get into the business with $5-$10k, vs $20-30k, it would be worth it.

Posted in Business Loans | No Comments »

All About Small Business Loans

December 3rd, 2009

Besides the myriad of problems that a small business owner faces, the most severe issue is lack of capital and limited avenues to raise capital from external sources. Being a small business owner, it is never easy to get a business loan, as most lenders would consider them as borrowers with unstable income and poor credit. Justifiably, as most small business often do not have a steady flow of income in the initial period and runs on low profit, it actually becomes a challenge for the owners to pay off their business loans. Most financial institutions and banks are therefore not very enthusiastic about lending to these small business owners and are concerned about their ability to repay.

However, the good news is that there is a group of lenders who would not like to let go this increasing market segment of small business borrowers and they have devised a lending scheme that fits the requirements of the small business owners. They can use these small business loans for expansion of their business, purchasing new tools and technology or even to meet revenue expenses like paying wages or buying raw materials.

Apprehensive about the increased risk involved in lending to small business owners, these lenders would always take sufficient measures to cover against any probably loss. In most cases the small business owners would be required to keep an asset as the security for his borrowed amount. Also, the interest for small business loans is always charged at a higher rate than other loans. Unlike normal business loans there is often a cap to the amount that any financial company would lend to a small business owner. Depending on the stability of the business, the credit history and several other factors the maximum amount of loan offered is decided.

Small business loans [http://1rstfunds.com/Small-Business-Loans.php] can be either for short term (ranging from few months to an year) or long term, which can be repaid over a longer period that might stretch even to 20-25 years. The small business entrepreneurs needs to decide on this repayment period and other terms and conditions depending on their specific requirements.

The most important factors that most small business owners should consider while deciding on a loan is the flexibility of repayment. As most small business would experience irregular income for some period in its life cycle, a flexible repayment schedule can be immensely helpful. There are lenders that offer extremely flexibility in terms of amount paid towards repayment as well as any pre specified period of repayment. This helps the small business owners to make repayments for any particular period based on their income during that period. As there is no specific pre determined amount to be paid, there is no question of underpayment or further interests being applicable. However, it is very difficult to find such a lender who will be so sensitive to your financial condition and offer you the highest degree of flexibility.

Alternative to small business loans there are many other companies that are offering business cash advance to small business owners, where they are not liable to repay. Business cash advance is not a loan and the organization offering this cash advance gets their money from the credit card sales that the business does in a specific period, there by reducing the burden of paying back the loan and the terms and conditions to qualify for such cash advance are also relatively simple.

With this increasing number of sources available for small business funding it is high time that you unleash the entrepreneur in you and give shape to that dream project you have in your mind.

This article is written by Ray Smith, a marketing expert with years of experience in different industries and specialized knowledge on branding and Internet marketing.
Small Business Loans, Business Cash Advance [http://1rstfunds.com/Small-Business-Loans.php]

Business Loans FAQ:

Question: Can you get a loan in the name of your business so your personal credit wont get damaged?
My partner and I have read you can can keep business separate from personal and the loan officer we were talking too didn’t seem to grab that concept. So it made us wonder if this was true about keeping business separate from personal.

Answer: You can, but your business has to be organized as a corporation or LLC to be considered a separate entity that shields the individual from liability. However, on a more practical matter, most lending institutions aren’t likely to loan a significant amount of funds for a start up business without getting a personal guarantee. The personal guarantee makes it allowable for the lender to go after your personal assets if your business defaults on loan payments.

Question: If I were to start a lawn mowing business and wanted a loan how much could I get?
I am interested in starting a lawn mowing business, I want to know what are the requirements to successfully be able to get a loan from the bank, (what do they want to see and hear). Say I am able to achieve this, how much would I be able to receive from them?

Answer: My take is don’t bother with a business loan initially for a lawn care business. Start it very simply and learn the basics of the business first. You may find you like the business or you may find you may not. After you experiment with it for a bit you may want to scale up with a loan. But more often than not, those who take out loans early on, fall into deep trouble.

Question: How to get business cash advance loan?

Answer: The business cash advance loan application is only two pages long and it will take about three to four minutes to complete. Once you have submitted your application along with your last four months of merchant statements, a copy of your business lease, a voided business check and a copy of your driver’s license. Your provider can approve the application in 48 hours. After approval, most business cash advance loan providers can fund merchant accounts in as little as five business days.

Question: How many years do banks fiance a business loan for like 2.5 million?

Answer: Anywhere from six months to 120 months. With some specifications, as much as 360 months.

Question: What are good resources for applying for small business loans and grants?

Answer: You stand a greater chance of getting a government-guaranteed loan through the Small Business Administration than a government grant. Read the SBA Financing page to learn about criteria needed for borrowing. It is hard to find grants to start a business. Unlike the myths that some perpetuate, federal government and even private foundations hardly give grant money for starting a for-profit business.

Question: Who do I go to get a loan for a new business?
Do you know of an organisation that helps people with funding to get an online store as well as a from home business? I am new to all of this but would like to open a jewellery store bracelets etc.

Answer: Your bank, the Small Business Administration, relatives and friends.

Question: What is the success rate of obtaining a small business loan (Less than $5000) from a bank?
Our company may require an initial bank loan of less than $5000 to utilize as startup costs. We are a company based on a new concept with a hybrid business model that hasn’t been quite done before in our particular industry. However, a main advantage of our model is that we require very little for startup costs, and our overhead is low (We are a services company, not a physical product producing or selling company). How difficult is it to convince a bank (either for-profit or credit union) to allow us to take out a small business loan if we presented them a well-established business plan?

Answer: This is going to be your first hurdle “hybrid business model that hasn’t been quite done before in our particular industry.” Bankers use industry benchmarks as part of their basis for reviewing loan applications, even small loans.

Second it appears you are still a ‘young’ company though you are an S-Corp. What is your D&B rating? It matters and if you don’t have one or any substantial business credit established, that’s going to trip you up also.

Finally, how are you going to repay the loan if this doesn’t work as you plan? The SBA doesn’t issue loans, they only guarantee the lender will be repaid if the borrower qualifies with the SBA first and defaults. You have to show this in your business plan or have money somewhere…just in case.

Before you ask for a loan, check with your banker. Will they give you a line of credit? It may not be the full amount you need at the moment, however over time as you use and repay the loan they will reconsider increasing your limit. Check this option first, the rates for the credit line may be lower than getting a straight loan.

Question: How do you make a business plan projection for next year after such a bad year compared to 20 good years?
I am trying to make sales projections for a business loan to expand and can not figure how to base my numbers…on a good year, average year or this years actually sales?

Answer: The most rational way to do this, Kathleen, is to create a 3-tiered business plan that projects several different scenarios: slow, medium and great. As you craft these plans, you will end up with a strong idea of places where your business can be flexible depending on how the year actually goes.

Your bankers for the expansion loan will almost surely require you to use this year’s actual sales, but I suggest adding another sheet with three or five years of data. Most bankers require multiple years of financial information anyway.

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Business Cash Advance Vs. Small Business Loans

December 3rd, 2009

Every business owner who has ever tried to get a business loan knows how difficult it is to get the money out of those banks and financial institutions. Surprisingly enough, these same people don’t need to be coaxed for a personal loan even if you are going to spend all that money for a pleasure trip or buying a car, but if you are looking for a business loan that is likely to give you a good ROI, you need to fulfill a bunch of criterions to qualify. One of the prime criteria for getting a business loan is to have a good credit score and unfortunately over 92% of the American population does not qualify for a business loan including the Small Business Administration (SBA) Guarantee Loan Program.

Credit Score is just the tip of the iceberg, even if you have a good credit score, you will have to provide the bank with financial statements, audited tax returns, business plan, a personal guarantee or collateral and meet other regulatory requirements set forward by the financial institutions.

Most banks would not even consider offering a business loan if you are

a) New in business

b) Have low credit score or no credit or credit problem

c) Do not have enough collateral

d) Need under $100,000

Also a business loan brings with it the liabilities of making monthly repayments of fixed amounts.

While it is so difficult to obtain a business loan, it becomes pretty easy to get some funding if you opt for a business cash advance. A business cash advance company would offer cash even to people with relatively low credit score. Most business that accepts credit cards and are in business for more than 2 years qualify for a business cash advance. A business cash advance is similar to a factor company except for the fact that it uses your future credit card receivables instead of business-to-business receivable invoices.

A business cash advance does not require a personal guarantee or a collateral neither is there a fixed monthly repayment schedule. Business cash advance is repaid automatically through Visa or Master card sales. A business cash advance is a much easier option compared to business loans. A cash advance provider would not take equity ownership of your business and you are free to use the money for any business purpose you see fit.

As the cash advance provider gets paid only when you sale and get paid, it is more of an investment to them. The repayment of your business cash advance follows the revenue trend of your business and your cash sales are never used for repayment. This ensures that it is never a burden for you to repay the cash advance.

If your business needs an injection of cash flow it is time you apply for a business cash advance and start enjoying the financial stability.

This article is written by Ray Smith, a marketing expert with years of experience in different industries and specialized knowledge on branding and Internet marketing. Business cash advance [http://1rstfunds.com/Business-Cash-Advance.php]

Business Loan FAQ:

Question: What is the key to getting a business loan?
I’m writing a business plan, and i want to know some key steps to make sure I get the loan. I know that I have to have good credit, but that’s about all that I know.

Answer: A clear business plan, that has all the elements, sales projections (good, okay, bad, three cases), SWOT analysis, projected revenue for first 3-5 years, anticipated loan for each phase and repayment, market analysis, and so on.

Question: What are the general requirements for business loan?

Answer: The basic requirements for business loan are: You should have own the business for at least six months, you should have business processes at least $3,500 in monthly credit card sales, the owner should not have unsettled bankruptcies, you should also have at least one year remains on business lease.

Question: I’m 20 yrs old and I want to start a business. Do you think I should get a loan or go princes trust?
I have spoke to the bank and they said I have to bring in a business plan but I am in the process of doing this. But when I spoke to Princes trust the process seemed so long winded! I would like to get the business started in a month.

Answer: Realistically, it takes longer than 4 weeks to get a business up and running. It took a team of 6 of us 3 months to get a business from concept to trading and that was working quite intensely.

Contact your local Business Link and go on one of their free starting in business seminars. That will take you through all the things you need to know. You’ll also be assigned an advisor who gives you free advice on taking your ideas forward. They’re very good on business plans and they also help a lot with sorting out the appropriate sources of funding.

Be clear about what kind of business you want to start, who it’s for and how you’re going to reach them. You’ll also have to explain in your business plan how you’ll repay any loan that you get.

Question: Where can I get a small business loan?
I need a small business loan for $1500.00 I don’t know if banks usually give out loans that small of an ammount. Is there any institutions that would help me out with this? I don’t want to get any credit cards. Also my credit isn’t the best. I know that with this business I can make the $1500.00 back in six months.

Answer: Go to the bank. If they won’t give you a small business loan perhaps they will give you a line of credit.

Question: If a person has money but no collateral how do they secure a business loan?
For example, I have $20,000 and I’m trying to secure a business loan for $100,000. I don’t have “collateral”…can I “put up” my money against it, or do I purchase something worth $20,000, or how do I go about “using” my 20k to secure the other money I need?

Answer: You can use your $20k to secure a larger loan, but unless you have spotless credit and a long credit history, you probably won’t be able to borrow $100k with only $20k as collateral. Talk to your banker and ask about keeping the $20k in a separate account called a “compensating balance” account.

Question: Am I eligible for a Business loan?
I need to get a loan for approx $100,000. I am currently on unemployment but have excellent credit. I want a career change and I have a business plan written for my up and coming boutique. Would the bank consider me or do I need an income when I apply for the loan?

Answer: Unless you have a house that you are willing to put up against the loan AND a co-signer, you will never get that kind of money being on unemployment. Even then, you will have a VERY hard time even finding a bank to dish out that kind of money.

Question: How can a business owner advocate the federal government to expand the SBA Community Express Loan program?
This loan program is a “pilot” meaning that the number of loans that can be made are limited a percentage of the total SBA loans approved. My business assists small business owners and this is an excellent program to get credit to business owners but it doesn’t have a champion!

Answer: You need to contact your local Representative and your two Senators. Provide them with as much information as you can to support the extension and expansion of the program. If possible, get testimonials from small businesses that have used the program successfully as well as get other small business owners to write to their senators and rep supporting the program. The more people you can get to have their voices heard, the better your chances – remember that you are competing for scarce dollars against other program people deem worthy.

Question: Where would I find a small business loan or grant in British Columbia without a magnificent credit score?

Answer: There are government programmes designed to help start up businesses and The Business Development Bank of Canada is a lender to small businesses that might have difficulty getting traditional bank funding. Check the web sites for BD Canada and the government of B. C. Depending on your location there may be incentives to start a business you could check on with your local municipal business development department.

It is very important to a lender to know how prepared the borrower is and what they plan to do with the funds borrowed. I strongly recommend you prepare a business plan before you approach anyone for a loan. The big banks have excellent web sites with instructions for preparing a business plan and advice for applying for a loan.

By the way, it will be more difficult to obtain a loan from any lender if your credit record is poor. Best advice is to acknowledge past problems and what you are doing to improve your record.

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