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Guide to buying a house with a Mortgage
Guide to buying a house with a Mortgage
by: The Mortgage Shop
Source: http://www.ArticleStreet.com/
Purchasing a house is one of the biggest financial commitments a person will probably make in their life. It can be very expensive, time consuming and difficult to organise, but if you do some research you can make the whole thing smoother for yourself.
Before you even start looking at your new dream home, you need to work out what you can afford to borrow by visiting a Mortgage advisor. They will look at your finances and work out what they are willing to offer. You should make sure you can afford the monthly repayments now and in the future, as you will have to take changing interest rates into consideration. Once you have sorted out how much a lender or bank is willing to lend you, then you can start looking for a property in your price range. The first stop will be an estate agents, but you should bare in mind there are alternative methods to finding property than the more traditional methods. Many people will advertise privately on the internet or newspapers. Word of mouth is also a great tool these days, as people may know someone who wants to sell but haven’t put their house on the market.
Once you have found an ideal property, make sure you don’t rush into making an offer and go to visit the property a few times so you can take a thorough look and make a good decision.
If you decide a property is for you then it is time to start making an offer and negotiating. To stop you paying more than you want to, you should agree to set a maximum before you make any offers. If the seller seems keen ask them to take the property off the market so that someone doesn’t sneak in and make a higher offer.
The next step involves solicitors and arrange the legal aspects of buying a property, the best way to find a solicitor is to ask around for any recommendations.
When it comes to mortgages there are so many types available that it can be hard to make a decision. Lenders will require a survey/valuation of the proposed property to make sure it suitable for the loan, identification and address verification. Some lenders will also want to see proof of your income such as bank statements and credit commitment. One they are satisfied you can afford the loan and the property is suitable, then they will agree to a mortgage offer.
Once the solicitor is happy your deposit will be paid to the solicitor and contracts can be exchanged. The seller and buyer will be legally committed and from this date if you pull out, you will lose your deposit. When the contracts are exchanged a date will be set for completion and on that date transfer of ownership will happen. You then pick up your keys and you will own your property.
Lenders vs Mortgage Brokers
Lenders vs Mortgage Brokers
by: Michael Sterios
Source: www.articlecity.com
When looking for a mortgage you may be faced with a decision as to whether you should use the services of a mortgage broker instead of applying for a home loan directly with a lender.
One of the main reasons why you should use a mortgage broker is that they have access to a much wider range of products than an individual lender does. Mortgage advisors who work within bank branches are tied to the products that the bank offers and cannot advise on products offered by other financial institutions. This means that tied advisors are not able to offer advice on the entire mortgage market and are therefore not independent and unbiased.
Instead those mortgage brokers are usually limited to about a dozen products, usually with varying interest rates, loan-to-value ratios, and fees. Apart from the variances in these factors, the products are mostly the same.
They will usually require the applicant to pass the same set of criteria, such as credit worthiness, in order to assess whether they are eligible for a loan. This normally means that applicants with adverse credit will not be approved and the lender will not assist them in locating a more suitable product.
Independent mortgage brokers, on the other hand, may have access to thousands of products from dozens of different lenders. This will certainly increase the odds of you finding a product to suit your individual circumstances, particularly if you are self-employed or do not have a perfect credit history.
An independent mortgage broker will have access to software that will be able to scour the entire mortgage market to find the best product available to suit your individual needs.
Many niche lenders specialize in providing mortgages for people who do not qualify for the products offered by mainstream lenders and they usually prefer to conduct their business through independent mortgage brokers. This means that you will not be able to access certain lenders without using the services of a mortgage broker.
Some larger mortgage brokers are even able to offer exclusive and semi-exclusive deals. These mortgages are not available on the open market which means it is always a good idea to contact at least one major mortgage broker to find out what they have to offer. Exclusive deals are usually only available for a limited time and target certain borrowers.
However if you are eligible for a prime mortgage product you may be able to secure the best deal directly from a lender. If you apply for a mortgage with a mainstream lender you will be able to save on mortgage broker fees as you will effectively cut out the middle man. Ordinarily you will be required to have a perfect credit file and some equity in your home or a large deposit.
Therefore, if you are looking to buy a home and need a mortgage, or if you are looking to remortgage a property you already own, you will need to asses the two options carefully and make a decision based upon your personal financial needs.
FHA Loans Lower Fees and Raise Acceptance
FHA Loans Lower Fees and Raise Acceptance
by: Gary Carraghan
Source: www.articlecity.com
FHA mortgage insurance programs assist low and moderate income families become homeowners by lowering some of the costs of their mortgage loans. FHA loans encourage mortgage companies to make loans to otherwise creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements by protecting the mortgage company against loan default on mortgages for properties that meet certain minimum requirements.
Today’s FHA program is the adaptation of the very same program which has helped save homeowners from default since the 1930s. Today, One to Four Family Mortgage Insurance is still an important tool allowed by the federal government to expand home ownership opportunities for first time homebuyers and other borrowers who would not otherwise qualify for conventional loans on affordable terms.
Several amendments have been made to the FHS in the nearly eighty years it has been a part of United States federal policy. Most notable to these changes is evident in the 203(b) clause added in the 1980s which allows numerous advantages to the first time and disadvantaged home buyer.
In contrast to conventional mortgage products, which frequently require down payments of 10% or more of the purchase price of the home, single family mortgages insured by FHA under Section 203(b) make it possible to reduce down payments to as little as 3% . This is because FHA insurance allows borrowers to finance approximately 97 percent of the value of their home purchase through their mortgage, in some cases.
With most conventional loans, the borrower must pay, at the time of purchase, closing costs (the many fees and charges associated with buying a home) equivalent to 2-3 percent of the price of the home. This program allows the borrower to finance many of these charges, thus reducing the up front cost of buying a home. FHA mortgage insurance is not free: borrowers pay an up front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.
Finally, FHA rules impose limits on some of the fees that mortgage companies may charge in making a loan. For example, the loan origination fee charged by the mortgage company for the administrative cost of processing the loan may not exceed one percent of the amount of the mortgage.
Along with a renovation of the FHA regulations during the 1980s to accommodate for an ever-evolving real estate market, the federal government adapted what’s known as a ‘streamline’ refinancing program. This refers only to the amount of documentation and underwriting that needs to be performed by the mortgage company, and does not mean that there are no costs involved in the transaction.
There are a few basic requirements to qualify for the streamline option. The mortgage must already be insured by FHA, the mortgage to be renewed must be current and paid on time to date, the refinance is to result in a lowering of the borrower’s monthly principal and interest payments, and no cash may be taken out on mortgages refinanced using the streamline refinance process.
Companies may offer streamline refinances in several ways. Some offer “no cost” refinances (actually, no out of pocket expenses to the borrower) by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium, the company pays any closing costs that are incurred on the transaction.
Also, companies may offer streamline refinances and include the closing costs into the new mortgage amount. This can only be done if there is sufficient equity in the property, as determined by an appraisal. Streamline refinances can also be done without appraisals, but the new loan amount cannot exceed what is currently owed, i.e., closing costs may not be added to the new mortgage with those costs either paid in cash or through the premium rate as described above. Investment properties (properties in which the borrower does not reside in as his or her principal residence) may only be refinanced without an appraisal and, thus, closing costs may not be included in the new mortgage amount.
Once you do, or if you have ever fully paid off a home backed by FHA, you may be owed back compensation from the government. About 1 in 10 FHA borrowers leave money in their escrow accounts when they pay off their loans. The average refund for each borrower is about $700.
In addition to the more standard mortgages available in this program, the federal government has also allowed for more creative forms of home owners who could qualify, at least in part, from FHA funding. For example, FHA’s energy efficient mortgage program provides mortgage insurance for a person to purchase or refinance a principal residence and incorporate the cost of energy efficient improvements into the mortgage. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.
One of the most enjoyed benefits of the FHA, though, is that the down payment for an FHA mortgage can be 100% gift funds. Verification of the source of gift money is not required to benefit from this particular aspect of the legislation. However, it is necessary that the gift funds be deposited in the borrower’s bank or savings account, or in an escrow account, prior to underwriting approval. Gift donors are restricted primarily to a relative of the borrower. They can also be certain organizations, such as a labor union or charitable organization. Contact your local branch for complete information. Additionally, proof of initial deposit is required.
The Federal Housing Administration is one of the most successful government programs in American history and over the decades during which the program has been in existence, thousands upon thousands of home owners have been able to procure the home of their dreams when it may not have been possible otherwise.
Adjustable Rate Mortgages Offer Alternatives For Home Buyers
Adjustable Rate Mortgages Offer Alternatives For Home Buyers
by: W. Troy Swezey
Source: www.articlecity.com
When looking for a mortgage to meet your needs, consider these key questions: Is your income expected to increase in the coming years? How long do you plan to live in your new home? And, which mortgage will provide the lowest interest rate?
While 15 or 30 year fixed-rate mortgages are the most popular, and Adjustable Rate Mortgage (ARM) offers some interesting alternatives for home shoppers who plan to move again within four or five years. Although interest rates are the lowest they’ve been in 20 years, an ARM provides even lower interest rates during its introductory period.
An Adjustable Rate Mortgage is a home loan with an interest rate that fluctuations with market interest rates. Instead of paying the same rate of interest over the life of the loan, as you would with a fixed-rate mortgage, you usually pay a lower interest rate the first four or five years. Your interest rate then changes in accordance with certain rate indexes.
However, ARMS come with maximum caps on how much the interest rate can increase in a single period (usually a year) and how high the rate can go during the entire life of the loan. Usually, the overall maximum cap is six percentage points, and the annual cap is two points
Should You Apply For A Fixed Rate Mortgage?
Should You Apply For A Fixed Rate Mortgage?
by: Michael Sterios
Source: www.articlecity.com
With so much interest rate uncertainty in the market borrowers are facing a dilemma as to whether they should fix their home loan interest rate or not by applying for a fixed rate mortgage. A fixed rate mortgage will provide absolute security against interest rate rises ensuring that monthly repayments remain constant regardless of what the money market is doing.
The interest rate, and therefore the interest payments, on the fixed rate product will remain stable for the fixed rate period.
Fixing home loan repayments can help considerably with household budgeting which is why this type of product is popular with low income earners and first-time-buyers. Mortgage payments usually account for about a third of a household’s disposable income so it is important to ensure that rising interest rates do not make the home loan unaffordable. Locking in the interest rate at an acceptable level can reduce this risk considerably.
Borrowers should be aware, however, that fixed interest rates are usually higher than variable rates offered on the same products. Additionally, as a general rule, the longer the fixed rate period is, the higher the interest rate will be. This is because lenders must provide themselves with a profit margin on the money they lend. If they are expecting interest rates to increase in the future, their costs will increase and their profit margin will decrease.
Lenders therefore need to build in a larger profit margin for this type of home loan product when compared to variable rate products. Mortgage products that have a variable interest rate should provide a profit to the lender for the entire term of the loan. Borrowers should therefore keep in mind that they might pay over the odds for a fixed rate home loan however the reduction in risk should make up for this.
If you are unsure on whether you should apply for a fixed rate home loan, contact a qualified independent financial advisor for expert advice. An independent advisor will be able to assess you borrowing needs and suggest the most appropriate mortgage products for you to consider for your home.
