Mighty Mortgages

As the baby boomers enter their senior years, there are more people than ever looking into reverse mortgages. They hope to use the income to finance their retirement so it is very important that they consult with honest reverse mortgage brokers. You need to be able to trust and rely on them to be forthcoming with respect to fees and terms.

For example, application fees are not always refundable. The application fee includes and appraisal of the home and other checks. The closing fees can be included in the amount loaned, however in that cases you will pay interest on them. The amount of these fees can vary significantly from lender to lender.

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The unfortunate fact of our recent serious economic downturn is that significant numbers of people are losing their jobs and are being forced to take new positions at lower rates of income. This problem is compounded by falling housing values which are also a result of current economic conditions. People have been losing their homes for the last 18 months due to the sub-prime mortgage crisis and it is much harder for buyers to get financing to purchase homes. Too much supply and not enough demand cause values to fall.

Homeowners in trouble find themselves with negative equity in their home because they actually owe more on their mortgage than what it is worth. Once payments start to fall behind, they think that foreclose is their only option or even inevitable. While that may be true in some circumstances there are other solutions.

A mortgage short pay, also called a mortgage short sale, is another very real option. This is essentially when a lender will agree to accept less than full amount owed on the loan instead of foreclosure. You may wonder why would a bank let you get away with this, but you need to understand that it is their best interests as well. Banks don’t want to be in the real estate ownership business, especially in this market. Additionally the foreclosure process can be long and costly and carry its own uncertainties. If the financial institution can limit its risk and loss to a predetermined acceptable amount than they are more likely to agree to this type of arrangement.

This isn’t to say that a bank opt to do this lightly. Banks are not in business to let people off the hook for their financial debt obligations easily. A mortgage short sale is a last resort resolution when a foreclosure is all but a certainty and the circumstances will need to be established as such.

If you can no longer afford the payments, but you could sell the home and pay off all the debts against it, then you should definitely do that. It is not otherwise worth it to risk permanent damage to your credit rating. If there is enough equity in the home to cover all of the banks expenses if they were to foreclose then they will not consider a short pay either.

If there are multiple lenders who have security interests in the property then negotiating a mortgage short pay gets considerably trickier. If the lender who has first position can foreclose and fully cover the amount owed plus costs, they will likely not agree to accept anything less. Likewise if a second or third position lender is not going to benefit from the deal, then there is no incentive for them to be cooperative either.

The first step in beginning the short sale mortgage process is to contact the lender(s). By phone or mail is fine, but essentially this is just a fact finding mission. You want to gage their receptiveness to the idea and find out exactly what information and supporting documentation they require to consider your proposal. This will vary from lender to lender, but you can expect to provide considerable information regardless, topped off with a well written hardship letter. Remember this is a last ditch effort to save your credit and you are asking the bank to take a loss. While they may agree, they are going to want to be convinced that there really is no alternative. Fannie Mae, Freddie Mac and private mortgage insurance (PMI) all add a layer of complexity.

After the proceedings have concluded you may get a form 1099 from lender’s loss. There is usually no lasting impact to your credit report as the debt is reported as paid in full. Occasionally it may be reported as settled, but in either case it is much better than having a foreclosure recorded on there.

Some people gladly go through the process of mortgages, but few people realize the potential danger of reverse mortgages. But first, what is a reverse mortgage? It is defined as a loan available to seniors of a country (the legal definition of “senior” differs according to where you live), that is mainly used to release home equity in a certain property as multiple payments or one lump sum.  To make the whole process run more smoothly, many borrowers opt to use reverse mortgage brokers.

Until the owner dies, leaves, or sells the house, the homeowner’s obligation to repay the loan is postponed. In its essence, a reverse mortgage is to convert the equity in your home into a cash amount. You may ask, “Why should such thing be dangerous?” The objective of this article is to enlighten you about the true risks involved in a reverse mortgage.

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When your peers or co-workers talk about mortgages, do you feel as if they’re speaking a different language? When they casually say words like “encumbrance” do you imagine carrying a physical burden? If they bemoan a high “ceiling,” do you wonder if they’re complaining about cleaning the upper part of their rooms? Well, fear these conversations no more, because the task of knowing a basic explanation of mortgage terms should not be that hard.

First of all, what is a “mortgage”? The dictionary defines it as a “temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.” Simply put, a mortgage is property that is placed by the borrower when he wants to assure the lender that that he will be paid back. It is used to ensure security. It is somewhat similar to a “Deed of Trust” used in many western states.

For example, let us assume I am the “mortgage lender” or the “mortgagee”, and you are the “borrower” or the “mortgagor”. If you want to borrow a sum of money (“a mortgage loan”) from me, you can offer your car as mortgage. Now, if you do not pay me back by the time we agreed upon, I can claim your car as property. This process is called “foreclosure”. If you do pay me back by giving a “mortgage payment”, you get your property back.

There are several other words you should be familiar with related to “mortgage payment”. The primary one is “amortization”, which is the method of repayment of the amount borrowed, usually through regular monthly payments of “principal” and “interest”, which compose the “mortgage payment”. The “principal” is the original amount that you borrowed, while the “interest” is the cost of borrowing the principal amount. The other two terms are the familiar words “taxes” and “insurance.” All together, these terms are called the “PITI payment”: principal, interest, taxes and insurance.  You can use a home mortgage payment calculator to determine exactly what your payment will be.

In terms of payment, there are two types of mortgages: “fixed” and “adjustable”. A “fixed mortgage” uses a fixed interest rate and a fixed length of time to pay back (“term”). This is fixed at the start of the mortgage, and cannot be changed. The “adjustable mortgage”, also called the “adjustable rate mortgage”, has an interest rate that will change up or down according to current interest rate levels. Now, the perplexing usage of the word “ceiling” comes in. A “ceiling” is the maximum allowable interest rate over the life of the loan of an adjustable rate mortgage.

There might also be some issues regarding the transferring of a mortgage or a property. One of the key problems is the issue of an “encumbrance” which is a claim against a property by another party. This may negatively affect the ability to transfer ownership of the said property. A concrete example would be a full-grown, independent man mortgaging his parents’ house, without his parents’ consent, in order to borrow money. Since the son does not legally own the house, there is an “encumbrance”.

You have been armed with the basic lingo used in mortgage talk. If asked, “How high is the ceiling?” you now can respond with a sensible (but less amusing!) answer.

There is an existing risk in the market nowadays regarding subprime mortgages. Delinquencies and foreclosures have defined the economic and social standards and regulatory procedures of subprime mortgage industry. Why did such conditions increase rapidly in the business?

Subprime mortgages are loans provided to borrowers regarded as high-risk creditors, which means these borrowers do not have a credible credit history to back up the loan or may have had characteristics that relate with a high-risk of default, and limited-income borrowers. The credit and financial profile of the consumers classify this kind of mortgage. Many subprime borrowers are deteriorating because of non-payments or late payments and other problems that may result to bankruptcies.

Like any mortgage offer, subprime mortgages have special loan features like, interest-only payments, pay-option loans, and hybrid mortgages. Interest-only payments permit borrowers to pay the interest alone for certain duration, that maybe five to ten years. The pay-option loan often has rates that are adjustable and leave the borrower in choosing their payment scheme. This could be in interest-only payment, minimum payment, or full payment, which are possibly lower than the required payment in order to trim down the loan balance. Meanwhile, hybrid mortgages are loans with fixed rates, which change into adjustable rates in no given time.

Why are subprime mortgages riskier then? The risk is higher because this mortgage type allows loan to borrowers who are incapable of qualifying under the traditional and rigid loan regulations due to a limited or badly marked credit background. Subpime borrowers end up receiving higher payments for their borrowings. Therefore, this loan type has higher risks to defaults over prime mortgage loans.

The problem with defaults means consequences of property foreclosures, credit access reduction, and acquired home equity loss. Did you know that borrower’s neighbors might as well endure the consequences? This may also cause to reduce the worth of properties around the borrower’s property, because the geographical factor defines the foreclosures.

Nevertheless, subprime mortgages and other credit methods have truly extended financial assistance to many property owners at the same time. That is why the Federal Reserve continues to make effort in regulating and controlling the existence of fraud and abusive lending institutions, in order to provide security in the practices of lending firms. Together with other government sectors, they also promise to balance continually the well-being of both lenders and borrowers as well, to enhance all the types mortgages offered in the market at present and make it available for anybody who is in dire need.

It is not fair for everyone to discount the fact that lending still assists many households today, despite the risks that it imposes to them. Although there may be cases of bad apples in these lending institutions, there are also several cases of irresponsible borrowers around.

The whole idea of borrowing should definitely not be an embarrassing condition for most of us. It sometimes happens that some of us get through difficult times holding up to our business or daily living. What should be embarrassing is to borrow money for expenditures not necessarily called for now and leave the payments hanging later on.

Refinancing a mortgage is a process that takes several steps. After all, it is a decision that deals with a large amount of money. So, to ensure that everything goes well, one must first think through a few questions and complete a few tasks.

Step One. Ask yourself, “Should I really refinance my mortgage?”

There are different answers depending on which situation you are currently in. Some may be beneficial, while others may not. Ask for advice from a person knowledgeable about your current situation. But remember: if you refinance your mortgage, you can save thousands of dollars, lower your monthly payments, consolidate your debts, and receive other benefits.

Also, consider the timing of your refinancing. If you’ve got an adjustable rate already, do it during a time of rising interest rates. Another possibility is refinancing to a fixed rate mortgage similar to your present adjustable rate, if it is low. You may also consider refinancing when you’ll save money by getting a lower interest rate.

Step Two. Ask yourself, “What are the possible dangers of refinancing my mortgage?”

The main danger is a surprising one: other people. Not all mortgage brokers are concerned about ethics, and many people have been scammed by such people due to ignorance of their personal mortgage situation. If you decide to proceed with refinancing your mortgage, get recommendations from people you know and trust.

A risk that emerges by selecting a devious broker is called “churning”. This is what happens when mortgage brokers refinance a loan despite the overwhelming drawbacks for the borrower. The commission money they will receive is their primary concern, not the benefits of the borrower.

With this in mind, select a broker that earns your trust. These types of brokers tend not to favour their own loan product, provide you with all the information you ask, give you unbiased lender choice, and other such qualities. Make sure that the broker is insured and is qualified to do the job that you ask him or her to do.

Step Three. Ask yourself, “Which mortgage loan type is best for me?”

Home loans are varied, since each home loan type focuses on the different needs of the borrower. Look at your current financial situation, with special care towards your own reasons for Refinancing Your Mortgage. For example, flexibility might be more important to you than stability of repayments. When in doubt, ask your trusted, chosen broker which home refinance loan type is best suited to you.

Step Four. Have your home appraised, so your lender will know the complete worth of your home. After this, have your home fully approved to receive your formal loan documents.

Step Five. Notary signing, in which an official who is authorized to witness your signing is needed, is one of the final tasks to fund your home mortgage refinance loan. This will ensure that everything is complied with legally, and binds the entire process as an obligation.

Step Six. Lastly, upon notarization, the documents if the mortgage refinance loan receive their last finish, and the funding for the process is sent.

Unlike the regular residential loans or even commercial loans, new construction mortgage loans are different. These are loans requested from a lender to assist the financial needs to build your dream house. The definition is truly very attractive to many dreamers of a wonderful home, but the basis of your construction loan approval is similarly strict.

The construction loan lender would require you the borrower a detailed list of preparation, explanation, and accounting information for the cost estimation of your home construction project. The lender will have to see your capacity as a homebuilder and planner until the result of your work materializes. Once you have passed the initial screening, only then that they will ask you to submit the documents of your financial capacity to earn and repay the loan. A good credit reputation will also help the approval of your loan.

There are various types of new construction mortgages loans. These are the construction to permanent loan, remodeler loan, bridge loan, and lot or land loan. The construction to permanent loan is ideal for majority of people wanting to build a house, because it only requires the borrower to submit documentations and pay the closing expenses once. It is a combination of a permanent financing and construction loan. This type can definitely help you to save more money and more time during the process. The remodeler loan type is a mortgage type made only to support home improvement or remodeling project by owners. The bridge loan type permits the borrower to make use of the equity on your current home and serve as down payment for a new home. On the other hand, the lot or land loan supplies you funding for your purchase of land instead of constructing a house.

However, picking a new construction mortgage lender is as difficult as choosing a friend, because if you choose the wrong lender and mess up in your payments, some of them can really be very harsh and grabby at once. Should you decide to get a construction loan, you have to consider some valuable guidelines.

Picking the right lender needs thorough decision and research. Gather several companies first and see what they offer. Find out if they are trusted and licensed lending institutions by asking around. Some friends or relatives may shed light on the background of these lending firms. Once you have few preferences at hand, ask for their terms and conditions. Review it carefully. If you have any information that seems to be unclear, ask for an explanation on this.

Although you have dreamt of having your own home built, borrowing is still risky if you are not responsible enough to take care of your finances. Every decision, when it comes to borrowing, has to have sound preparation and evaluation of your capacity to repay the new commercial mortgage loan. Besides, you do not want your new-built home in front of you but with other properties taken away at the same time.

There are no certainties in life. Life is full of surprises, both and good bad. You may be healthy and strong today, then get sick and injured or disabled the next. If you have responsibilities in life, it is better to be prepared for uncertainties or unfortunate incidents such as these. One good way of preparing is through mortgage protection insurance.

Mortgage payment protection insurance would cover or pay for your mortgage payments if you become ill, injured or if you lose your source of income and become unemployed. Mortgage protection insurance is usually offered by banks or financial institutions together with their loan products, credit cards or home mortgages.

Mortgage payment protection insurance can also be bought separately from insurance providers. You can even customize it to cater to your specific requirements. You can opt to just avail of accident and sickness cover and not the unemployment cover. It is wise to shop around for the best mortgage payment protection insurance provider. There are many websites that list and compare the rates of insurance providers.

Unknown to you, some banks may lump mortgage protection insurance with your mortgage loan. This is not a good practice though, it should not be included in your loan without your knowledge or consent. There are government institutions that help customers or borrowers who have been deceived by insurance providers. In fact, these have been very vigilant in apprehending such deceptive providers, who can be fined or closed.

Depending on the bank or financial institution, mortgage payment protection insurance may be a condition to a mortgage loan. Most of the time though, it is not a compulsory requirement. But most financial consultants or experts advise borrowers to secure their mortgages with protection insurance.

Once a borrower applies for mortgage payment protection insurance, the policy would usually pay for your loan or mortgage payment a month after you fall sick, get injure or disable or lost your job. The coverage or payment is usually done within a period of one year. Of course, within 12 months, it is expected that the defaulting borrower would have already recovered from his or her illness or found a new employment.

People who avail mortgage payment protection insurance should be warned that canceling it may not be allowed once you have signed up to it. Thus it is imperative that you should read the fine prints in your loan contract or agreement. There are few insurance providers that allow you to cancel it at any time. However, if you have signed for mortgage protection for a fixed period, usually one year, then you cannot terminate payments.

As customers or borrowers, you have rights. You have a right to refuse mortgage payment protection insurance if your have no need for it, there are insurance providers who may force it on you. Salesmen or insurance brokers may also mis-sell the product to you in order to get their commissions. You have a right to cancel the mortgage payment protection insurance, if its cancelable that is. Remember, forewarned is forearmed.

There are fraudsters everywhere. They take advantage of unsuspecting people. They have made an art or a living from trickery, fraud and deception. They are commonplace everywhere, particularly when a huge amount of money or resources are involved.

Securing a mortgage is one good example of a business transaction that involves a great deal of money. Thus mortgage fraud has become pretty common. Mortgage fraud in general means performing a variety of misrepresentation such as giving false information in order to secure the mortgage loan.

In fact, according to the Federal Bureau of Investigation (FBI), mortgage fraud has become one of the fastest growing white-collar crimes in the United States. FBI has thus increased the number of its agents who are tasked to look after mortgage fraud-related cases. It is a federal crime to misrepresent yourself or provide false information in connection with your mortgage loan application. You may be criminally prosecuted.

Just as there are various types of mortgages and mortgage protection insurance, there are also many types of mortgage fraud. These include occupancy fraud, employment or income fraud, identity theft, failure to disclose liabilities, appraisal fraud, mortgage fraud ring, cash-back schemes, and ‘shotgunning’.

The borrower or mortgage applicant is usually the main perpetrator in a mortgage fraud. But it can also involve a number of persons, just in a scheme dubbed as mortgage fraud ring, when a group of individuals are in it together. The aim is usually to defraud a lender or the lending institution a huge amount of money. The accomplices to mortgage fraud may include the borrower, the loan or mortgage officer, the real estate agent or appraiser or even the escrow lawyer or attorney.

There are various fraudulent schemes or so-called modus operandi. For instance, a mortgage salesman or broker may ask a loan officer or agent of a bank to create a fictitious credit account for a mortgage borrower. Then can even sought the help of a real estate appraiser in order to inflate or increase the real value of the property that will be mortgaged. There is also a scheme called foreclosure rescue, where a fraudster would promise to pay off the mortgage borrower’s delinquent payments. It is not as good as it sound though. In the end the homeowner would lose ownership of his or her home, and become merely a renter. In effect, the homeowner has signed off his equity in his or her home.

Homeowners or mortgage borrowers, particularly those who have defaulted on their mortgage payments or at the brink of defaulting, should also be vigilant and avoid being victimized by mortgage fraudsters. The first thing that you should do is to make sure you are dealing with a reputable organization or its authorized representative. Do not deal with the so-called fly-by-night firms.

Even the banks, insurance providers and, other financial institutions are also becoming more vigilant in detecting fraudulent claims or applications of their customers. They are have become stricter and more thorough in reviewing as well as validating the documents submitted by borrowers together with their mortgage loan applications.

The world of mortgages is an extensive industry that supplies the need for a stable flow of funding for many investors, proprietors, executives, and homeowners as well. Yet, some beginners in the mortgage industry are lost why there are mortgage closing costs attached to their loans. Are they even necessary in the process?

Mortgage closing costs are costs for the required services that the lender needs to pursue in order to be able to process and close your loans. As the law requires prior to any loan application, these lenders are obliged to inform you the estimated mortgage closing costs in writing. They call it Good Faith Estimate.

Some borrowers misunderstood that mortgage closing costs are payments that the lender wholly acquires from you. In actuality, costs mainly go to various services performed by third parties. These are compulsory to verify and complete all the details of your loan transactions.

Below is a run-down of these costs for your reference:

Cost of Appraisal. This primary factor needs a special attention prior to other loan transactions. It determines the fair market value of your property and secures the lender that the value of your mortgage loan is not above the fair value of your property. This requires the expertise of an appraiser.

Credit Background. This may mean both your past credit history and present capability to pay for the credit being obtained in the lending institution. Your past credit history will be investigated and evaluated whilst your present financial status will additionally back up your lending. So there is a cost for the lender to hire a credit report investigator or an agency.

Closing Fees. This is paid to the title company or attorney that conducted the closing.

Fees for Title Company Title Search or Exam Fees. Since a detailed and relevant search about your home’s property records is necessary for the loan application, expenses go to the title company handling the research. The research ensures that there are no problems affixed to your property.

Survey Fee. Your property’s ownership lines and boundaries for verification guarantee that there is no present violation on the lot.

Flood Determination/Life of Loan Coverage. Flood is a major factor in ruining your property’s assessment. If it stands in a flooding area, they will require flood insurance from you.

Courier Fees. Documents transportation to finish the loan application as fast as possible require additional costs, too.

Title Insurance for the Lender’s Policy. This appears to be an assurance cost for the lender to validate that you are the legal owner of the property and that the mortgage is a legitimate lien.

Title Insurance for the Owner’s Policy. In turn, this becomes your assurance cost as a borrower to validate that the property is legally yours, in cases where the ownership gets questioned.

Insurance for Homeowners. If future damages come such as fire, this insurance covers these damages.

Attorney’s Fee for the Buyer. This cost if for the attorney who makes all the reviews and preparations of the closing documents on your behalf.

Attorney’s Fee for the Lender. Same thing applies to the lender; a lawyer manages the reviews and preparations of closing documents on the lender’s behalf.

Nevertheless, it is still better to check all the attached mortgage closing costs to your lender. Cases point out to scheming tactics of some lenders wherein they adjust the rate to a much lower cost and brag about this to clients, when in fact they try to keep up with these costs through other lender fees.