When it comes to buying a home, there's a lot to learn about mortgages and credit. The terminology comes at you pretty fast, and when the terminology is new to you, it can all seem overwhelming. This article will help you make sense of it all.
Fixed Rate Mortgage
A fixed-rate mortgage offers an interest rate that will never change over the life of the loan. The primary benefit is that if interest rates increase during the term of your loan, your rates stay the same.
On the other hand, if interest rates drop during the term of your loan, your rates still stay the same (unless you refinance your home at the lower rate). This is the biggest difference between this loan and variable / adjustable loans (see next item).
The length (or "term") of a fixed-rate mortgage can be 15, 20 or 30 years. Each of these terms has its pluses and minuses:
* 30-year fixed rate - The 30-year term gives you maximum tax advantage by having the greatest interest deduction. It's also worth noting that the 30-year fixed-rate loan is often the easiest type of loan to qualify for.
* 20-year fixed rate - If you shorten your mortgage, you usually get a lower interest rate. The 20-year mortgage is not as common as the 30-year, so you'll have to shop around to go this route.
* 15-year fixed rate - Same benefits as the 20-year term (quicker payoff, lower rates), but will increase the monthly amount you pay.
Adjustable Rate Mortgage (ARM)
The adjustable rate mortgage (or "ARM") offers a fixed initial interest rate with a fixed initial monthly payment. "Initial" is the key word here, because after some predetermined initial period, the loan is subject to changes in market conditions.
The initial interest rate you pay will probably be lower than a fixed-rate mortgage; but the uncertainty, of course, comes after the initial period. This type of loan is usually a good option for buyers who only plan to stay in a home for a short while.
In other words, if you turn around and sell the house before the initial fixed-rate period expires, you'll benefit from the lower rate and be out before the uncertainty sets in.
How often the interest rate adjusts with an ARM depends on the terms of the loan. Take the 5/1 ARM as an example. 5/1 means your interest rate would stay the same for the first five years and then adjust each year starting at the sixth year. A 3/3 ARM would offer an initial fixed rate for three years and would then adjust every three years starting at the fourth year.
Balloon Loan
The balloon loan is a short-term, fixed-rate loan that lets you make small payments for an introductory period of time. After the introductory period - usually five, seven or ten years - you must refinance or pay off the remaining balance with one lump-sum ("balloon") payment.
Government Loans (FHA, VA, RHS)
FHA Loan - A loan insured by the Federal Housing Administration, open to all qualified homebuyers. There are limits to the size of FHA loans, but they are usually enough to cover most moderately priced homes. FHA loans also offer low down payments (usually 3-5 percent).
VA Loan - A long-term, low or no-down-payment loan guaranteed by the Department of Veterans Affairs. Because this loan is insured by the VA, it has the added benefit of zero down payment. This type of loan is only available to qualified military veterans who have obtained a certificate of eligibility from the Department of Veterans Affairs.
RHS Loan - The Rural Housing Service (RHS) loan offers low interest rates with no down payment. It is available to households with low to moderate income located in rural areas or small towns.
Article Source: http://EzineArticles.com/?expert=Brandon_Cornett
Tuesday, September 25, 2007
Low Credit Score Home Loans – Home Buying Tips
Although you can purchase a new home without knowing all the tricks and techniques for securing a low rate, future homebuyers should educate themselves on the home buying process.
In some states, it is mandatory for first time homebuyers to attend a home buying workshop. If you have bad credit, these workshops are beneficial. They teach you various techniques such as how to improve credit rating, and how to find a lender that caters to bad credit home loans.
Bad Credit Rating Effect Loan Approval
For the most part, you can obtain a home loan with fair credit. In some cases, you may even be able to get a low rate. Unfortunately, if your credit score falls below 500, homeownership may be impossible. Even with a credit score below 600, your loan options are limited. Thus, it is important for those contemplating buying a home to improve their credit rating.
Before approving a loan and offering a mortgage rate, lenders will carefully review your credit report and score. Late payments, collection accounts, excessive debts, and inquiries contribute to having a high or low credit score. Mortgage rates are based on credit rating. Hence, if you are hoping to get a great mortgage rate, which equals lower monthly payments, now's the time to improve credit.
Save Enough Money for a Down Payment
Because it is difficult for hard-working people to save money for a down payment and closing costs, various loan programs will incorporate fees into the total loan amount. However, if you have bad credit, a down payment can improve your chances of getting approved for a home loan.
The ideal down payment is about 20% of the home price. Nonetheless, lenders are willing to accept smaller amounts. If possible, attempt to have a down payment of at least 3% to 5%. Aside from boosting approval chances, a down payment may help you secure a lower rate.
Use the Right Lender for a Bad Credit Loan
To obtain the best mortgage loan with a low credit score, you need to use a sub prime or high risk lender. Some traditional lenders offer sub prime loans. However, choose a lender that specializes in bad credit loans. You may obtain better rates with a bad credit mortgage lender.
View our recommended bad credit mortgage lenders online.
Article Source: http://EzineArticles.com/?expert=Carrie_Reeder
In some states, it is mandatory for first time homebuyers to attend a home buying workshop. If you have bad credit, these workshops are beneficial. They teach you various techniques such as how to improve credit rating, and how to find a lender that caters to bad credit home loans.
Bad Credit Rating Effect Loan Approval
For the most part, you can obtain a home loan with fair credit. In some cases, you may even be able to get a low rate. Unfortunately, if your credit score falls below 500, homeownership may be impossible. Even with a credit score below 600, your loan options are limited. Thus, it is important for those contemplating buying a home to improve their credit rating.
Before approving a loan and offering a mortgage rate, lenders will carefully review your credit report and score. Late payments, collection accounts, excessive debts, and inquiries contribute to having a high or low credit score. Mortgage rates are based on credit rating. Hence, if you are hoping to get a great mortgage rate, which equals lower monthly payments, now's the time to improve credit.
Save Enough Money for a Down Payment
Because it is difficult for hard-working people to save money for a down payment and closing costs, various loan programs will incorporate fees into the total loan amount. However, if you have bad credit, a down payment can improve your chances of getting approved for a home loan.
The ideal down payment is about 20% of the home price. Nonetheless, lenders are willing to accept smaller amounts. If possible, attempt to have a down payment of at least 3% to 5%. Aside from boosting approval chances, a down payment may help you secure a lower rate.
Use the Right Lender for a Bad Credit Loan
To obtain the best mortgage loan with a low credit score, you need to use a sub prime or high risk lender. Some traditional lenders offer sub prime loans. However, choose a lender that specializes in bad credit loans. You may obtain better rates with a bad credit mortgage lender.
View our recommended bad credit mortgage lenders online.
Article Source: http://EzineArticles.com/?expert=Carrie_Reeder
7 Common First Time Home Buyer Mistakes
Not all that long ago I was a first time home buyer. Actually, it was a while ago, but that's okay! I remember being very excited about owning my first home. I was also pretty naive and during the home buying process realized just how little I knew about real estate and how difficult it was trying to navigate the murky waters and not get eaten up by folk looking to take advantage of me.
It was easy to make mistakes back then, and is even easier nowadays to turn a pleasant dream of owning a home into a nightmare. But if you're able to avoid the 7 common mistakes that home buyers make it could help you achieve a safer and smoother transaction.
First, changing jobs during the home buying process is a definite no-no! Lenders like to see employment stability and job tenure, and as a general rule will hold job hopping against you. So, unless you just can't stomach your job another minute tough it out until you close on the sale of your home.
Second, never give earnest money deposits directly to For Sale by Owners. If the deal falls through you won't have any leverage to get it back. Instead, put the deposit into a trust account until the transaction is finalized - title companies, attorneys and closing agents can help you with this. In any regard your contract needs to specifically state what will happen to the deposit in the event that the transaction falls through.
Third, stay practical and realistic during the home buying process and understand that while some sellers are willing to fix their homes to sell them others aren't. So, don't let a refusal to make repairs close the door on your dream home. However, at the same time don't let your desire for a particular home blind you to costly repairs down the road.
Fourth, arrange in advance to have the utilities turned on in your new home. The utility companies usually need at least a few days to switch the service. Also, don't forget to cancel the service at your old residence. This seems simple enough, but there are so many things to remember that this one is often overlooked.
Fifth, be sure to get hazard insurance for your new home and be able to show proof of purchase prior to closing. Failure to have insurance at the time of closing may delay the closing, which could result in all kinds of unforeseen complications; angry sellers, you've already given notice to move out of your old place and have no place to go, etc.
Sixth, purchasing a home is a business deal, so treat it that way. Don't get too close and personal with the seller, as it could unexpectedly lead to hurt feelings and/or deal breaking situations. For example, you could make a seemingly harmless comment about how you dislike like the decorations in the mother in law suite, only to have the seller get upset because they have great sentimental value attached to it.
Finally, use an agent, unless you're well schooled in real estate transactions. It's most buyer's fantasy to save money by cutting out a Realtor. However, it's a full time job keeping up with all of the daily details of a contract, including the lender, the seller, and the seller's agent. It'll be your agent's responsibility to do all of this; as well as disclose any information that they are aware of that you might otherwise be unaware of.
In closing, buying a home is a business transaction and may be one of the largest transactions you'll ever make. By treating it that way and surrounding yourself with knowledgeable professionals you can have smooth, safe transactions. Anything less becomes risky business, at least until you know what you're doing.
Article Source: http://EzineArticles.com/?expert=Lanard_Perry
Buying a New Home - Things to Consider Before Buying a House
Buying a new home is an exciting and tiring ordeal. However, the thrill of moving into a new home can often overshadow the frustration that comes with searching, negotiating, and being out bided. The home buying process is very lengthy. Thus, you should be prepared to devote a lot of time and energy to making your dream a reality. Here are a few tips to help smooth the home buying process.
Fix Credit Blemishes and Errors
Credit reports are critical to the home buying process. Sadly, many young adults and first time homebuyers minimize the importance of maintaining a good or fair credit rating. Although various mortgage programs exist to help bad credit applicants get approved for a home loan, these loans have higher interest rates. To ensure a low rate mortgage, which will also lower your mortgage payments, improve your credit rating.
If your credit score is at least 680, lenders consider you a prime candidate. As a prime candidate, you qualify for a low rate mortgage. On the other hand, those with credit scores below 600 can expect considerably higher rates.
Before applying for a home loan, check your own credit score. If your score needs a little improvement, delay purchasing a home for at least six months and raise your rating.
Choosing an Affordable Home
Naturally, pricier homes are more appealing. However, if buying a new home, realistically determine what type of home will fit into your budget. Many mistakenly purchase expensive homes, and can barely afford the payments. Avoid becoming "house broke." Ideally, mortgage payments should be no higher than 36% of our total monthly income. This way, you can comfortably pay your mortgage and care for other household expenses.
Get a Lower Interest Rate with a Down Payment
Although down payments are not mandatory when purchasing a home, they will help you secure a low rate mortgage. Moreover, with a 20% down payment, you do not have to pay private mortgage insurance. Planning for a down payment takes time and discipline. It may require cutting expenses, or sticking to a strict budget. However, the results are worth the sacrifice.
Article Source: http://EzineArticles.com/?expert=Carrie_Reeder
Fix Credit Blemishes and Errors
Credit reports are critical to the home buying process. Sadly, many young adults and first time homebuyers minimize the importance of maintaining a good or fair credit rating. Although various mortgage programs exist to help bad credit applicants get approved for a home loan, these loans have higher interest rates. To ensure a low rate mortgage, which will also lower your mortgage payments, improve your credit rating.
If your credit score is at least 680, lenders consider you a prime candidate. As a prime candidate, you qualify for a low rate mortgage. On the other hand, those with credit scores below 600 can expect considerably higher rates.
Before applying for a home loan, check your own credit score. If your score needs a little improvement, delay purchasing a home for at least six months and raise your rating.
Choosing an Affordable Home
Naturally, pricier homes are more appealing. However, if buying a new home, realistically determine what type of home will fit into your budget. Many mistakenly purchase expensive homes, and can barely afford the payments. Avoid becoming "house broke." Ideally, mortgage payments should be no higher than 36% of our total monthly income. This way, you can comfortably pay your mortgage and care for other household expenses.
Get a Lower Interest Rate with a Down Payment
Although down payments are not mandatory when purchasing a home, they will help you secure a low rate mortgage. Moreover, with a 20% down payment, you do not have to pay private mortgage insurance. Planning for a down payment takes time and discipline. It may require cutting expenses, or sticking to a strict budget. However, the results are worth the sacrifice.
Article Source: http://EzineArticles.com/?expert=Carrie_Reeder
First Time Home Buyer Loans - Home Buying Advice for First Timers
Purchasing your first home is an exciting and scary time. For the most part, new homebuyers are unfamiliar with the home buying process. Before accepting a mortgage loan, it is important to educate yourself on various loan programs. Furthermore, first time home buyers should be aware of factors that improve and decrease their chances of getting a good loan package.
How Much Can You Afford to Spend?
The biggest mistake that some homebuyers make is purchasing a home they cannot afford. Many assume that since their mortgage application was approved, they can meet the expenses of homeownership. On the contrary, some lenders regularly approve questionable loans.
Obtaining a pricier home may sound appealing; however, the risk of foreclosure is higher. Aside from affording your monthly mortgage payment, you must have the funds for utilities and unexpected expenses that arise.
Get Pre-Qualified for a Home Loan
Getting pre-qualified for a mortgage before beginning your search will speed up the home buying process. A pre-qualification provides an idea of an affordable mortgage amount. Thus, you avoid touring homes and neighborhoods outside your budget. A pre-qualification letter from a lender does not guarantee a loan. The loan amount is contingent on income, employment, and credit verification.
Fix Your Credit before Applying
Although it is very possible to get approved for a first time home loan with poor credit, a good credit rating will open the doors for low rates and better financing options. Improving your credit is a slow process. To begin, strive to pay all creditors on time and avoid skipping payments. A key to increasing credit scores is maintaining a good credit standing. Secondly, reduce your debts. Maintain credit cards at half the maximum limit. If possible, payoff balances monthly.
Select a Good First Time Homebuyer Loan Package
Working with a mortgage broker is the best way to locate excellent first time home buying loans. Many first time homebuyers do not have extra cash for closing or down payments. A mortgage broker has access to several lenders that are willing to offer assistance for down payments and closing fees. Furthermore, if you have bad credit, a broker can match you with a bad credit or sub prime mortgage lender. The advantage of working with brokers is that you receive multiple offers. After receiving the loan application, your broker will send you up to four offers from prospective lenders
How Much Can You Afford to Spend?
The biggest mistake that some homebuyers make is purchasing a home they cannot afford. Many assume that since their mortgage application was approved, they can meet the expenses of homeownership. On the contrary, some lenders regularly approve questionable loans.
Obtaining a pricier home may sound appealing; however, the risk of foreclosure is higher. Aside from affording your monthly mortgage payment, you must have the funds for utilities and unexpected expenses that arise.
Get Pre-Qualified for a Home Loan
Getting pre-qualified for a mortgage before beginning your search will speed up the home buying process. A pre-qualification provides an idea of an affordable mortgage amount. Thus, you avoid touring homes and neighborhoods outside your budget. A pre-qualification letter from a lender does not guarantee a loan. The loan amount is contingent on income, employment, and credit verification.
Fix Your Credit before Applying
Although it is very possible to get approved for a first time home loan with poor credit, a good credit rating will open the doors for low rates and better financing options. Improving your credit is a slow process. To begin, strive to pay all creditors on time and avoid skipping payments. A key to increasing credit scores is maintaining a good credit standing. Secondly, reduce your debts. Maintain credit cards at half the maximum limit. If possible, payoff balances monthly.
Select a Good First Time Homebuyer Loan Package
Working with a mortgage broker is the best way to locate excellent first time home buying loans. Many first time homebuyers do not have extra cash for closing or down payments. A mortgage broker has access to several lenders that are willing to offer assistance for down payments and closing fees. Furthermore, if you have bad credit, a broker can match you with a bad credit or sub prime mortgage lender. The advantage of working with brokers is that you receive multiple offers. After receiving the loan application, your broker will send you up to four offers from prospective lenders
Article Source: http://EzineArticles.com/?expert=Carrie_Reeder
Home Buying 101: House Hunting in 5 Easy Steps
The home buying process can be exciting and overwhelming at the same time. After all, it's one of the biggest financial decisions you'll ever make. So before you begin looking for a home, make sure you have a plan in place.
Here are some more tips to help you get the most out of your house hunting experience.
Take pictures of the home, inside and out.
When shopping for a home, bring your digital camera along. Or borrow one from a friend. Take pictures of all the houses you visit, and then group the pictures by house address for easy viewing later. This will help you remember the details of each house afterward. Then you can more easily decide which houses you’d like to follow-up on or revisit.
Bring a friend of family member along.
Buying a home can stir up a lot of different emotions, and that’s perfectly normal. But emotion can sometimes overpower logic -- not something you want when making a financial decision.
You can counter this by bringing a friend or family member along on your house hunt. By bringing someone who's not so emotionally attached to the process, you’ll have an objective ally to help you identify the pros and cons of each house.
This person can also help you recall details about a house after each visit. And chances are, they’ll be able to point out aspects of a home you might not have noticed otherwise.
Compare the house to your budget.
Ever heard the expression "house poor"? This is what happens when people take on more of a mortgage than they can comfortably afford. Ask yourself this question. If you have to work longer hours and scrimp and save just to afford a house, is it really worth it?
While house hunting, you’ll inevitably come across one or two houses that really knock your socks off, but would also knock a hole in your budget. But you have to keep your finances in mind, no matter how gorgeous a house might be.
Consider the commute.
Here’s another area where it pays to be objective. If you find a house you like, and it’s within your price range, the next thing to consider is the location. Is the house near or far from work? Does it have access to the highways you need? How long will your commute be each day?
It’s easy to fall in love with a house and dismiss the drive time. But if you commute every day, drive time matters! Try driving to or from the house during rush hour to get a realistic picture of what you’ll face every day.
Avoid spur-of-the-moment decisions.
Buying a home will probably be the biggest financial decision of your life. So it requires careful consideration. Know what you're looking for and how much you can afford. Remember to be objective. Then get out there and hunt!
* Copyright 2006, Brandon Cornett. You may republish this article in its entirety, provided you leave the byline, author's note and website hyperlink intact.
Article Source: http://EzineArticles.com/?expert=Brandon_Cornett
Home Buying Guide: Five Things to Remember When Making an Offer
The offer is a critical part of the home buying process. It's when you, as the buyer, say to the seller: "Here's what I'm willing to pay for this house."
This home buying guide will explain the five factors of a smart offer.
1. Base the offer on hard evidence
Before making an offer, you should have a good idea of the home's estimated value. This knowledge will come from understanding your market conditions and knowing what comparable homes are selling for in your area. Making a realistic offer will increase your chances of acceptance, while preventing you from overpaying.
If you agree to a price higher than the home's value, and the subsequent home appraisal comes in lower than that price, you'll have trouble getting financing. That's time wasted!
2. Make the offer contingent
It's a safe practice to make your offer contingent on two things -- loan approval and inspection. Even if you've been pre-approved by a lender, there's a chance you could get turned down for the actual loan (especially if the price you agree to pay is higher than the pre-approval amount).
The home inspection is also critical, because you won't know the true "health" of the house based on a casual walk-through. Only a qualified home inspector can dig up the facts. Your offer should be contingent on both of these things.
3. Set a time limit
The last thing you want to do is sit around wondering when you'll hear back from the sellers (if at all). For this reason, it's common practice to put a time limit on a home buying offer. It shows the seller you're serious and prevents the process from dragging on. Some buyers limit their offer to 24 hours, some for 48 hours, and others even longer. It will depend on your comfort level and unique circumstances.
4. Hope for acceptance, but plan for everything
Of course you want the seller to accept your offer. But there's always a chance they won't, so you need to have a plan in place so you can react quickly. Discuss this with your agent before making the offer. Have a plan for three different scenarios -- an acceptance, a rejection, and a counteroffer.
5. Know your limits
If you've been pre-approved for a certain loan amount by a mortgage lender, then you have a pretty good idea of your limitations. Be careful making offers that exceed your pre-approval amount (unless you can make up the difference in cash).
Keep this home buying guide in mind when making offers. Practice the five factors of a smart offer. Good luck and happy home buying!
* Copyright 2006, Brandon Cornett. You may republish this article if you keep the byline and author's note, and also leave the hyperlinks active.
http://ezinearticles.com/?Home-Buying-Guide:-Five-Things-to-Remember-When-Making-an-Offer&id=174375
This home buying guide will explain the five factors of a smart offer.
1. Base the offer on hard evidence
Before making an offer, you should have a good idea of the home's estimated value. This knowledge will come from understanding your market conditions and knowing what comparable homes are selling for in your area. Making a realistic offer will increase your chances of acceptance, while preventing you from overpaying.
If you agree to a price higher than the home's value, and the subsequent home appraisal comes in lower than that price, you'll have trouble getting financing. That's time wasted!
2. Make the offer contingent
It's a safe practice to make your offer contingent on two things -- loan approval and inspection. Even if you've been pre-approved by a lender, there's a chance you could get turned down for the actual loan (especially if the price you agree to pay is higher than the pre-approval amount).
The home inspection is also critical, because you won't know the true "health" of the house based on a casual walk-through. Only a qualified home inspector can dig up the facts. Your offer should be contingent on both of these things.
3. Set a time limit
The last thing you want to do is sit around wondering when you'll hear back from the sellers (if at all). For this reason, it's common practice to put a time limit on a home buying offer. It shows the seller you're serious and prevents the process from dragging on. Some buyers limit their offer to 24 hours, some for 48 hours, and others even longer. It will depend on your comfort level and unique circumstances.
4. Hope for acceptance, but plan for everything
Of course you want the seller to accept your offer. But there's always a chance they won't, so you need to have a plan in place so you can react quickly. Discuss this with your agent before making the offer. Have a plan for three different scenarios -- an acceptance, a rejection, and a counteroffer.
5. Know your limits
If you've been pre-approved for a certain loan amount by a mortgage lender, then you have a pretty good idea of your limitations. Be careful making offers that exceed your pre-approval amount (unless you can make up the difference in cash).
Keep this home buying guide in mind when making offers. Practice the five factors of a smart offer. Good luck and happy home buying!
* Copyright 2006, Brandon Cornett. You may republish this article if you keep the byline and author's note, and also leave the hyperlinks active.
http://ezinearticles.com/?Home-Buying-Guide:-Five-Things-to-Remember-When-Making-an-Offer&id=174375
Seven Deadly Home Buying Mistakes
The most important aspect of purchasing a home is having an expert on your side. The average home owner may purchase two or three homes in their lifetime. Real estate professionals know how to navigate through the potential pitfalls of purchasing a home. They can help you avoid costly mistakes such as: choosing the wrong lender, the wrong type of home, failing to get a thorough home inspection and problems with the title. Any of these problems can cause you a lot of money and grief.
Do not buy a home without a real estate agent to represent your best interests. The seller pays your real estate agent’s fees. Buying a home through an agent that represents your best interests costs you nothing and can save you thousands.
Here are some of the most common mistakes buyers make, which often costs thousands of dollars, large investments of time and loads of grief:
1. Plan Before You Purchase.
Purchasing a home is an emotional experience. Make sure to sit down with your real estate agent and map out a strategy. Don’t let just one aspect of the home drive your decision. Try to answer the following questions.
• Where would you like to live? How far do I want to commute?
• How much home can I afford? Get pre-approved!
• What type of home do you want?
Come out of this exercise comfortable with your area and your mortgage.
2. Get The Right Lender.
There are many types of loans available and getting the right one for your situation is crucial. There are also many lenders vying for your business. Some are online and some local. Getting a good local lender is crucial. Your real estate agent should be able to make recommendations from lenders they have experience with. A good lender will make sure you get the right loan and rate.
3. Identify Your Opportunities.
If you’re looking for a deal, you need to know where they are. You real estate agent is a excellent resource for finding deals. They work in your market and probably know of several sellers that may have special circumstances. These circumstances could be divorce, relocation or loss of job. Work with your agent on this and you may be able to save yourself thousands.
4. Get A Good Home Inspector.
Just like any profession, there are both good and bad inspectors. Bad inspectors tend to overlook a lot of problems. You want an inspector that will scrutinize every aspect of your home. Your real estate agent knows the industry and can recommend good inspectors. You do not want to purchase a home that has structural or other serious defects because the home inspector overlooked them. This could cost you big!
5. Not Getting Clear Title.
Purchasing a home with a “clouded” title can be both financially and emotionally draining. Learning after the fact the previous owner still owed contractors money for the finished basement on your property which is now a lien against your property causes a lot of grief. Your real estate agent will help you purchase title insurance and make sure the title to the property is free and clear.
6. Don’t Waste Time.
Home buyers can waste valuable hours in front of computers searching for homes online. Most times the homes you find are not the best deals. Let your real estate agent save you that time to spend on what is important to you like your friends, family and work. Let your agent find the right home and notify you when it’s available.
7. Do the Final Walkthrough.
Not completing the final walkthrough can be a crucial mistake. Before closing, make sure you check to see any requested repairs have been completed. Make sure there is no damage you were unaware of and that nothing else has changed. Any problems after the purchase are yours.
Article Source: http://EzineArticles.com/?expert=Bruce_Swedal
Sticking With Some Home-buying Rules Makes Sense
Buying a home is a part of most people's lives. It fits right into our finances with saving for retirement and health insurance. It is simply a part of our finances.
You can turn to a lot of places for advice when buying a home. You can talk to a realtor, a mortgage lender or even your family. But there are some tried and true personal finance laws that fit the home-buying situation perfectly.
Rule 1: Do your homework
It used to be that you were told to learn as you go. After all, the saying says that you only learn by making mistakes. Not true. Don't feel as if you need to just go out and jump into a home because that is what you are expected to do. Take some time and do your homework.
If you don't have the money and the time to devote to a home, then buying is not for you. Look at your finances, job situation, family life and goals when deciding what and when you want to buy. Don't forget that owning a home is a big deal. You will not only have monthly payments, but you will also have insurance premiums, property taxes, utilities and possibly even PMI to tack onto the cost. Renting could be a better choice for right now.
Rule 2: Buy what you need
If you buy something just to tide you over, you might find that it doesn't last long. Advisors will tell you to buy quality and for the long term when it comes to big ticket items. The same goes for a house. Yes, buy a small starter home if that is what you want and what your finances dictate. But unless it is a roomy home at a good price, you may have to move fairly soon. And all of the commissions and closing costs could be avoided by simply buying what you need now.
Rule 3: Fixed-rate is the only way to go
I know that you may be thinking that adjustable rate mortgages have the potential to go down in interest rate. Well, they can. But what will you do if it goes up? A fixed-rate mortgage gives you the security in knowing that what your payment is today, it will be tomorrow and twenty years from now. It's not going to go up and throw your budget in the pit. If you have extra cash, go ahead and add it to your payment and get rid of that mortgage early.
What is the perfect term? It depends on your finances. But remember, you will own your home quicker, have more equity faster and pay less interest over time if you pay off your mortgage in 15 years versus 30 years.
Rule 4: Have a backup plan
If you haven't noticed it now, you will. Things go wrong. Often. They just do. And you will be glad you have a backup plan when you are down to your last penny. I see nothing wrong with taking out a equity line of credit and not using it. Just tuck it away for an emergency. Don't touch it until absolutely necessary. Or better yet -- forgo the temptation and make sure that you save some emergency money. You will need about three months worth of expenses for safety's sake. But if you aren't a good saver, your home equity will be a good backup plan.
Rule 5: Take your time
Like rule number one, you should simply take your time and have everything lined up before you jump on in. Take the time to search for a home. Look at the neighborhoods, the market and the homes that interest you. The more you know, the better you will be at negotiating. There is no big hurry. There are plenty of homes out there. Dream homes are a dime a dozen, believe me. If they weren't, so many people wouldn't own homes.
It all boils down to being wise in your decisions. Look at your finances, goals and needs before you consider anything else. These factors are the necessities. The rest is just nice. By using your financial sense, you will find that homeownership is a natural part of life.
Martin Lukac, represents http://www.RateEmpire.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today
Article Source: http://EzineArticles.com/?expert=Martin_Lukac
You can turn to a lot of places for advice when buying a home. You can talk to a realtor, a mortgage lender or even your family. But there are some tried and true personal finance laws that fit the home-buying situation perfectly.
Rule 1: Do your homework
It used to be that you were told to learn as you go. After all, the saying says that you only learn by making mistakes. Not true. Don't feel as if you need to just go out and jump into a home because that is what you are expected to do. Take some time and do your homework.
If you don't have the money and the time to devote to a home, then buying is not for you. Look at your finances, job situation, family life and goals when deciding what and when you want to buy. Don't forget that owning a home is a big deal. You will not only have monthly payments, but you will also have insurance premiums, property taxes, utilities and possibly even PMI to tack onto the cost. Renting could be a better choice for right now.
Rule 2: Buy what you need
If you buy something just to tide you over, you might find that it doesn't last long. Advisors will tell you to buy quality and for the long term when it comes to big ticket items. The same goes for a house. Yes, buy a small starter home if that is what you want and what your finances dictate. But unless it is a roomy home at a good price, you may have to move fairly soon. And all of the commissions and closing costs could be avoided by simply buying what you need now.
Rule 3: Fixed-rate is the only way to go
I know that you may be thinking that adjustable rate mortgages have the potential to go down in interest rate. Well, they can. But what will you do if it goes up? A fixed-rate mortgage gives you the security in knowing that what your payment is today, it will be tomorrow and twenty years from now. It's not going to go up and throw your budget in the pit. If you have extra cash, go ahead and add it to your payment and get rid of that mortgage early.
What is the perfect term? It depends on your finances. But remember, you will own your home quicker, have more equity faster and pay less interest over time if you pay off your mortgage in 15 years versus 30 years.
Rule 4: Have a backup plan
If you haven't noticed it now, you will. Things go wrong. Often. They just do. And you will be glad you have a backup plan when you are down to your last penny. I see nothing wrong with taking out a equity line of credit and not using it. Just tuck it away for an emergency. Don't touch it until absolutely necessary. Or better yet -- forgo the temptation and make sure that you save some emergency money. You will need about three months worth of expenses for safety's sake. But if you aren't a good saver, your home equity will be a good backup plan.
Rule 5: Take your time
Like rule number one, you should simply take your time and have everything lined up before you jump on in. Take the time to search for a home. Look at the neighborhoods, the market and the homes that interest you. The more you know, the better you will be at negotiating. There is no big hurry. There are plenty of homes out there. Dream homes are a dime a dozen, believe me. If they weren't, so many people wouldn't own homes.
It all boils down to being wise in your decisions. Look at your finances, goals and needs before you consider anything else. These factors are the necessities. The rest is just nice. By using your financial sense, you will find that homeownership is a natural part of life.
Martin Lukac, represents http://www.RateEmpire.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today
Article Source: http://EzineArticles.com/?expert=Martin_Lukac
Home Buying Tip - How to Avoid Common Mortgage Problems
If you plan to buy a home in the near future, you will likely be applying for a mortgage as well. After all, home buying and mortgage loans go hand in hand (unless you've just won the lottery).
The key to a smooth mortgage application process is to understand the most common mortgage problems, and then work hard to avoid them. So what are these common problems when applying for a mortgage, and what can you do to steer clear of them?
Problem #1 - Too Much Debt
When you apply for a mortgage loan, the lender will check your debt-to-income ratio. Basically, they will want to see how much money you make (next item) compared to how much you owe. The rule of thumb is 20%. Mortgage lenders prefer that your overall debt be no greater than 20% of your net income. If your debt is too high as compared to your income, it sends a signal that you cannot mange your finances. This can hurt your chances of qualifying for a loan at a good interest rate.
Possible Solutions
The solution here is simple. Reduce your debt. I know it's not always that simple, but if you want to qualify for a good mortgage loan, you'll need to have your debt under control. So the ideal scenario is to pay off as much of your debt as possible. If you are unable to do so, you could always shop for a more affordable home that would require a smaller loan.
Problem #2 - Not Enough Income
If you apply for a loan that a lender thinks you can't afford, your chances of being approved for the loan are slim. This may actually be a good thing, as it will prevent you from amassing more debt than you can cover with your income, which can lead to bigger problems like foreclose.
Possible Solutions
An obvious solution, of course, is to increase your income. But this is easier said than done. Another option would be to put more money down up front. If you make a down payment higher than the 20% average (say, 25% or 30%), you could qualify for a mortgage loan that doesn't require income verification. Just realize you'll probably pay a higher interest rate with this type of loan. A final option would be to get a co-signer, such as a parent or other relative ... somebody with good credit standing and favorable debt-to-income ratio.
Problem #3 - Low Credit Score
Credit scores range from 300 to 850, with 850 being the best. The higher your credit score, the easier it will be to qualify for a mortgage loan. You can also get a better interest rate when your credit is strong. But when your credit is low, you could have problems qualifying for a loan, and you'll likely pay a much higher interest rate. This means a bigger mortgage payment each month. Every lender looks at credit a little differently. The national average (U.S.) is around 723. Anything above 650 is usually considered good, and anything above 700 is considered excellent. Below 600, and you will start to have problems, in the form of higher interest rates.
Possible Solutions
The first thing to do is make sure you don't have errors on your credit report that are dragging your score lower than it should be. Visit AnnualCreditReport.com to request a copy of your credit report from all three credit-reporting agencies. Check your report to make sure there aren't any errors. If the reports are accurate, and you simply have a low credit score, you'll have to work on improving your credit. Pay your bills on time, and try to pay off as much debt as possible. In time, this kind of financial responsibility will help you increase your credit score.
Article Source: http://EzineArticles.com/?expert=Brandon_Cornett
The key to a smooth mortgage application process is to understand the most common mortgage problems, and then work hard to avoid them. So what are these common problems when applying for a mortgage, and what can you do to steer clear of them?
Problem #1 - Too Much Debt
When you apply for a mortgage loan, the lender will check your debt-to-income ratio. Basically, they will want to see how much money you make (next item) compared to how much you owe. The rule of thumb is 20%. Mortgage lenders prefer that your overall debt be no greater than 20% of your net income. If your debt is too high as compared to your income, it sends a signal that you cannot mange your finances. This can hurt your chances of qualifying for a loan at a good interest rate.
Possible Solutions
The solution here is simple. Reduce your debt. I know it's not always that simple, but if you want to qualify for a good mortgage loan, you'll need to have your debt under control. So the ideal scenario is to pay off as much of your debt as possible. If you are unable to do so, you could always shop for a more affordable home that would require a smaller loan.
Problem #2 - Not Enough Income
If you apply for a loan that a lender thinks you can't afford, your chances of being approved for the loan are slim. This may actually be a good thing, as it will prevent you from amassing more debt than you can cover with your income, which can lead to bigger problems like foreclose.
Possible Solutions
An obvious solution, of course, is to increase your income. But this is easier said than done. Another option would be to put more money down up front. If you make a down payment higher than the 20% average (say, 25% or 30%), you could qualify for a mortgage loan that doesn't require income verification. Just realize you'll probably pay a higher interest rate with this type of loan. A final option would be to get a co-signer, such as a parent or other relative ... somebody with good credit standing and favorable debt-to-income ratio.
Problem #3 - Low Credit Score
Credit scores range from 300 to 850, with 850 being the best. The higher your credit score, the easier it will be to qualify for a mortgage loan. You can also get a better interest rate when your credit is strong. But when your credit is low, you could have problems qualifying for a loan, and you'll likely pay a much higher interest rate. This means a bigger mortgage payment each month. Every lender looks at credit a little differently. The national average (U.S.) is around 723. Anything above 650 is usually considered good, and anything above 700 is considered excellent. Below 600, and you will start to have problems, in the form of higher interest rates.
Possible Solutions
The first thing to do is make sure you don't have errors on your credit report that are dragging your score lower than it should be. Visit AnnualCreditReport.com to request a copy of your credit report from all three credit-reporting agencies. Check your report to make sure there aren't any errors. If the reports are accurate, and you simply have a low credit score, you'll have to work on improving your credit. Pay your bills on time, and try to pay off as much debt as possible. In time, this kind of financial responsibility will help you increase your credit score.
Article Source: http://EzineArticles.com/?expert=Brandon_Cornett
Adverse Credit Mortgages - Home Buying Tips
Bad credit mortgage loans are available to individuals with bankruptcies, foreclosures, repo's, low credit ratings, etc. Unfortunately, having a negative credit rating means a higher mortgage rate and a limited choice of lenders. Still, there are numerous home loans to choose between. Thus, homebuyers with bad credit can easily qualify for a mortgage.
Who are Mortgage Brokers?
If buying a home with bad credit, a mortgage broker is your best friend. Without using a broker, selecting the right mortgage loan is time consuming. This would entail contacting several private lenders, and inquiring about their mortgage loan requirements. Because a large number of traditional lenders favor home buyers with down payments and high credit scores, persons with bad credit will not be eligible for most bank or credit union loan.
A better use of time would involve contacting a broker once the decision has been made to buy a home. Mortgage brokers have associations with several types of lenders, including an extensive selection of sub prime or bad credit mortgage lenders. Consequently, brokers are capable of quickly matching homebuyers with suitable loan programs.
How to Apply for Mortgage Loans
Homebuyers have the choice of using a local mortgage broker or an online broker. Both will have access to a large database of mortgage loans. However, applying online is much easier and convenient.
Online broker sites offer no-obligation mortgage quotes. Based on the information included, such as credit rating, income, desired loan amount, and debts, the broker will sort through various mortgage lenders, and remit a quote. On average, homebuyers will receive at least three quotes from different lenders.
Also, try using a Recommended Bad Credit Mortgage Lender from a list of bad credit lenders on ABC Loan Guide. ABC Loan Guide is an informational website about various types of loans.
Increase Chances of Getting a Better Rate
Homebuyers with a low credit rating should not expect the best mortgage rate. Of course, there are ways to improve your odds of obtaining a low rate mortgage. At least twelve months before applying for a mortgage loan, make an effort to boost your credit rating.
Most of the time, this can be accomplished by simply paying bills on time and reducing debts. Other approaches to raising credit score involves keeping credit accounts opened, limiting the number of credit inquires, and paying off high interest credit cards.
Article Source: http://EzineArticles.com/?expert=Carrie_Reeder
Who are Mortgage Brokers?
If buying a home with bad credit, a mortgage broker is your best friend. Without using a broker, selecting the right mortgage loan is time consuming. This would entail contacting several private lenders, and inquiring about their mortgage loan requirements. Because a large number of traditional lenders favor home buyers with down payments and high credit scores, persons with bad credit will not be eligible for most bank or credit union loan.
A better use of time would involve contacting a broker once the decision has been made to buy a home. Mortgage brokers have associations with several types of lenders, including an extensive selection of sub prime or bad credit mortgage lenders. Consequently, brokers are capable of quickly matching homebuyers with suitable loan programs.
How to Apply for Mortgage Loans
Homebuyers have the choice of using a local mortgage broker or an online broker. Both will have access to a large database of mortgage loans. However, applying online is much easier and convenient.
Online broker sites offer no-obligation mortgage quotes. Based on the information included, such as credit rating, income, desired loan amount, and debts, the broker will sort through various mortgage lenders, and remit a quote. On average, homebuyers will receive at least three quotes from different lenders.
Also, try using a Recommended Bad Credit Mortgage Lender from a list of bad credit lenders on ABC Loan Guide. ABC Loan Guide is an informational website about various types of loans.
Increase Chances of Getting a Better Rate
Homebuyers with a low credit rating should not expect the best mortgage rate. Of course, there are ways to improve your odds of obtaining a low rate mortgage. At least twelve months before applying for a mortgage loan, make an effort to boost your credit rating.
Most of the time, this can be accomplished by simply paying bills on time and reducing debts. Other approaches to raising credit score involves keeping credit accounts opened, limiting the number of credit inquires, and paying off high interest credit cards.
Article Source: http://EzineArticles.com/?expert=Carrie_Reeder
Home Buying 101: The All-Important Pre-Closing Inspection
The pre-closing inspection is the buyer’s opportunity to ensure that the house they are buying is in the same condition it was in when they first inspected it (prior to signing contracts).
Protecting Your Interests
The pre-closing inspection, also referred to as "the final walk-through" is a critical step in the home buying process, but many home buyers fail to take it seriously. As a buyer, you need to conduct a thorough inspection prior to closing on the house. Why? Because in most states, once the closing is completed, the seller has no further obligations to you.
How to Conduct Your Inspection
When you are doing the final inspection, start with the basics. Examine the windows and doors and make sure all of them open, close and lock. Double-check that the windows are not cracked or broken and that all screens are present.
Make sure there are no signs of flooding, leaking or water damage of any kind. Look on the ceilings and floors for evidence of this. If you see anything that seems awkward, make sure you speak to your agent about it.
Check that all appliances are working. That includes turning the oven on and ensuring it gets hot. Turn on the burners on the stove to make sure all of them light. Actually open the refrigerator and freezer to make sure they are working. Run the dishwasher, turn on the washing machine and the dryer.
Though you may feel awkward doing all of this, it will save you money and time down the road.
You should also turn all lights on and off to make sure they work. You might even check all the electrical plugs to ensure they work. Make sure none of the walls were damaged by movers or anyone else. Verity that any pools, hot tubs, saunas or other items are all operational and able to be tested.
Check on Repair Items
If the seller was required to do any work in the home, inspect the work carefully. Ask if there are any copies of work orders and warranties / guarantees by the vendors who performed the work.
It's usually a good idea to have your agent present when conducting your inspection. That way, you can speak to him or her about any concerns you have along the way. Your agent can negotiate any agreements that need to be made based on any of your findings.
Don't Be Shy
This is not the time to be shy or feel awkward. You are about to make what will probably be the largest investment of your life. Make sure you protect your investment by spending ample time during the pre-closing inspection.
Sometimes boxes and other obstructions make it difficult or impossible to do a complete inspection. In that case, make sure you voice that concern to your agent and / or attorney so an arrangement can be made to give you a chance to complete your inspection before all funds are released to the seller.
The pre-closing inspection usually takes place right before the closing (within 24 hours in most cases). Because of this, many buyers are anxious and exited, and therefore fail to do a thorough inspection. Slow down, keep a cool head, and give your future home a thorough pre-closing inspection.
Article Source: http://EzineArticles.com/?expert=Brandon_Cornett
Protecting Your Interests
The pre-closing inspection, also referred to as "the final walk-through" is a critical step in the home buying process, but many home buyers fail to take it seriously. As a buyer, you need to conduct a thorough inspection prior to closing on the house. Why? Because in most states, once the closing is completed, the seller has no further obligations to you.
How to Conduct Your Inspection
When you are doing the final inspection, start with the basics. Examine the windows and doors and make sure all of them open, close and lock. Double-check that the windows are not cracked or broken and that all screens are present.
Make sure there are no signs of flooding, leaking or water damage of any kind. Look on the ceilings and floors for evidence of this. If you see anything that seems awkward, make sure you speak to your agent about it.
Check that all appliances are working. That includes turning the oven on and ensuring it gets hot. Turn on the burners on the stove to make sure all of them light. Actually open the refrigerator and freezer to make sure they are working. Run the dishwasher, turn on the washing machine and the dryer.
Though you may feel awkward doing all of this, it will save you money and time down the road.
You should also turn all lights on and off to make sure they work. You might even check all the electrical plugs to ensure they work. Make sure none of the walls were damaged by movers or anyone else. Verity that any pools, hot tubs, saunas or other items are all operational and able to be tested.
Check on Repair Items
If the seller was required to do any work in the home, inspect the work carefully. Ask if there are any copies of work orders and warranties / guarantees by the vendors who performed the work.
It's usually a good idea to have your agent present when conducting your inspection. That way, you can speak to him or her about any concerns you have along the way. Your agent can negotiate any agreements that need to be made based on any of your findings.
Don't Be Shy
This is not the time to be shy or feel awkward. You are about to make what will probably be the largest investment of your life. Make sure you protect your investment by spending ample time during the pre-closing inspection.
Sometimes boxes and other obstructions make it difficult or impossible to do a complete inspection. In that case, make sure you voice that concern to your agent and / or attorney so an arrangement can be made to give you a chance to complete your inspection before all funds are released to the seller.
The pre-closing inspection usually takes place right before the closing (within 24 hours in most cases). Because of this, many buyers are anxious and exited, and therefore fail to do a thorough inspection. Slow down, keep a cool head, and give your future home a thorough pre-closing inspection.
Article Source: http://EzineArticles.com/?expert=Brandon_Cornett
Buying a First Home - How to Review Your Credit Report
Advanced Summary
This article will educate first-time home buyers on the relationship between credit and mortgage loans, and why a thorough review of one's credit should be part of your home buying process.
The Credit - Mortgage Relationship
Credit and mortgage loans go hand in hand. When you apply for a mortgage loan as part of the home buying process, the mortgage lender will review a number of your financial factors. One of those factors is your credit score, which is derived from your credit report. Basically, the mortgage lender wants to know (A) your credit score, which they will use to assess the risks involved in loaning money to you, and (B) your ability to manage debt.
Reviewing Your Credit
Long before you apply for a mortgage, you take a look at your credit. The idea is to get the "lay of the land" before a mortgage lender puts you under the financial microscope. At the least, this will help you avoid unpleasant surprises. At most, this will allow you to identify errors on your credit report and work to correct them.
Credit reports are maintained by three credit reporting companies. Chances are, you've heard of these companies before. They are Experian, Equifax and TransUnion. Your credit score is derived from the information found in the three credit reports maintained by the three aforementioned companies.
Getting Copies of Your Credit Report
As part of a thorough credit-review process, you'll need to start by requesting copies of your credit report from the three companies mentioned above. The easiest way to do this is to visit www.AnnualCreditReport.com. This is a joint website managed by all three of the credit reporting companies. By law, you are entitled to one free credit report per year, so you shouldn't have to pay anything if this is your first time.
Looking for Credit Errors
Once you receive your credit report, review it for errors or inaccuracies. Check the personal information to make sure it's correct. Look for loans or other lines of credit that are not yours (possible credit fraud), and anything else that doesn't seem right. If you find an error, visit the website of the company in question to submit a correction request. Or call the company's customer service number and ask how to proceed.
Don't delay in correcting credit mistakes. The process takes time, so start it as soon as you find an error. Under the Fair Credit Reporting Act (FCRA), credit reporting companies bear full responsibility for correcting inaccurate credit reports. So don't be shy about asking them to do so!
Credit Report vs. Credit Score
Let's clarify the difference between a credit report and a credit score. When you order your credit report, you won't receive a score. The score is usually determined by the mortgage lender, based on information found in the credit report. So if you want to know your credit score, you'll need to purchase it separately. You can obtain your credit score by visiting www.MyFICO.com.
http://ezinearticles.com/?Buying-a-First-Home---How-to-Review-Your-Credit-Report&id=552118
This article will educate first-time home buyers on the relationship between credit and mortgage loans, and why a thorough review of one's credit should be part of your home buying process.
The Credit - Mortgage Relationship
Credit and mortgage loans go hand in hand. When you apply for a mortgage loan as part of the home buying process, the mortgage lender will review a number of your financial factors. One of those factors is your credit score, which is derived from your credit report. Basically, the mortgage lender wants to know (A) your credit score, which they will use to assess the risks involved in loaning money to you, and (B) your ability to manage debt.
Reviewing Your Credit
Long before you apply for a mortgage, you take a look at your credit. The idea is to get the "lay of the land" before a mortgage lender puts you under the financial microscope. At the least, this will help you avoid unpleasant surprises. At most, this will allow you to identify errors on your credit report and work to correct them.
Credit reports are maintained by three credit reporting companies. Chances are, you've heard of these companies before. They are Experian, Equifax and TransUnion. Your credit score is derived from the information found in the three credit reports maintained by the three aforementioned companies.
Getting Copies of Your Credit Report
As part of a thorough credit-review process, you'll need to start by requesting copies of your credit report from the three companies mentioned above. The easiest way to do this is to visit www.AnnualCreditReport.com. This is a joint website managed by all three of the credit reporting companies. By law, you are entitled to one free credit report per year, so you shouldn't have to pay anything if this is your first time.
Looking for Credit Errors
Once you receive your credit report, review it for errors or inaccuracies. Check the personal information to make sure it's correct. Look for loans or other lines of credit that are not yours (possible credit fraud), and anything else that doesn't seem right. If you find an error, visit the website of the company in question to submit a correction request. Or call the company's customer service number and ask how to proceed.
Don't delay in correcting credit mistakes. The process takes time, so start it as soon as you find an error. Under the Fair Credit Reporting Act (FCRA), credit reporting companies bear full responsibility for correcting inaccurate credit reports. So don't be shy about asking them to do so!
Credit Report vs. Credit Score
Let's clarify the difference between a credit report and a credit score. When you order your credit report, you won't receive a score. The score is usually determined by the mortgage lender, based on information found in the credit report. So if you want to know your credit score, you'll need to purchase it separately. You can obtain your credit score by visiting www.MyFICO.com.
http://ezinearticles.com/?Buying-a-First-Home---How-to-Review-Your-Credit-Report&id=552118
Home Buying Terminology -- What's PMI?
If you're entering the home buying process, the term PMI will probably pop up on your radar. So what is PMI, and what does it have to do with your bottom line?
Private Mortgage Insurance, or PMI, is required on most mortgages with a loan-to-value ratio of 80% or more. In other words, if you put less than 20% down when buying a home, you will probably have to pay PMI.
A third-party insurer provides PMI to protect the mortgage lender. This is a critical point. Many homebuyers think PMI is designed to somehow protect them, but this is not the case. PMI protects the lender in case you default on your loan.
The only way PMI benefits a buyer is by helping them qualify for a loan in the first place. Beyond that, PMI does nothing for the homebuyer is merely one more thing to pay each month (normally half a percent of the loan amount).
This is not to say that PMI is all bad. It helps people with bad credit (or those who can't afford a 20% down payment) obtain a loan they wouldn't otherwise be able to obtain. So for some, PMI is the only path to homeownership. But for others, PMI is more avoidable.
Even if you can't afford a 20% down payment, there are ways to avoid paying PMI:
PMI Sidestep #1
You can get an 80-10-10 loan. In this option, you would pay 10% down and then obtain two loans for the remaining 90%. And because no single loan accounts for more than 80% of the home's value, you would avoid having to pay PMI. Interest on the second loan (the loan for 10%) will be higher, but the two loan payments combined will still probably be lower than a single loan with PMI on top.
PMI Sidestep #2
Another way to avoid PMI (while putting less than 20% down) is to pay a higher interest rate.
Here's the key to the two approaches above. Mortgage interest is tax deductible -- PMI is not. In the options above,you could conceivably pay less each month and have more to write off at tax time. With the PMI option, you might end up paying more each month with less of a write-off.
Bottom line: PMI can help some people qualify for a loan who might not qualify otherwise. But in most cases, PMI is best avoided if at all possible -- or discontinued as soon as you reach the 20% equity mark (80% loan-to-value or lower).
Article Source: http://EzineArticles.com/?expert=Brandon_Cornett
Private Mortgage Insurance, or PMI, is required on most mortgages with a loan-to-value ratio of 80% or more. In other words, if you put less than 20% down when buying a home, you will probably have to pay PMI.
A third-party insurer provides PMI to protect the mortgage lender. This is a critical point. Many homebuyers think PMI is designed to somehow protect them, but this is not the case. PMI protects the lender in case you default on your loan.
The only way PMI benefits a buyer is by helping them qualify for a loan in the first place. Beyond that, PMI does nothing for the homebuyer is merely one more thing to pay each month (normally half a percent of the loan amount).
This is not to say that PMI is all bad. It helps people with bad credit (or those who can't afford a 20% down payment) obtain a loan they wouldn't otherwise be able to obtain. So for some, PMI is the only path to homeownership. But for others, PMI is more avoidable.
Even if you can't afford a 20% down payment, there are ways to avoid paying PMI:
PMI Sidestep #1
You can get an 80-10-10 loan. In this option, you would pay 10% down and then obtain two loans for the remaining 90%. And because no single loan accounts for more than 80% of the home's value, you would avoid having to pay PMI. Interest on the second loan (the loan for 10%) will be higher, but the two loan payments combined will still probably be lower than a single loan with PMI on top.
PMI Sidestep #2
Another way to avoid PMI (while putting less than 20% down) is to pay a higher interest rate.
Here's the key to the two approaches above. Mortgage interest is tax deductible -- PMI is not. In the options above,you could conceivably pay less each month and have more to write off at tax time. With the PMI option, you might end up paying more each month with less of a write-off.
Bottom line: PMI can help some people qualify for a loan who might not qualify otherwise. But in most cases, PMI is best avoided if at all possible -- or discontinued as soon as you reach the 20% equity mark (80% loan-to-value or lower).
Article Source: http://EzineArticles.com/?expert=Brandon_Cornett
Port Orange Home Buying
If you’re just starting the process of buying a Port Orange home, be sure to know some basic facts about home buying first.
A home purchase is usually the biggest purchase a person will make in their lifetime, so home buying education is essential. Understanding the Port Orange real estate market – or other markets you might be interested in – is the foundation of any successful purchase.
What should you do before you begin looking at homes for sale? Here are some basics:
First, get pre-approved before you even begin working with a Port Orange realtor or looking at homes for sale. Don’t get pre-qualified, which isn’t the same thing. Be sure you know you are approved for a loan first; not only will this make you more desirable in the eyes of a potential home seller, but it will also help you understand how much Port Orange house you can afford.
Second, have fairly clear ideas about what you want in your new home. If you can talk to your realtor in a specific way, detailing what amenities you want and what you can live without, he or she can move ahead with a clear picture of what to show you. In addition, be realistic about what your budget will get you. Don’t ask to look at Port Orange homes with 5 bedrooms if your budget will allow 3.
Third, keep an open mind. Your real estate agent might suggest a “fixer upper” or a home not in the specific neighborhood you had in mind. Don’t immediately discount such suggestions, but rather consider they might end up being viable options. The Port Orange real estate market is a diverse one, so keep your mind open and you might surprise even yourself with your home choice.
Kevin is a realtor® at Gaffs Realty Co in the Port Orange. He sells Port Orange real estate and beautiful Port Orange homes. Kevin Kling can be reached directly at 386-527-8577.
Article Source: http://EzineArticles.com/?expert=Kevin_Kling
A home purchase is usually the biggest purchase a person will make in their lifetime, so home buying education is essential. Understanding the Port Orange real estate market – or other markets you might be interested in – is the foundation of any successful purchase.
What should you do before you begin looking at homes for sale? Here are some basics:
First, get pre-approved before you even begin working with a Port Orange realtor or looking at homes for sale. Don’t get pre-qualified, which isn’t the same thing. Be sure you know you are approved for a loan first; not only will this make you more desirable in the eyes of a potential home seller, but it will also help you understand how much Port Orange house you can afford.
Second, have fairly clear ideas about what you want in your new home. If you can talk to your realtor in a specific way, detailing what amenities you want and what you can live without, he or she can move ahead with a clear picture of what to show you. In addition, be realistic about what your budget will get you. Don’t ask to look at Port Orange homes with 5 bedrooms if your budget will allow 3.
Third, keep an open mind. Your real estate agent might suggest a “fixer upper” or a home not in the specific neighborhood you had in mind. Don’t immediately discount such suggestions, but rather consider they might end up being viable options. The Port Orange real estate market is a diverse one, so keep your mind open and you might surprise even yourself with your home choice.
Kevin is a realtor® at Gaffs Realty Co in the Port Orange. He sells Port Orange real estate and beautiful Port Orange homes. Kevin Kling can be reached directly at 386-527-8577.
Article Source: http://EzineArticles.com/?expert=Kevin_Kling
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