Best Rate for Buyers Mortgage Blog

Using your home to pay off your credit cards?

2007-11-29T09:10:00.001-08:00

Home equity loans are great. They offer some of the lowest interest rates around, and they are easy for homeowners to get. So, when you look at your monthly credit card statement, that home equity line of credit starts to look pretty attractive. Right? You could borrow against your home, pay off your credit cards and save a fortune. But, this approach can be pretty risky, so put some thought into it before rushing to borrow against your home.

The biggest concern in borrowing against your home is the collateral. When you mis a credit card payment, you have little at risk aside from your credit rating. Credit cards are unsecured debt; you don’t put up any collateral. Home equity loans, on the other hand, are collateralized – with your home. If you default on a home equity loan, you could wind up putting your home at risk. Credit card debt may be more expensive, but in a sense, they also can be safer.

The next problem that many face involves the credit cards. After they pay off their credit card debt with a home equity loan, they start to use the credit cards again. What happens? Well, the borrower has to make payments on the home equity loan. But, he also has all this new credit card debt. In extreme cases, he could wind up with more debt than when he started.

If you plan to use a home equity loan to pay off your credit card debt, cancel the credit cards. This is the only safe way to use this strategy (though it is not completely safe, because you are still using your home as collateral). You need to be able to resist the temptation to use those credit cards again, and sometimes the only way to resist temptation is to remove it completely. Don’t just cut up your credit cards. Call the company, and cancel them. The customer service reps on the phone will do everything they can to keep you as a customer, including offering to increase your credit limit, lower your interest rate (probably only temporarily) and extend cash advances. Be strong. Do not accept these inducements.

If you are using a home equity loan to pay off your credit cards, be careful. Above all else, don’t use your credit cards any more!

Do I need to get out of my ARM?

2007-11-20T10:45:00.000-08:00

Analysts expect a record amount of foreclosures in the coming months. In particular, “hot” real estate markets are at risk. Places like Boston, New York and San Francisco – which have seen housing prices grow astronomically for the past few years – could become the scariest markets for existing home owners. As mortgage interest rates go up, homeowners with adjustable rate and interest only mortgages could feel the squeeze. Believe it or not, your mortgage payment could grow every month, and with an interest only or adjustable rate mortgage, there is little you can do about it. Now may be the time to look into a fixed rate mortgage.

If you have a traditional fixed rate mortgage, you probably don’t have to worry. Your mortgage interest rate is locked in, regardless of what happens to housing prices around you. More exotic home loans, though, could be troubling in the current financial climate. If you have an interest only or an adjustable rate mortgage, refinancing should be a top priority.

The reason for the insanity in the mortgage market is the recent credit crunch caused by subprime mortgages. Subprime mortgages are risky. Lenders issue them to prospective home buyers who may not qualify for mortgages with more favorable terms. For a higher interest rate, the lender accepts the risk. Unfortunately, these loans have caused problems for mortgage lenders this year, leading to substantial losses. As a result, lenders are tightening the rules on subprime lending, and they are issuing fewer adjustable rate and interest only mortgages.

Borrowers who currently have interest only or adjustable rate mortgages may want to think about refinancing. As rates go up, your mortgage payment increases. You could see your cost of living increase every month simply as a result of changes in the market for mortgage interest rates. You are at the mercy of the market, and your home could wind up at risk. Instead of hoping for rates to be cut, you can take action today.

Refinance into a fixed rate mortgage, and enjoy the predictability of the same monthly mortgage payment every month. Your fixed rate mortgage may not be as cheap as the ARM with which you stated. But, times have changed, and so have interest rates. Hunt for a deal later. Now is the time to be conservative. Start looking for a fixed rate mortgage today!

A safety fund for your home

2007-11-09T13:00:00.001-08:00

Every financial advisor suggests that you put aside a safety fund before you do anything else. You should save three to six months’ expenses in case you lose your job or suffer some sort of financial misfortune. You should have a safety fund before you save for retirement or put money into your kids’ college fund. You can take this thinking a step further and put together a special safety fund specifically for your home.

Think about the money you spend on your home. The monthly mortgage payment probably is the first thing that comes to mind. It is your largest home expense, and it comes every month. But, what else is there? Most people pay their real estate taxes through their mortgages, so it looks like the mortgage is the only expense. Think harder. In addition to your mortgage, you probably pay homeowners insurance. If you live in a condo or a coop, you have a monthly association fee. In some places, like New York City, this monthly fee can be quite high.

Next, there are the unexpected expenses. You may have a problem with your foundation, or you could have a flood in your basement. During a storm, you may find a leak in your roof. These problems have to be addressed, often quickly. They have to be resolved whether you have the money or not. While these expenses can be unexpected, you can prepare for them by putting money aside.

This is why your home safety fund becomes important.
Start with your mortgage payment. Put aside enough money to cover your mortgage for at least three months. Then, turn to your homeowners insurance and (if applicable) association fees. Do the same. Save enough money to pay your homeowners insurance and association fees for at least three months. Finally, think about the unexpected. How much would it cost to fix one major problem, such as a roof, kitchen or termite problem? Find out where your risk is most likely to be, and put that money aside, too.

It is always best to plan ahead. Put together your home safety fund. If you don’t need it, that money will do nothing but accumulate interest, which just puts more money into your pocket. But, if you lose your job or have to fix a leak in your bathroom, you’ll be happy that you have your home safety fund.

Understand the Tax Implications of Investment Property

2007-10-18T08:36:00.000-07:00

You are getting ready to buy a second home. You have been pre-approved, run your credit reports and secured a pre-approval letter from a mortgage lender. You are ready to buy your real estate investment property. But, you haven’t thought about taxes. In addition to real estate taxes, you will have to be ready for income taxes as well. After all, you want this investment to make money for you!

Your investment property is a business, and you should treat it as such. You will have to put money into your business, for example, to make repairs. These expenses may be tax deductions! Keep track of them carefully. You should save your receipts and be ready to settle with the IRS (and your state) by the end of the year.

This is especially true if you have income form your investment property – which ultimately is your goal. All that income is taxable, and the rules are not straightforward. It is likely that you will need all those deductions to offset some of your income. Save some of the income you earn to pay the tax bill.

If you are going to buy an investment home, become familiar with the income tax laws surrounding property management, federal tax and state tax. Instead, you could talk to a professional tax preparer who will be informed on these issues and keep up with the changes from one year to the next. Many will be willing to prepare a tax projection for you before you even start to look for an investment property. This will help you understand what your income tax burden would be if you purchased a real estate investment. Make sure that the tax preparer models a few different scenarios for you. Unless you are extremely lucky, your real estate business is unlikely to be completely predictable. Since your tax burden will vary, you should be aware of the possibilities.

Taxes can catch you off guard, sticking you with a sizeable bill when you least expect it. Unless you have extra money sitting around, you will want to plan ahead. Have some tax projections run, so you can be ready for the IRS at the end of the year.

Remember; you can’t afford an investment property if you can’t afford the taxes!

Plan Your Purchase up Front

2007-08-23T08:22:00.000-07:00

When you are getting ready to buy a home, everything seems to happen quickly. Surprises arise, and they can catch you off guard. The easiest way to take the sting out of the process is to plan ahead. There is a lot you can do before you cruise the real estate section of the newspaper or contact a mortgage lender for pre-approval.

Start by getting your documents in order; you are going to need them. You should dig out your tax returns for the past two years. If you do not have them, contact your tax preparer. Most will mail or fax you a copy right away, especially if you are not asking during tax season. Do you prepare your own taxes? Many people do. If you did not save a copy of your tax return, you can contact the IRS for copies. Keep in mind that it may take a few weeks for the IRS to get them to you. This is another good reason to plan ahead.

In addition to your tax returns, you will need your W-2 and pay statements for the past few months. Most employers do this electronically now, so you can go to the company intranet at any time and pull copies, print them and keep them for your records. If your company has not moved into the information age, start by talking to your Human Resources department. If they cannot help you out directly, they can still point you in the right direction.

For the self-employed, this step is a bit more complicated. You will need to collect your 1099 forms that have been issued to you by clients (if applicable), and you should prepare a profit and loss report. Make sure you have information, such as bank statements, to support your claims. The mortgage lender will not simply accept a report that you have prepared.

You should run your credit report before getting started as well. You are entitled to a free copy of your credit report every year from each of the three major credit reporting agencies: TransUnion, Equifax and Experian. This will give you an indication of your credit strength, and it will be an important factor in determining the mortgage interest rate you are given.

There can be other documents that you will need, too. Pull together your bank statements and balances from brokerage accounts. If you are divorced, you should have a copy of your divorce decree on hand. It’s better to have all your documents up front, especially if it could take you a few weeks to collect them. If you have everything you need when you start to look for a home, you won’t experience nearly as much stress down the road.

When Should You Refinance

2007-08-13T11:54:00.000-07:00

Refinancing is strictly a game of measuring costs. A slight drop in rates may offer little reason to refinance your mortgage, especially if the trend is pointing downward. Instead of jumping for a lower interest rate, pull out the calculator and do a little homework. Measure the costs of a new mortgage against the savings it yields. This quick exercise could save you thousands of dollars, not to mention the headaches that come with the additional cost of buying your home.

A refinancing mortgage, like a first mortgage, has fees. The likelihood that you will have to pay closing costs is quite high. Before applying for a refinancing mortgage, take a look at the outcome. You should recapture more in savings than you pay in closing costs for the mortgage to work in your favor. Realistically, you should look at the savings against how long you plan to stay in your home rather than over the life of your mortgage. When you move, you’ll probably secure a new loan, making your current refinancing moot. Thus, the timeframe for recapturing the fees paid for your refinancing mortgage is shorter than you may think. Keep this in mind as you shop for a refinancing mortgage.

If the closing costs for you refinancing mortgage are $3,000 for example, and you play to stay in your home for another five years, you should save at least $3,000 over five years – at least. Otherwise, you are spending more than you would save. Including inflation, the calculation becomes a bit more complicated, but the outcome is that refinancing savings has to be higher for your new mortgage to work in your favor. Realistically, your mortgage savings should at least double your closing costs for the decision to pay off.

Be honest with yourself when doing the math. Sometimes, it’s too easy to be enchanted with what looks like a great deal. You may tell yourself that you can stay in your current home for a few extra years, even if it seems unimaginable. Don’t put this kind of unreasonable pressure on yourself. Your mortgage is a means to an end: home ownership for as low a cost as possible. When you put the mortgage before the home, you wind up paying more than you have to.

Refinancing is always worth considering, especially as your credit score improves (because you could be eligible for a lower interest rate). But, it pays to work the numbers first. You don’t want to pay the bank for nothing; you already pay them enough! Make sure your refinancing mortgage will save you money before you sign on the dotted line.

When Should I Consider an Adjustable Rate Mortgage?

2007-08-09T11:42:00.000-07:00

Adjustable Rate Mortgages (ARMs) are not right for everybody. If you plan to stay in your home for a long time, have a rocky credit history or prefer that your payments be the same every month (i.e. predictable), you would be wise to get a 30-year fixed rate mortgage. But, buyers with strong credit ratings who plan to move after a few years can save a considerable amount of money with a 3-year or 5-year ARM.

Most lenders offer low interest rates on ARMs, making these loans quite attractive to prospective home buyers. For the first few years (three or five, depending on the particular mortgage you secure), the ARM has a low fixed rate. After this initial period, though, the rate becomes variable, changing monthly with the bank’s prime rate. In an economic climate with falling interest rates, an ARM can be advantageous; your monthly mortgage payment actually goes down every month. If rates are going up, on the other hand, your mortgage becomes more expensive. You are at the mercy of the interest rate market when your mortgage rate is adjustable. If there is a maximum monthly payment that you can afford, a fixed-rate mortgage would be safer.

For those who don’t plan to stay in the new home for a long time, though, an ARM can be an effective financing tool. If you plan to live in your new home for only a few years, you can use an ARM to get a low fixed interest rate. The fact that the rate will become variable in three-to-five years does not matter if you plan to sell your home by then. With an ARM, you get a lower interest rate for the short term – which is what you need. If you decide not to move, you can refinance into a fixed-rate mortgage later. Of course, if interest rates are going down, you may want to hold onto that ARM for a while! Keep it for as long as it makes sense, and then refinance when conditions change.

Since the interest rates for ARMs can be unpredictable, mortgage lenders apply stricter underwriting criteria. For the banks, these loans are riskier. If you do not have a high FICO score, you may not be eligible for an ARM. Before basing your house hunting plans on an ARM, talk to a few mortgage lenders first to see if you will qualify. When you have found a favorable mortgage lender, ask to be pre-approved or pre-qualified. Then, you will be more certain that an ARM is the right fit for you.

ARMs can be powerful tools for those who qualify. If you do not plan to spend more than a few years in your new home and you have a high FICO score, talk to a mortgage lender about an ARM. You will notice the savings every month.

Does It Make Sense to Skip the Down Payment?

2007-08-03T15:46:00.000-07:00

Making a down payment can save you a lot of money through the life of your mortgage. But, the hardest part of buying a home is the money up front. With closing costs, inspections and appraisals, the price tag can get pretty steep, and none of this actually goes toward the home itself! You spend a fortune to be able to purchase a home, but it’s almost as though you don’t get credit for it. After preparing for thousands of dollars in closing costs, you are faced with the next hurdle: the down payment.

If it is at all possible, you want to make a down payment. Even if it is as little as 5% of the home, a down payment can save you hundreds of thousands of dollars over the life of your mortgage. Also, a small down payment means that your Private Mortgage Insurance (PMI) payments will end sooner, and you are likely to get a more favorable interest rate. By getting your down payment up to 20%, you can avoid PMI completely, putting hundreds of dollars back into your pocket every month.

Clearly, it makes sense to put money down. But, it’s not always that easy. Rising home prices are pulling down payment sizes upward as well. For most people, the issue is affordability. Most people do want to make a down payment, but they simply cannot afford to do so. “No money down” mortgages are available, but there are a few things you should consider before applying for one. Look at your estimated monthly payments. If you can afford one, a no money down mortgage will work. This is often the case in expensive rental markets (e.g. New York, Boston or San Francisco). High rents make it difficult to save enough for a down payment, but a mortgage may not cost much more than the rent.

Also, think about your credit. If you have a high FICO score, the interest rate on a no money down mortgage will be a bit lower. Start with the no money down mortgage, and refinance a few years later, after you have saved enough for a down payment. Remember; you aren’t stuck with your first mortgage for the rest of your life. You always can refinance later for more favorable terms, particularly a lower interest rate.

No money down mortgages may not be ideal, but they do serve an important purpose. If you can handle a high monthly payment but have trouble saving money for a down payment, skipping the down payment may be the right move. Revisit your mortgage in a few years, though, to refinance for a lower interest rate.

The First Question a Real Estate Agent Should Ask

2007-08-01T09:33:00.000-07:00

“Have you been pre-approved for a mortgage?”

If this is not among the first questions that your real estate agent asks you, find a new one. Pre-approval (or at least pre-qualification) is an important part of the home buying process, and it normally is the first thing you should do after deciding to buy a house. If you start house hunting before being pre-approved or pre-qualified for a mortgage, then you really have no idea what you can afford. You could wind up spending all your time looking at homes that are out of your price range. An agent that does not insist that you be pre-qualified or pre-approved before beginning your search for a home is either inexperienced or ineffective, and your search will not yield satisfactory results.

Pre-approval and pre-qualification are often used interchangeably, though there are some important differences. Both are intended to help you figure out how large a mortgage you can afford. A mortgage lender will ask you a series of questions about your income, assets and debt in order to get a picture of your financial situation. Using your answers, as well as your credit score, the lender will tell you how much you can afford, your interest rate and what your monthly payment is likely to be. But, this is where the similarity between pre-approval and pre-qualification ends.

To be pre-qualified, the lender takes your answers at face value; he assumes that you have been honest. For a mortgage pre-approval, though, the mortgage lender will verify your claims. He will call the banks where you have accounts and verify your income with your employer. Either approach is acceptable, though, pre-approvals are preferred because they are more reliable, as all your claims will have been verified.

Pre-approvals and pre-qualifications are the only way that you can know how much house you can afford (unless you plan to pay cash for the whole house). Without this step, the real estate agent is forced to lead you blindly. When it is time for you to get approved for a mortgage, you may be surprised at the amount for which you are approved. In the extreme, you may have to start your search for a new home from scratch.

Use this as a way to screen potential real estate agents. If an agent does not ask in your first meeting if you have been pre-approved, keep looking. There are better agents out there!

Choosing a Real Estate Agent

2007-07-31T08:04:00.001-07:00

A real estate agent or broker will guide you through the entire home buying process. You will work closely with this person to find the house that is best for you and your family, possibly spending a few hours together every week for months. You need to know that you have the right partner in your search for a new home.

Many agents will ask your price range and show you only homes at the upper edge of what you want to spend. Some will go even higher. These real estate agents are thinking about their commissions first – not your needs. To prevent this situation, have a frank discussion with any real estate agent you are considering. Tell him or her your price range, and insist on seeing a variety of homes from the least expensive in your price range to the highest. This will give you a feel for how far a dollar goes in your particular market.

Settle for nothing less than honesty. If you have unrealistic expectations, your real estate agent should be candid with you. Trying to find a two-bedroom home for $100,000 in Manhattan, for example, would be a waste of your time and the agent’s. An experienced real estate broker would suggest that you revise your price range or look elsewhere. One who does not should be avoided.

Finally, only work with agents who have experience in the town or neighborhood where you would like to buy your new home. Every market is different, with nuances that can shape your hunt for anew home and ultimately the terms of the sale. A real estate agent who is familiar with the market where you would like to buy will be able to give you the best advice and help you secure the right home for a fair price. Also, a real estate agent who specializes in a particular town will be able to refer the services of experienced appraisers, real estate attorneys and other professionals associated with the home buying process.

Most important, you should be comfortable with the real estate agent you choose. Talk to more than one in order to find the best fit for your needs and your personality. Buying a home is a time-consuming, personal and expensive undertaking. Being comfortable with your chief advisor can make the experience faster, easier and more rewarding. Choose carefully, and remember that your real estate agent works for you.

Buying a Home for Retirement

2007-07-26T09:06:00.000-07:00

Did you know that you can use an IRA to invest in real estate?

Most Individual Retirement Accounts contain liquid assets, such as stocks, bonds and mutual funds. But, an IRA can do much more. Using a “self-directed” IRA, you can put investment property aside for retirement. Most IRAs are not self-directed, but a few companies (such as Trust Company of America) are willing to put you in control. They administer the IRA for you, but you can put whatever you want in it. Unlike most financial institutions, self-directed IRA custodians are prepared to support the unique requirements associated with illiquid assets such as real estate.

The easiest way to put a home into an IRA is to use money already sitting in the IRA itself. If you have $50,000 in an IRA, for example, you could use that to cover closing costs and a down payment for an investment property. If you have more, you could even use IRA funds to pay cash for a home. Income from the investment property goes into the IRA. Some of it pays the mortgage (if you have one), and whatever is left stays in your retirement account. Everything in your IRA will grow tax-deferred; you only have to settle with the IRS when you withdraw funds from the account.

When you are ready to sell the property, the proceeds from the sale go into your IRA, where it will stay – and hopefully grow – until you retire. In fact, you could use these IRA funds to purchase another investment property!

The only catch is that you do not own the property; your retirement account does. As a result, you can’t touch that money until you turn 59 ½ without paying taxes and a 10% penalty to the IRS. But, if you use money already in your IRA, that’s not a problem. The money in the account is already subject to these restrictions.

Real estate is hot. Instead of riding the stock market rollercoaster, you can put your retirement money into real estate. This will allow you to take advantage of the appreciation of the property and any rental income it generates without incurring any income tax burden until you withdraw the funds. The tax savings can be quite large, and you will take the important step of preparing for retirement. This unique way to get ready for retirement is not difficult, as long as you plan properly and talk to an expert.

Start planning for retirement with investment property today!

Put Your Credit Cards to Work for You

2007-07-23T08:52:00.000-07:00

Credit cards can work against you. When you apply for a mortgage, the bank assumes that you have reached your credit limits for all cards, even if that is not the case. Since you have such easy access to credit card debt, this is how the bank protects itself. Even if you have a stellar credit score and don’t carry any balances on your credit cards, all that plastic could work against you. Until now. Did you know that there is a way to put your credit cards to work without disrupting your credit rating?

Assume that you have $10,000 in available credit through three credit cards. By not using this money, you are behaving responsibly; credit card debt is costly and risky. On the other hand, you have $10,000 at your disposal, and it could help you in the home buying process.

Mortgage lenders reward you for saving. If you can show at least $20,000 in assets, you are usually eligible for a lower interest rate. Meanwhile, the mortgage lenders do not reward you for not touching your credit cards. In fact, they do the opposite in assuming that you have borrowed money when you haven’t. This creates an interesting situation. You could use your available credit to increase your total assets without (in the bank’s mind) incurring any additional debt.

When you are getting ready to apply for a mortgage, take cash advances on all your credit cards until you have maxed them. Using the example above, you would now have an extra $10,000. Put that money into a savings account, and don’t touch it! As you go through the mortgage approval process, the bank will note that you have an additional $10,000 in assets. Hopefully, this will help you get past a threshold such as the $20,000 level, earning you a more favorable interest rate.

When you have been approved for your mortgage, use that money to repay your credit cards. Your balances will go back to $0, and your total assets will decline. But, this doesn’t matter. You just return to where you started, though you have a much better mortgage rate to show for it!

Use your credit cards to your advantage, but be careful. It is easy to spend money once you have it, and credit card debt is the most expensive kind. If you don’t repay the cash advances as soon as your mortgage has been approved, you may incur hundreds of dollars in interest and fees, costing you money unnecessarily.

Dealing with a lowball appraisal

2007-07-17T09:08:00.000-07:00

Most homeowners have an idea of what their homes are worth. Unfortunately, these suspicions may not be accurate, especially in today’s soft real estate market. You may have an idea of what your home is worth, but a professional appraiser uses a different set of criteria. The appraiser’s role is to tell the mortgage lender how much a home would be worth on the open market if the borrower defaults on his mortgage. The net outcome may surprise you.

An appraiser is a professional in the field of home valuation. An expert, the appraiser is trained to evaluate a home, the surrounding community and the real estate market to discern what a particular property is worth. Keep in mind that home appraisal is not an exact science. Different appraisers may value a home differently. They evaluate factors differently, and with sales occurring every day, a home’s value can be a moving target.

The type of appraisal can make a difference in the value of your home. A full appraisal involves a visit to your home by a human being, and it tends to be the most accurate approach. The other type of appraisal is electronic. This increasingly popular method is completed entirely by computer, and it can be quite inaccurate. If your mortgage lender requires a home appraisal, insist that the full, human method be used.

If you feel that the value determined by the appraiser is too low, you can get a second opinion. But, you will have to pay for this second appraisal. If the second appraisal leads to a higher value, the bank still can choose which appraisal to use. If the second appraisal is at least 5% higher than the first, you may be able to convince the bank that the first appraisal was not accurate. Bring as much proof as you can in order to support the claims that you make to the bank. Find as many variations between the two appraisals as you can, particularly if they favor you.

Some approaches and mortgage lenders will be open-minded as long as you supply sufficient support for your opinion. You are the only person who has your best interests in mind; remember that. Be vocal, and do your homework. The results may wind up saving you a considerable amount of money. You just have to be willing to roll up your sleeves and do some work on your own behalf.

Always do your mortgage homework

2007-07-16T13:39:00.001-07:00

The house-hunting process starts at home. Before calling a real estate agent or thumbing through the real estate section of the Sunday newspaper, take a look at your finances. Know what you can afford. Understanding your financial situation can save you a considerable amount of time and aggravation. The best way to get a realistic view of what you can afford is to get pre-qualified or pre-approved. Friends, mortgage calculators and other informal methods may give you a rough idea, but nothing works like the opinion of a mortgage lender.

When you first decide to buy a home, you will receive advice from everybody. At least a few will tell you the mortgage amount you can afford. Don’t pay any attention to them. Your next step may be to go to a mortgage calculator. This can help, but remember that the information you receive will not be accurate. It is a rough estimate that can help you get started.

You will not know what you can afford until you go through the pre-approval or pre-qualification process. Thus, your first call should be to a mortgage broker rather than a real estate agent. The mortgage broker will help you understand what you can afford, information that will shape the entire house-hunting process for you. Buy the time you talk to a real estate agent, you should know for how much you have been pre-approved or pre-qualified and what your monthly payments on that amount are likely to be. As a result, you will not waste time looking at homes that you cannot afford.

Your mortgage broker will work with you to be pre-approved or pre-qualified. Pre-approval and pre-qualification are similar, and they serve roughly the same purpose. The difference between these two processes is subtle. In both, you supply information to the mortgage broker about your income, debt and assets, and the mortgage broker tells you how much you can afford. Verification differentiates the two processes. To be pre-approved, the information that you provide to the mortgage broker has to be verified. The broker will call the bank, for example, where you have your savings account. In a pre-qualification, the mortgage broker simply accepts your claims.

Plan ahead. The first thing you should do when you decide to buy a home is talk to a mortgage broker about pre-approval or pre-qualification. This will tell you how much you can afford. All the house-hunting that follows will be much more productive, because you will be abele to focus on what you can afford.

Reverse mortgages make healthcare easier

2007-07-02T10:58:00.000-07:00

It is no secret that most health care spending comes later in life. This, unfortunately, is when illness, hospital stays and rehabilitation become much more common – and expensive. For those in retirement, especially if they are living on fixed incomes, the high costs of healthcare may prohibit certain types of treatment. There is a solution, though. You could use your home as a way to finance your health care while you continue to live in it. In the process, you won’t have to pay a penny in taxes for the extra money.

With a reverse mortgage, the bank pays you. The payments come from a loan that the bank provides, and the amount that you can receive depends on the value of your home and your current age. A higher home value and more advanced age will result in larger monthly payments from the bank, as there is more principal against which to borrow, and the bank does not expect to make payments for as long as it would to a younger borrower. To participate in a reverse mortgage transaction, you must be at least 62 years old.

The borrower does not make any payments while collecting on a reverse mortgage. Upon the borrower’s death or decision to move, the account is settled. The sale of the house – either by the borrower or his estate – is used to repay the bank for the proceeds of the reverse mortgage. Any funds remaining from the sale of the house are given to the homeowner (or the homeowner’s estate) in compensation for any equity he had in the property following the reverse mortgage. With a reverse mortgage, you collect now and pay later – the reverse of a traditional mortgage.

The proceeds from a reverse mortgage are tax-free. The government does not tax reverse mortgage proceeds because it can’t! The funds that the borrower receives are not income; instead, the money comes from a loan. The loan is just structured a bit differently from most other loans. But, since there is no actual income in this transaction, the IRS cannot get involved.

The high costs of health care, especially later in life, may make a second source of cash important, especially if home health care, a hospital stay or lengthy rehabilitation is necessary. Pensions, savings and Social Security payments can do little to help when one is faced with an astronomical doctor or hospital bill. A reverse mortgage can make this process a bit easier. You can use the equity that you have in your home to make health care more affordable.

Put your home to work for you. You spent a lifetime paying for it, and now is the time that you can regain some benefit. If you are struggling with the high cost of health care, own a home and are over age 62, a reverse mortgage is worth a look. It could be the key to a healthy retirement!

Mortgages might be getting cheaper

2007-06-29T10:13:00.001-07:00

Mortgage rates could become lower. As lower rates make homes more affordable, this is positive news for existing and prospective home buyers. The existing market, characterized by slowing new construction and declining interest rates, provides a unique opportunity for anyone in the market to buy a home.

For the past five weeks, interest rates on 30-year fixed rate mortgage loans have been climbing, and this weeks drop signals a change from the norm. Economists believe that the drop in mortgage interest rates is the result of general economic pressure applied to consumers by the housing market. Essentially, as rates increased and owning a home became more expensive, homeowners felt the squeeze. Since the high cost of housing is slowing economic growth, a drop in mortgage rates is likely to save consumers some money and inject some growth into the economy.

Freddie Mac, a mortgage corporation chartered by the federal government, stated that mortgage interest rates (for 30-year fixed rate loans) averaged 6.69% last week, down from 6.74% the week prior. This decline is actually the first drop since mortgage interest rates reached their highest level in the past 11 months. While investors are still reacting to this change, the result is positive news for prospective home buyers, who can take advantage of more favorable interest rates. Existing homeowners may want to take this opportunity to consider refinancing their mortgages, especially if they have mortgages with fixed interest rates.

The climate of increasing interest rates and high housing costs also has led to slowdowns in the new home building market. The construction of new homes (both houses and apartments) fell 2.1% from April to May. This is an overall decline of 24.2% from May 2006. The National Association of Home Builders announced that new home builder sentiment – an index measured by the organization has fallen to a 16-year low.

Among the reasons new construction is slowing is that rates have been high for 11 months, resulting in less sales activity from prospective home buyers. When rates are high, new homes don’t go up. As a result, this can be an interesting time to purchase a home, especially if you have a high credit rating (and can get a more favorable interest rate). With new construction slowing, there are bound to be bargains on the market, making this an ideal time to pick up an investment or vacation property.

The mortgage and housing markets are always moving, so it pays to stay in touch. If you keep track of the direction of mortgage rates, you will know when it is time to refinance your mortgage, in order to save money on your monthly payments. By keeping track of both the mortgage and housing markets, you will be able to identify the right time to buy a new home, perhaps one to use as an investment. Watch the market. Keep track of interest rates and new construction. These small bits of information can scream loud opportunities to you if you are paying attention.

Understand how much your mortgage costs

2007-06-28T14:42:00.001-07:00

Most Americans believe that interest is not expensive. According to a survey by credit reporting agency Trans Union’s TrueCredit.com division, 62% of respondents believe that in repaying a 30-year fixed mortgage, the interest payments will not exceed 100% of the amount borrowed. Put simply, most people believe that they will repay twice the price of the home, with the extra going toward interest.

In reality, a 30-year fixed rate mortgage can lead to interest payments of much more than 100% of the amount borrowed. The effect of compound interest can make a home purchase quite expensive, and the size of the mortgage will dictate just how much the interest will cost over the life of the loan. In order to avoid overpaying, it is prudent to offer as large a down payment as possible in order to reduce the amount borrowed. This approach literally can lead to hundreds of thousands of dollars in savings.

Additionally, the interest rate can have a profound impact on the interest payments over the life of a 30-year mortgage. It is important to get as low an interest rate as possible in order to slow the effects of compound interest and realize a cost savings every month. Consumers also should keep track of interest rate changes in order to take advantage of drops in rates that could provide a refinancing opportunity. Simply by monitoring the mortgage market, even in passing, can provide the information necessary to take advantage of lending changes that can benefit the consumer.

The TrueCredit.com study found that 24% of American homeowners claim to be concerned about the monthly cost of their mortgages, and that fixed rate mortgages are most popular. 49% of homeowners have fixed rate mortgage loans. The remainder is split among Adjustable Rate Mortgages (ARMs), interest-only mortgages and other mortgage products that have only specific applicability.

13% worry about negative equity. Negative equity occurs when the amount that the homeowner owes is greater than the value of the home itself. When this occurs, the home is no longer sufficient collateral for the mortgage. If the homeowner wishes to sell, there are only three viable alternatives. The homeowner could come up with the difference in cash, roll the negative equity into the next mortgage (assuming the homeowner is buying a new home) or sell the home and refinance the remaining debt into an unsecured loan at a substantially higher interest rate.

In order to get the most from your mortgage, it pays to understand how this market works. TrueCredit.com’s survey found that few homeowners really understand what their mortgages mean, aside from a certain amount to be paid every month. If you invest your time into understanding your mortgage, you have the potential to save hundreds of thousands of dollars over the life of your mortgage. Watch interest rates, and make a down payment if possible. Always be ready to refinance, and don’t borrow excessively against your home. With these four tips, your home will become a more productive asset.

Mortgage foreclosures climb steeply

2007-06-13T11:29:00.000-07:00

Mortgage foreclosures climb steeply
By Darla Mercado June 13, 2007

U.S. foreclosure filings have spiked 90% in the last year and have risen 19% between April and May alone.

Last month saw a total of 176,137 foreclosure filings, which cover default notices, auction sale notices and bank repossessions, according to online mortgage marketplace RealtyTrac of Irvine, Calif. That’s up 19% from April.

This translates to a national foreclosure rate of one filing for every 656 U.S. households.
California had the most foreclosure filings, reporting 39,659 during May, while Florida came in second with 21,704.

The news may not be so bad if you’re looking to buy a house cheap.

“Such strong activity in the midst of the typical spring buying season could foreshadow even higher foreclosure levels later in the year,” said James J. Saccacio, CEO of RealtyTrac.

“Foreclosed properties are becoming more commonplace and adding to the downward pressure on home prices in many areas,” he added.

Source: Investment News

Countrywide Financial May 2007 Mortgage Loan Fundings Grow 15%

2007-06-12T10:42:00.000-07:00

6/12/2007 10:46:13 AM Tuesday morning, Countrywide Financial Corporation (CFC), a provider of diversified financial services, said Mortgage loan funding for May 2007 grew 15% to $44 billion, compared to the same period last year.

The Calabasas, California-based company said on a consolidated basis it funded $2.3 billion in pay-option loans during the month as compared to $6.6 billion in May 2006. Year-to-date funding for pay-option loans totaled $15 billion, as compared to $35 billion for the same prior year period.

Average daily mortgage loan application activity for May 2007 was $3.1 billion, an increase of 17% from May 2006. The mortgage loan pipeline was $70 billion at May 31, 2007 as compared to $66 billion at May 31, 2006.

The company generated robust residential mortgage productions results for the month of May, said David Sambol, President and Chief Operating officer. The mortgage loan-servicing portfolio totaled $1.4 trillion at May 31, 2007; an increase of $214 billion, or18%, from May 31, 2006.

Banking Operations' assets rose to $87 billion at May 31, 2007 from $80 billion at May 31, 2006. Securities trading volume in the Capital Markets segment of $351 billion for May 2007 was 6% higher when compared to the same month last year. Net earned premiums from the Insurance segment totaled $118 million, up 30% from May 2006.

CFC is currently down $0.10 or 0.26% and trades at 37.74

Introduction to Best Rate for Buyers

2007-06-11T14:55:00.001-07:00

BestRateForBuyers.com finds the right mortgage for you. With access to an extensive network of mortgage providers, our mortgage professionals are able to find the specific products that can make your new home a reality. We work with you to understand exactly what you want – not just in a mortgage but in the entire home mortgage process. If you have no idea, we can help! Then, we search the mortgage marketplace for the best interest rates available. Our team will work with you for as long as it takes to find the home mortgage loans / equity home loans of which you are comfortable with.

Our experienced mortgage professionals do more than find you a great mortgage loan rate. They will take the time you need to understand exactly what your choices are. Fixed or adjustable? Should you pay points? What about a down payment? Don’t worry; we are here to help you understand what all this mean to you. The mortgage process may not be easy, but it does not have to be intimidating. With BestRateForBuyers.com, you have a partner in the entire process.

You will also notice that each State has there own "mini site" and all the information listed on those pages are completely relevant to only that specific state. Each state also has there own Directory Box, where industry related partners can list their business to share in the traffic and benefit the user as a whole. We want to create a truly reliable directory where a user who is looking for a mortgage can easily find all the resources needed throughout the mortgage process.
If you are interested in getting your business advertised on our site, please call us at
561-340-1441 or email me at info@bestrateforbuyers.com