What is a forty year mortgage?

A forty year mortgage term is not very common, but some borrowers have obtained this extra long term to keep the monthly payments as low as possible. The most common length of term for a home loan is thirty years and some homeowners may even have a twenty year loan. A mortgage with a short term typically has much higher payments, but with these high payments the equity in the home builds much faster than those of long term.

Sometimes lenders will offer a forty year mortgage so the borrower can afford a home that they could not with a shorter term. Usually a forty year mortgage is the longest term for a loan an individual can possible get. However, there are actually few homeowners out there with a fifty year mortgage. But with these extra long mortgage terms there may also be difficulties that one may encounter.

With a forty year loan the total price you will end up paying will be much higher because of all the interest thats paid over the extra ten to twenty years of monthly payments. Before deciding to get this type of loan it would be wise to first use a mortgage calculator to determine the total amount you will be paying over the term. You may want to compare the price to the total amount you will pay over the twenty or thirty year mortgage. Many times you will figure out that you will end up paying a significant amount more, and may only lower monthly payments very little.

This type of mortgage has another major disadvantage as the borrower makes their payments they will very slowly begin to build equity. The interest part of the loan will take up most of each monthly payment. When the housing market is low it makes it very easy for the homeowner to lose any equity they have in their home, even if they have been already been paying on the home for a few years.

Many times real esate agents will criticize a forty year loan because of how long the term is. Someone who is purchasing a home in their thirties will will not have the loan paid off until they were at least seventy. Which most of us realize it may be more difficult then to keep up on payments. Borrowers can obtain various types of this loan including fixed interest interest rate, adjustable mortgage, or even a ballon mortgage loan. Remember to calculate and find out how much you will end up paying by the end of the loans term.

Homeowner Rights While in Foreclosure

Many homeowners are struggling to pay their mortgage due to this economic crisis and are currently in risk of losing their homes through foreclosure. One major reason why this is happening is because so many people around the United states have been let go from their jobs and are currently unemployed. One of the main questions asked by these homeowners in this time of need is “whats rights do we have while we are currently facing foreclosure?” (more…)

What is a non-conforming loan?

Many people are well aware of what the definition of a conforming loan, but some may not know what a non-conforming mortgage is. This type of loan is also very commonly referred to as a “jumbo mortgage. The reason it is considered a jumbo mortgage is because the loans balance exceeds the typical limit allowed to be lent to the borrower. This type of loan is much more common in the United States of America, than any other place in the world.

The way that a conforming loan and a non-conforming mortgage differ has to do mainly with the loans total balance that the mortgage company offers to the borrower. With a normal conforming mortgage there is a maximum limit set forth by the Government Sponsored Enterprises (GSE) that manages how much the mortgage lender is allowed to lend to their clients. The government guidelines issued a certain limit for single family residents, secondary housing, and also will depend mainly on the size of the property. Loans that exceed the limit for loans are referred to as non-conforming loans.

Today the maximum amount allowed to be lent under a standard conforming loan is $417,000 and any mortgage that exceeds this amount is considered a jumbo loan. In order to qualify for this type of loan you will be required to have a good credit rating to prove to the lender you can manage the monthly payments. Other qualifications will be based off guidelines very similar to a regular mortgage including the calculation of your monthly budget, income, credit, etc. 

But these jumbo loans are very similar to conforming mortgages because they will also offer the borrower a fixed rate or adjustable rate mortgage. This type of loan will usually come with a slightly higher interest rate than normal. Anyone applying for this type of mortgage should expect to pay at least a 1-2% higher interest rate than normal.

What is a lot loan?

Some people decide to design and build the home of their dreams, but are in need of a loan that will help them buy the land to place it on. So because many times borrowers are in need of this financial assistance mortgage lenders will often offer what is called a lot loan. You can go to your local mortgage lender or bank to apply for this type of loan to either build your primary residence, or possible even a secondary home you intend to rent out.

The money lent to the borrower is only used to allow the land to be purchased before the construction begins. A lot of times people will get this type of loan confused with a construction loan. But they are actually very different because with a lot loan the mortgage company will lend the borrower money for the land in which they intend to start building their home, and a construction mortgage is cash for the building to begin including the needed materials and the workers to begin construction.

Sometimes when the borrower is ready to begin constructing their home certain lenders will actually transfer the former lot loan into a new construction loan to help the borrower begin building the property. If the borrower has full intention of financing the property after it is completely built they can now request from their lender that the construction loan be transferred to a regular home mortgage loan. By this time you will have a home that you designed to fit your families needs, or even maybe rent out the property for a monthly profit.

If your wondering what terms come along with this type of loan be aware that they will differ depending on the lending company in which you choose. Typically this type of loan will either be a fixed rate or an adjustable rate mortgage (ARM). The specific terms will vary depending on the mortgage lender because usually the term of the loan is very short. During the monthly payments the borrower will be required to pay either interest only or principle and interest payments. Most of the time lot loans will be given in a lump-sum to the buyer.

Lenders will not automatically qualify any borrower for this type of loan. You must first meet the guidelines and also prove to the lender your intentions of the lot and what you are planning to build. Keep in mind that with any type of loan your credit rating and down payment will also play a major role in qualifying.

What is a balloon mortgage loan?

Many borrowers out there are not exactly sure what the definition of a balloon mortgage is. This type of loan is not long term, but a short term mortgage. This loan is commonly compared to a traditional fixed-rate loan because it happens to share many of the same qualities and features. A balloon mortgage loan is much like a traditional mortgage because it offers the borrower a set amount of money that is due back in a certain amount of time. But unlike a regular mortgage this type will not amortize during the set term, and typically has one of many maturity types.

Most of the time when someone takes out a mortgage loan they will obtain a mortgage that is supposed to be paid in full within a certain amount of time. The length of time when a loan is due is called a “loan term.” Same goes for a balloon mortgage, these have a set term as many others do as well. But the monthly payments the borrower is making is not sufficient to the repayment of the loan. So because of this the borrower will have to pay the remaining balance of the loan in a lump-sum, once the loans term is up.

Most mortgages that lenders offer their customers will be for a length of 15, 30, or even 40 year loans. With a regular loan the borrower will be free and clear of the debt once the loan term is up and all of the monthly payments were paid. But a balloon mortgage will usually only extent its term for about five to seven years depending on the company and circumstances (some cases the term is much longer). At the end of the term the borrower is not clear of the debt once all they have made all the monthly payments. The end of the mortgage term is called the “maturity date.”

Many people find this type of loan a very bad decision because you must maintain your budget well enough in order to pay the lump-sum on the maturity date. This is the main disadvantage borrowers find with this type of loan. On the other hand others might find a balloon loan to be of the advantage because they will often carry a very low interest rate, therefore allowing the borrower to save up extra cash for the large lump-sum.

Definition of collateral

Banks do not just give out loans to borrowers without knowing that they will receive something for their investment, if the person fails to pay back the loan in full. Before one can obtain a loan from the bank they will often times require the designation of collateral from the borrower. Many people are not sure exactly what collateral is. This is simply assets of the borrower that are pledged to be the security back for the loan.

In the event of the borrower defaulting on their payments and are not able to repay the loan back in full, the pledged collateral will be then transferred to the lender to settle the remaining debt. There may be different kinds of collateral used depending on what type of loan is borrowed. The two most common are for real estate loan and car loans.

Real estate mortgage loans are the most common loans that will use collateral with the purchase of the property. Most of the time with real estate loans the borrower is forced to use the home as collateral if they default on their monthly payments. While the borrower is paying the mortgage they will also be paying interest to their lender until the loan is paid in full. Once the loan is repaid in full the mortgage lender will release the collateral and the homeowner will not have to worry about losing their home.

Also when it comes to purchasing a new car the finance company will typically use the car as collateral to obtain the loan. In the even the borrower does not repay the loan the finance company will repossess the vehicle and the borrower will be left with a large negative mark on their credit score. Many people take out a loan for their new car and believe its no big deal if they skip a few payments but trust me it is, they will take the vehicle back in a heart beat.

On cash loans many other forms of collateral may be used such as securities or possible jewelry that has a value that meets the loan. In special cases even rare antiques may be accepted by the lender. Almost any asset the borrower owns can be used as collateral, but it will all depend on the current circumstances. As long as the lender is willing to accept what is being offered many different assets may be used.

What does loss mitigation mean?

Due to our economic crisis homeowners have begun to fall behind on their mortgage payments and are in great danger of having their home foreclosed on. So because of this the term “loss mitigation” tends to be used more than ever before. This is actually an attempt by your current mortgage lender to reduce their loss as much as possible in the event the homeowner defaults on their monthly payments. The lender will try to regain as much as the loans value as possible even though they are likely to suffer some loss.

Pretty much every major mortgage company will have a special loss mitigation department that is trained to negotiate with the homeowner new loan terms that will better fit their financial situation. Once the borrower begins to fall behind on the monthly payments they will usually start receiving calls from either their collection department or loss mitigation. This department is trained to negotiate several kinds of loss mitigation with the homeowner such as a loan modification, short sale, or possibly even a deed in lieu.

Today the most common and popular method used to avoid foreclosure is through a loan modification. Through this route the homeowner will try to negotiate completely new terms for their current loan. A loan modification can help the homeowner catch up on their missed payments to become current, lower interest rate, or possibly even achieve a principle reduction to match the current market value. This has got to be the best route to choose to avoid losing your home.

Short sales are the second best route to avoid the devastating affects of foreclosure. Although, this method will have negative affects on your credit score and should only be used when there is no other choice. Through a short sale the borrower will list their home for a asking price that is less then what they owe on the home. But the sale price of the property must be agreed upon by the mortgage lender that holds the loan. By selling the home instead of foreclosing the lender will still gain some profit from the sale. I’m some cases the lender will issue the borrower a 1099 for the deficiency balance after the sale.

Loss mitigation has been used by many mortgage companies for many years and has helped many people remain in their homes. But ever since the foreclosure rates in America have risen higher than ever over the past two years, this is being used more than ever. If you are one of thousands of borrowers who have fallen behind on  their monthly payments, I suggest you contact your lenders loss mitigation department and negotiate new terms to avoid foreclosure.

Can a second mortgage be discharged in chapter 7?

Bankruptcy (BK) can help a debtor eliminate his obligation to pay his debts. When a second mortgage is discharged through BK, a debtor is no longer required by law to repay the outstanding balance. Creditors are not allowed to pursue debtors to collect any longer for debts that are discharged. BK is usually used as a last resort by people faced with too much debt. The rules that govern bankruptcy depend on what kind of bankruptcy is filed.

A chapter 7 discharge is obtained through filing a  bankruptcy. Once the discharge is approved, the debtor no longer has the obligation to pay for the discharged debts, however, not all debts can necessarily be discharged. Creditors are ordered not to collect debts from debtors whose debts have been discharged and harassing collection calls should cease. However, not all debts and individuals are eligible to file a this type of BK. (more…)

Why do lenders prefer a loan modification over a foreclosure?

Today in America foreclosure rates are higher than ever and many people are in desperate need of a modification. Many homeowners are beginning to default on their payments due to financial hardships such as lost jobs or even had there ARM loan adjust to a payment that is just not affordable. The question many people are asking is “why does a bank choose to foreclose rather than perform a loan modification?”

Well as we all know mortgage lenders are currently playing hardball when it comes to modifying your mortgage. But many homeowners don’t know that foreclosure do not benefit the bank much at all and they should modify to save them the trouble. One reason why it is so hard to get your lender to work with you is because they are just overwhelmed with thousands of loan mod requests from all over the united states. Each and every request takes a certain amount of time to review and make sure the calculations are correct. (more…)

80/20 mortgage, what is it exactly?

As we all know it is required by all lenders that the borrower puts a down payment on their home. Many mortgage lenders will require their borrowers to put a large amount down, usually twenty percent of the asking price of the home they are planning to purchase.

Our economy has gone into a huge mortgage crisis due to the decline in home values and the dreadful subprime mortgages that have caused so many to default on their payments. So because of this lenders are much more strict when it comes down to the twenty percent guideline for a down payment. When the housing market was at its peak many borrowers qualified for an 80/20 mortgage. (more…)

Can mortgage servicing companies foreclose on property?

Mortgage servicing companies usually initiate foreclosure proceedings on behalf of the lender or investor. Foreclosures occur when homeowners fail to make monthly mortgage payments and the servicer has full legal authority to act on behalf of the lender.

Mortgage servicing companies are usually paid monthly based on the monthly payments of a borrower. They may resort to calling you many times in a day to collect mortgage payments. Servicers do not get anything from helping borrowers. They get paid when borrowers pay. They also get a huge incentive from late payment charges. Charges earn these companies big amounts of money. (more…)

Can bankruptcy be declared if you have a judgment?

Bankruptcy (BK) is a privilege that is provided by federal law to enable individuals to be relieved from their debts and obligations. The primary goal of bankruptcy law is to permit the debtors to begin again in their financial situation. A bankruptcy means that the debtor will no longer have to pay money that is owed to certain creditors. In the case where a judgment has already been made against the debtor, it is indeed possible for BK to still be declared.

The debt that results from a judgment may also be discharged as a result of the BK proceedings. However, this would depend on whether the person is qualified to file for BK protection. He may not succeed in his plan if he just wants to escape the obligation to pay the debt resulting from a judgment.  (more…)

What does a real estate agent do?

A real estate agent or commonly referred to as “Realtor” is a person who has a license in a specific state that allows them to help people find a property to purchase, or even help a homeowner sell their home. This person has gone through intense training through various real estate classes or sometimes even through “on the job training.” After the training is complete this person must pass various examinations that will allow them to achieve a real estate license.

Even though you may be able to sell or buy a new property on your own you need to understand that there are many laws that come along with this process. This is why many borrowers choose to hire a person with this knowledge to help them through the process. Also this will make the task of selling your property much easier because your agent will advertise and list your property under the agency or company in which they work. (more…)

What is a commercial loan?

Commercial mortgages are a type of loan that is offered to different kinds of business owners such as store owners, office buildings, restaurants, etc. This may also be used to help business owners with short term assistance for operating expenses such as mandatory payroll for employees or possible even to help the company purchase supplies that are needed to run the business. In some cases this loan is actually used to buy new machinery that is absolutely needed for the business to continue functioning.

This type of loan is commonly known as a short term form of assistance for businesses that are strapped for cash. Some mortgage lenders will even offer a type of commercial loan called a “renewable loan.” This is often used to when the company needs cash to secure inventory for the huge seasonal orders that come in while still providing other products to customers.  (more…)