Home Equity Loan Questions

Home equity loans are a type of mortgage loan which differ from a first mortgage, otherwise known as a first lien that allows a borrower to purchase a property. These loans originate from a property owner’s equity and although first and second mortgages differ quite a bit, they still use many of the same terms. Some terms that you see with a home equity loan that you may also see with a first mortgage, but may differ in some meaning may come across as: (more…)

Advantages of Mortgages with Shorter Terms

Around this same time period last year, mortgage rates were at all-time lows. Even the 30-year fixed -rate mortgage (FRM) was averaging 3.50%. With mortgage rates currently dwindling in the mid 4% range, many homeowners might be thinking about refinancing to a shorter-term mortgage. While some people see the rise in monthly payments as a drawback, mortgages with shorter terms do have some advantages. (more…)

How Mortgage Shopping Mistakes Can Cost You More

With mortgage loans being one of the most expensive things anyone will finance in a lifetime, borrowers are bound to make nervous mistakes along the way. Some of these mistakes are worse to make than others, but in the end you may end up paying thousands of dollars in unnecessary costs over the life of the loan. Here are five common mistakes first-time or repeat buyers make:

1. Not Shopping Around

Avoiding making comparisons when shopping for a home or mortgage is a common but devastating mistake. Going with the recommendation of a real estate agent, realtor, a neighbor or another credit source can be a helpful way to start, however in the end your own research is going to be the best source of information.

Getting at least 3 to 4 quotes from reputable mortgage lenders is a crucial step in the home buying process.

2. Getting a Loan That Doesn’t Suit Your Needs

These needs should cover all short and long-term housing goals. If not done right, mortgage shopping can be just like buying a service that was identical to another, but ended up charging more in the end. There are so many components to look at when deciding on a 30-year or 15 year fixed mortgage (FRM) compared to an adjustable-rate mortgage (ARM). Comparing federal loans with private loans, or even jumbo loans can be a long process too.

Even if you know you do not want to gamble with a jumbo loan, every borrower will be attracted to certain aspects of either a federal or private loan. FHA loans for example come with lower interest rates and minimal down payments, which is why lenders make up for it with the mortgage insurance premium. A new rule recently enacted even made it possible for borrowers to be tied to mortgage insurance for the entire life of the loan.

Going back to a FRM vs. an ARM, it all might depend on how long you plan to remain in the home. Interest rates on an ARM may be lower at first, but they are always subject to increase following the initial payment period.

3. Ignoring Everything but the Interest Rate

Mortgage interest rates are important factors to consider when mortgage shopping, however are not the only variable to consider. Even if you found the lender that offers the best interest rate you can find, all of that hard work you put into searching will be for nothing if their service is lousy. Besides the notion that the fees with them might be higher, a lousy business model may keep you from closing on time. In an ever expanding market where competition is the norm, most sellers are selling to the highest bidder these days. If you miss any deadlines because of the lagging of a bad lender or even agent, you may lose the house of your dreams and your entire mortgage application process may be trashed.

4. Self-Misinterpretation

Not all mistakes are made by the lender. Borrowers, especially first time homebuyers can be notorious for making misstatements and misinterpretations. Some misinterpretations can be counted as fraud, but others just come with a large fee to pay if caught. Some common lines to avoid are:

  • Fudging the numbers when it comes to your credit
  • Misleading on your monthly income
  • Acting like you don’t even know what type of property you are looking into
  • Pretending you’re not going to rent out the property when you actually are

5. Pretending Your Credit Does Not Exist

Treating your credit as an insignificant part of the process will only land you in hot water. In reality, a borrower’s credit rating is probably the largest factor in determining things such as the mortgage rate. Some borrowers may not know important facts, such as that a handful of points added to their FICO scores can save them THOUSANDS. A $300,000 loan with Fannie Mae for example with a borrowing score of 699 can make you save less. If you can pump the score up to 700, your charge drops to 1% which will end up being $2,100 less.

How to Pay Off Your Mortgage Balance Faster

Many borrowers may never come across the idea of whether or not they’ll ever pay off their mortgage in full while remaining in their home, because the practice has become less common. According to a Harvard’s Joint Center for Housing Studies survey, 63% Americans ages 55 to 64 still have mortgages. Regardless, actually owning your own home is still part of the growing American Dream, and there are ways to do it. (more…)

Important Details When Looking Over Your Mortgage Contract

Although for many, skimming over a contract and signing it is the norm, however this may not be how you want to handle things when it comes to your mortgage contract. Never be embarrassed for reading your loan contract and questioning any terms and/or fees, even if you have to spend an hour doing so in front of your lending representative. Even if you don’t have the necessary skills or knowledge in regards to mortgage terms, there’s always help available to understand a credit card, mortgage or other type of loan agreement. This is why it’s crucial to work with a reputable and trusted mortgage loan originator. (more…)

Five Tips for Refinancing an Investment Property

As past real estate market conditions have caused homeownership rates to decline, the need for a rental property has surged over the last several years, boosting the demand for investment properties. Refinancing investment properties can be an attractive option due to the factors; such as long-term ownership, higher property values, reduced loan balances through amortization and increased rental rates. It’s important to note 5 crucial variables that make lending standards for investment properties different from those of a primary residence. (more…)