Mortgage Rates in Florida with EverBank
EverBank offers a number of options for home financing. The bank offers fixed rate home loans and adjustable rate home loans with competitive mortgage rates in Florida and other states.
The fixed rate mortgage loan options have varying terms and all of the fixed rate loans provide the borrower with a fixed monthly payment that will not change during the term of the mortgage loan. Many borrowers have chosen fixed rate mortgages due to their constant monthly payment but they are also the number one home loan chosen when mortgage interest rates are low.
The adjustable rate mortgages offered by EverBank offer a lower initial monthly mortgage payment and mortgage rate to fit the financial needs of borrowers who willing to accept the risk of rising rates and mortgage payments for a reduced payment initially.
Current Florida mortgage rates and loan terms offered by EverBank include:
30 year fixed rate home loan has a mortgage rate of 4.75% and an APR of 4.89%.
A fixed rate home loan on a 15 year terms has a mortgage rate of 4.125% and APR of 4.348%.
The bank offers an adjustable rate mortgage that has a mortgage rate fixed for the first five years that has a rate of 3.500% and a 3.385% APR. This is mortgage loan that has a variable rate and the monthly paymenst and interest rate may change.
Mortgage loans are available for purchases as well as refinancing existing home loans.
Mortgage rates as current as of March 9, 2010 but rates are subject to change and are not guaranteed. Florida mortgage rates and APRs are based on a single family home that is owner occupied and has a minimum 20% down payment. All mortgage loans are subject to bank approval and underwriting standards. Other restrictions and limitations on the loans listed may apply.
For more information on current mortgage rates in Florida or any other state that EverBank makes home loans or to start the mortgage application process, a mortgage representative from EverBank can be reached at 877-436-4381.
EverBank Financial Corp is a private financial services holding company headquartered in Jacksonville, Florida. EverBank operates nationally and handles consumer direct banking and lending across the U.S. The Community Banking division of EverBank serves banking customers in the Northeast Florida retail market, offering commercial and retail banking and lending products.
Top Five Bank Mortgage Rates March 8, 2010
The top five banks ranked by assets include Chase Bank, Bank of America, Citibank, Wells Fargo Bank and US Bank. All five of these banks offer mortgage loans and mortgage rates in the majority of the states. Mortgage rates offered by these financial institutions provide a good barometer of prevailing mortgage rates and mortgage activity in the lending arena.
The following rates can help borrowers easily compare mortgage interest rates and product information to help find the right mortgage quickly and efficiently.
The rates are for mortgage loans based in California with a 20% or greater down payment for a single family, owner occupied home. If the down payment on a new home purchase is less than 20%, mortgage insurance may be required on the loan. The added cost of mortgage insurance could increase the APR as well as the monthly mortgage payment.
All loans would be subject to bank approval including a credit, income and assets. The mortgage rates were run on sample loan amounts of $175,000.00. Additional mortgage rates, point options and loan amounts are available from the mortgage lenders listed.
Chase Mortgage is currently offering a 30 year fixed rate home loan with mortgage rate of 5.25% and 0.125 points for an APR of 5.343%.
The 15 year fixed rate loan offered by Chase has a mortgage rate of 4.625% and 0.125 points for an APR of 4.782%.
Bank of America Home Loans promotes a 30 year loan with a mortgage rate of 4.875% with 1.0 point and an APR of 5.098%.
A 15 year term loan from Bank of America has a mortgage rate of 4.250% with 0.625 points and a 4.576% APR.
Citibank markets a 30 year home loan with a mortgage rate of 5.125% and 0.125 points for a 5.317% APR.
Citibank has a 15 year mortgage loan with an interest rate of 4.375% and 0.375 points with an APR of 4.773%.
Wells Fargo Home Mortgage markets their 30 year fixed with a mortgage rate of 4.875% and 1.0 point yielding an APR of 5.065%.
The 15 year fixed rate loan from Wells Fargo has a mortgage rate of 4.250% and 1.0 point with a 4.573% APR.
US Bank’s 30 year fixed rate mortgage has a mortgage rate of 5.125% and no pints with a 5.192% APR.
The 15 year fixed rate home loan at US Bank has a mortgage rate of 4.375% and no points and a 4.487% APR.
All rates are believed to be accurate and were verified on the date of this publication but interest rates are not guaranteed. For current mortgage rates and loan terms contact the mortgage lenders directly.
Freddie Mac Finally Stops Buying Interest Only Mortgages
Freddie Mac announced, with little fanfare, that it will stop buying and securing mortgage loans that are based on interest only payments. Freddie Mac is the second largest purchaser of home mortgages in the U.S. behind only Fannie Mae. The press release provide by Freddie Mac announced that on or about September 1, 2010, the company will cease purchasing and securitizing interest only mortgages, including Freddie Mac Initial Interest fixed-rate and adjustable-rate mortgages.
Interest only mortgages became popular near the top of the housing boom, allowing buyers to purchase a larger home based on a lower mortgage payment provided by the interest only loan feature. Interest only mortgage loans offered the borrowers the ability to make monthly payments that were only the interest portion of the debt and paid off none of the principal balance.
The interest only option would be for a specified period after which time the loan would require interest and principal payments to retire the debt in full. The interest only period frequently ran from five to ten years and then principal and interest payments would be scheduled on a fully amortizing basis for the remainder of the mortgage term.
Interest only options were available on both fixed rate mortgages and adjustable rate mortgages. These loans allowed homeowners to make purchases during the period when homes were becoming less affordable. The rational for these home loans is certainly suspect, the borrower is eventually going to be confronted with a larger more mortgage payment once the interest only period expires and for both the mortgage lender and home owner, there is no increase in equity during the interest only period unless housing prices continue to ratchet up. The end result, these types of mortgage loans ended up performing worse than conventional, fully amortizing fixed rate loans.
Fewer of these home loan have been produced in the past months since underwriting standards have become stricter. Borrowers need to qualify for the loan based on a fully amortizing payment instead of just the interest only payment and they often require a larger down payment.
These changes may not put an end to these type of home loans forever but there are certainly fewer banks that make loans that do meet the qualifications established by Fannie Mae and Freddie Mac. It is not likely that very many banks will be willing to take the risk of originating these loans without the security of Freddie Mac purchasing or securitizing the loans and leaving the possibly the bank will get stuck with a greater number of non-performing loans.
Mortgage Closings and Per Diem Interest
Many home loan borrowers are confused about a charge on their mortgage loan closing statement referred to as per diem interest. Part of the confusion stems from the fact that this charge is referred to as a closing cost on the good faith estimate provided to the borrower.
Per diem interest means the amount of daily interest payable under a home loan. The mortgage lender needs to calculate per diem interest in order to determine the amount of interest payable by a borrower at the loan closing.
At the loan closing, this will the daily cost of interest form the time the funds are disbursed to either purchase the home or after the three day right of rescission on a mortgage refinance to the time period when the mortgage interest starts to accrue for the first payment.
Most all home mortgages have loans monthly payments that cover a 30 day period of time due on the first of the month. A borrower’s first monthly payment is typically due the first day of the second month after closing. For example, if a loan closes on January 15, then the first monthly payment will be due on March 1 not February 1.
Interest paid on home loans is payable in arrears, using the above payment date example, the March 1 monthly payment will cover interest which accrued during the month of February. Normally, rent payments are calculated another way and are forward payments, the March 1 payment covers the rent for the month of March not February.
Following this same example, the borrower that would close on the home loan on January 15 has their first monthly mortgage payment due on March 1, whether the loan was a refinance or for a purchase. The borrower has a payment due on March 1st that covers all of February’s interest charges and any principal due, but the borrower had access to the funds from the time it disbursed in mid January. To cover the interest charges from January 15 to the February 1st, at the closing the borrower will have to pay interest covering that period from January 15 through January 31 since this interest will not be included in the March 1 monthly payment.
Per diem interest is determined by first multiplying the principal amount of the loan by the interest rate to determine the annual amount of interest payable under the loan. Next, the annual amount is divided by 360 days to determine the per diem interest amount (note mortgage lenders typically calculate per diem interest based on a 360 day year; when calculating per diem interest it always divided by 360 days unless the mortgage lender specifically instructs otherwise). Finally, the per diem interest amount is multiplied by the number of days remaining in the month of closing, including the date of closing.
For example assume that a loan with an original principal amount equal to $100,000 and an annual mortgage interest rate of 7.00% is funded on January 15. To determine all charges at the closing, the mortgage lender must determine the amount of per diem interest which will be payable by the borrower at closing.
The total annual interest is equal to $7,000 or 100,000 x 7%. This is interest for the year and therefore has to be divided by 360 to obtain the daily interest of $19.44. This figure is now multiplied by the 15 days remaining in the month to come up with a total interest charge of $291.60.
This charge will be depicted as a closing cost on the settlement statement but this would seem like a misnomer. The interest charge is simply the cost of having access to that money before the first mortgage payment, referring to interest charges as a closing cost in the same general category as origination fees can appear confusing.
Mortgage Approvals and Compensating Factors
Mortgage loans are approved based on a fairly strict set of guidelines. Some of the guidelines are hard rules that can not be broken. An example of hard rule is the maximum loan to value ratios or down payment requirements. If a home loan for a particular 30 year fixed rate mortgage requires a 5% down payment or a loan to value of 95%, 4.75% down payment will not be accepted. On the other hand, some rules are general guidelines.
An example of a general guideline is the debt ratio requirement. Standard debt ratios are approximately 32% for the amount of the borrowers’ gross monthly income that can be used for the monthly mortgage payment and a 38% ratio representing the amount of the gross monthly income that can be allocated for the monthly mortgage payment and all other monthly debt obligations. These debt ratios are guidelines. A home loan applicant that has debt ratios of 33% and 40% may very well be approved for a mortgage loan.
In situations where a home loan borrower has debt ratios that exceed the guidelines or perhaps a credit history that is slightly below the requirements, a mortgage lender will look for compensating factors to justify making the home loan approval.
Compensating factors that may be used to justify approval of mortgage loans with ratios exceeding the benchmark guidelines are evaluated on a case by case scenario. Any compensating factor used to justify mortgage approval must be supported by documentation with the mortgage lender.
Common compensating factors that are reviewed to approve a home loan that is just marginally beneath the loan guidelines include:
The borrower has successfully demonstrated the ability to pay housing expenses equal to or greater than the proposed monthly housing expense for the new mortgage over the past 12-24 months.
The borrower makes a large down payment, one that is above the minimum established for the home loan program applied for, toward the purchase of the property.
The borrower has demonstrated an ability to accumulate savings and a conservative attitude toward the use of credit.
A previous credit history shows that the borrower has the ability to devote a greater portion of income to housing expenses.
The borrower receives documented compensation or income not reflected in effective income, but directly affecting the ability to pay the mortgage, including food stamps and similar public benefits.
There is only a minimal increase in the borrower’s housing expense.
The borrower has substantial documented cash reserves (at least 3 months worth) after closing. In determining if an asset can be included as cash reserves or cash to close, the mortgage lender must judge whether or not the asset is liquid or readily convertible to cash and can be done so, absent retirement or job termination.
Funds borrowed against these accounts may be used for home loan closing, but are not to be considered as cash reserves. “Assets” such as equity in other properties and the proceeds from a cash-out refinance are not to be considered as cash reserves. Similarly, funds from gifts from any source are not to be included as cash reserves.
The borrower has substantial non-taxable income (if no adjustment was made previously in the ratio computations)
The borrower has potential for increased earnings, as indicated by job training or education in the borrower’s profession
The home is being purchased as the result of relocation of the primary wage earner and the secondary wage earner has an established history of employment is expected to return to work, and reasonable prospects exist for securing employment in a similar occupation in the new area. The mortgage loan underwriter must document the availability of such possible employment.
Employment and Income Calculations for a Mortgage
In order to qualify for a home loan, standard ratios are applied to the borrower’s income and debt payments. For conventional conforming mortgage loans the standard ratios are 32% and 38%. To calculate these debt ratios the mortgage lender needs to measure the borrower’s debts and income.
The first debt ratio measures borrowers new monthly mortgage payment divided by gross monthly income. The second debt ratio measures the monthly mortgage payment plus all other contractual monthly payments divided into the gross monthly income. These two debt ratios are often referred to as the front end ratio and back end ratio in the mortgage lending industry.
When applying for a home mortgage, a borrower should not only be aware of these debt ratio requirements but how they are calculated. When these debt ratios are calculated, one of the hardest measurements to calculate and often improperly calculated components is the borrower’s gross monthly income. What appears to be a simple calculation is often made difficult because of the borrower’s employment history and income fluctuations as well as guidelines that are mandated by the mortgage industry.
The anticipated amount of gross monthly income and likelihood that it will continue must be established to determine a borrower’s capacity to repay a new mortgage loan. Income that can not be verified or will not continue or is not stable, can not be used to calculate debt to income ratios on a mortgage loan request.
Gross monthly income will be checked by the mortgage lender for consistency and continuity. Once a stable income and employment position is considered acceptable, the mortgage lender will need to calculate gross monthly income based on historical pay and employment verification. Standard income is calculated by analyzing the average income and hours worked as well as the contractual relationship with the employer.
If the mortgage loan borrower is paid twice a month, then the gross monthly pay from the two most recent paychecks is added together to determine monthly income. If the borrower is paid every other week, then the gross bi-weekly paycheck is multiplied by 26 then divided by 12 to determine the monthly income figure. If the home loan borrower is paid weekly, the weekly gross pay is multiplied by 52 then divided by 12 to determine gross monthly income.
Mortgage loan applicants that have stable income with set employment contracts are the easiest gross monthly income calculations for the mortgage lender. For example; a school teacher that is paid a $60,000.00 per year should have a w-2 from the previous year that reflects that income amount and pay stub that confirm and monthly income amount of $5,000.00.
However, a construction worker that is paid $25.00 per hour may or may not be as easy a calculation to determine the monthly gross income. If the worker is consistently working a set number of hours per week, the gross monthly income is achieved by multiplying the hourly wage by the number of hours worked per week, which is then multiplied by 52 weeks and divided by 12.
If a mortgage applicant receives overtime or bonus income the income can be used to qualify for the home loan with restrictions. The borrower must have received the bonus or overtime income for a period of at least two years and the income has to be determined as likely to continue at the average rate of the past two years.
Part time or seasonal income may be used to qualify for a home loan if the income has been earned for a period of at least two years and is likely to continue.
Commission income can be included if it has earned for a period of at least two years and will be determined by the mortgage lender based on an average of the past two years income. If the commission income shows a decline over the two-year period the mortgage lender may deny the inclusion of the income to qualify for the mortgage loan request. Commission income that has not be earned for more than one year will generally be excluded from gross monthly income calculations.
A borrower may qualify for the home loan request if they have earned commission income for less than one year but have earned income not including commissions that would be sufficient to qualify the borrower for the mortgage.
Commission income must be verified with two years of signed federal income tax returns along with one month of current income pay stubs. Any business expenses or unreimbursed business expenses declared on the tax return will deducted from the gross pay calculations.
Unemployment income may be used as qualifying income for a home loan request if the income is recurring and consistent. The test for recurring and consistent income is documentation of two years history in income and reasonable belief that the income will continue. Examples of recurring unemployment income includes seasonal workers or recurring factory layoffs.
Any income earned that is legal non taxable income may have the savings that would have been paid as tax added back into the monthly gross income calculations to qualify for the home loan request. The process of adding income to non taxed income sources such as social security income is referred to as grossing up the income in the mortgage lending industry
The amount of income that can b added to the regular income that is not subject to federal income taxes must not exceed the appropriate tax rate for that income amount. The mortgage lender must document and support the additions to the income. The mortgage lender should use a tax rate that is appropriate for the borrower’s income level and should not be greater than 25%.
Projecting future income to qualify for a home loan is not allowed. Projected raises or self employed income that has not been documented can not used for qualifying purposes.
There is no established limit regarding the amount of time a home loan applicant has to have on a job to qualify for the home loan. The mortgage lender is generally required to verify the home loan applicant’s most recent employment covering the past two years. Gaps or periods of time of unemployment does not mean that a borrower will declined for the mortgage loan request but employment gaps should be explained and documented.
Although a home loan applicant will have to document gaps in employment that are longer than one month, seasonal unemployment is an acceptable source of income, recent school graduation is acceptable.
Frequent job changes that are either lateral moves or advances in income and position are not considered high-risk employment and income situations. But, the mortgage lender is required to document or assess the probability of continued employment which can either be accomplished in writing or determined by reviewing the previous to years employment and income history.
Home loan applicants that have recently returned to work after a prolonged absence from the work force may pose a problem for the mortgage lender to consider the total monthly gross income of that borrower. The mortgage lender will generally try and document a two-week employment history that excludes the long employment gap and will usually require six full months of income on the new job.
Standard employment verification procedures for new home loan applicants will generally entail a process of validation that is dependent upon the source and type of income the borrower obtains.
Salaried borrowers will generally need to supply to the mortgage lender the borrower’s most recent two years W-2’s and pay stubs that cover a 30 day periods of time. The mortgage lender will generally verify employment by phone or in writing if sufficient data is not obtained over the phone.
Overtime and bonus income must be verified with two years W-2’s and a written employment verification to ascertain the rate of previous bonus and /or overtime income and the likelihood of that rate continuing.
Child support or alimony may be used to qualify for a mortgage loan. The mortgage lender will be required to validate the divorce decree and the borrower will have to supply at least three months of canceled checks verifying receipt of the income. Child support, alimony and social security that is not received for those of retirement age must be verified to continue for at least a period of three years into the future.
Social security income and pension income is often paid to individuals by direct deposit. These sources of income will be verified by reviewing the bank statements in which the funds are direct deposited. These sources of income will generally be verified by the sender with annual awards letters. The mortgage lender will request a copy of the most recent annual award letter as well.
Rental income will need to be verified with tax returns and leases. The average of the last two years of net rental income will be used as the monthly income figure. Often, this figure is negative since many rental properties generate a loss for the owners that can be used to offset other taxable income sources. Unfortunately, the only help in overcoming the loss is to add in the depreciation charges that may be on the tax return for the property to calculate an adjusted gross rental income amount.
A mortgage loan borrower that owns more than 25% of a business is considered self employed on most all mortgage programs. Self employed borrowers will have to two years of corporate tax returns f the business owned is a schedule C or S corporation. If the borrower runs a sole proprietorship, two years of personal income tax returns will be needed.
Understanding the needs of the mortgage lender to calculate and verify income will help a borrower understand the mortgage loan approval process and expedite that approval.
Qualifying for a Mortgage for the Self-Employed
Many potential home loan borrowers that are self employed believe that it is much more difficult to be approved for a new mortgage if you are self employed. While it can certainly be difficult for a self-employed buyer to qualify for a mortgage, the qualifying standards for a self employed borrower and the qualification standards for a wage earner or salaried borrower are the same.
The difficulty with the approval process is not with different underwriting standards it is simply that self employed borrowers often have irregular income and unsubstantiated savings or reserves.
It is often difficult for the self-employed individual to predict cash flow and business profits on a regular basis, making a self employed borrowers income highly variable. It is that variable income that presents the biggest obstacle.
Complicating the matter even further, in the past, mortgage lenders made a whole host of mortgage to self employed borrowers that were low and no documentation loans. A large portion of these home loans have since gone into default, casting self-employed home buyers in a negative light and making mortgage lenders hesitant top offer any home loan products with additional layers of risk available to self employed borrowers.
Self-employed borrowers must demonstrate an appropriate net income before they can obtain a home loan. This guideline is no different than it is for a wage earner applying for a home loan. Standard mortgage guidelines call for verification of a two year average of monthly income.
This is true whether the borrower is self employed or not. Sometimes automated underwriting systems will require only a one year verification of income, this may be found in some case where borrowers have very high credit scores and large down payments or savings. Conditions in which a borrower has very high credit scores or large accumulated savings is referred to as compensating factors.
Two years of consistent, verifiable income can be difficult sometimes for those that are self employed, as many self-employed business owners take a great deal tax deductions each year and deduct as many expenses as they can from their gross business revenue, lowering their tax bill but also lowering their net income. This makes it hard for self-employed borrowers to show, on paper, that their business has a high earning potential or more importantly that the average of the business income actually qualifies for a mortgage loan based on the proposed mortgage payment and other debts of the borrower.
The problem with the self employed fundamentally rests the inability to produce filed tax returns that have sufficient monthly income to qualify for the home loan request.
Self-employed borrowers will generally have to provide a great deal of documentation to the potential mortgage lender to verify their income. This is because there is more room for self-employed individuals to embellish or exaggerate figures, so everything must be documented appropriately. A wage earner has less documentation to supply since the verification process is far easier as it generally involves the most recent w-2, current pay stubs and verification in writing or verbally of present employment. Clearly, that process would yield very little relevant information for the mortgage lender on a self employed borrower. In addition to standard loan paperwork, a self-employed borrower may also be required to provide the following:
Two years personal income tax returns
Two years of business income tax returns
A profit and loss statement
The following calculations are used by mortgage lenders to calculate the income of self-employed applicants – the applicant’s net income for the past two years based on the filed tax returns plus depreciation declared from the business. This gives a monthly average income that can be used to qualify for a home loan. Year to date income is measured but almost always ignored for qualification purposes as it can not be adequately verified. Expenses paid out of the business are not added back in to help increase the income, declared net income plus depreciation is the standard rule for calculating self employed borrower’s income.
If self-employed borrowers experience a great deal of difficulty when qualifying for a loan, they may consider alternative financing options other than a fully documented loan. One such option is stated income. These home loans have been sharply curtailed recently and are reserved for borrowers with excellent credit and substantial equity. Alternative documentation loans are suffering the same fate, however there are still programs available that allow alternatives such as the use of bank statements which add up the last 12 months of deposits to calculate an average monthly income.
Other options may include the compensating factors. A borrower who has limited income and therefore a high debt ratio may be able to qualify for a mortgage loan with a large down payment or large reserves after the down payment. In addition, have exceptional credit scores and limited debt outstanding will also help grease the wheels for a home loan approval.
The last resort may be seller financing. Sellers may require some credit checks, but may not require such extensive paperwork to verify income. The terms almost certainly will be less generous as well.
Though the paperwork for the self employed borrower may be more burdensome, if the income is consistent and the appropriate tax returns are used, there should be very little problems qualifying for all mortgage loan types. To check the possibility of qualifying for a home loan, a mortgage calculator can used to first calculate a two year average of monthly income and then the qualifying mortgage debt ratios. The mortgage calculator can be used to check debt ratios for a variety of home loans to see how well a borrower may meet the standard underwriting guidelines.
Home loans to purchase a property or for a mortgage refinance will have the same income qualification requirements for the self employed borrower. Good documentation is the key to a fast and painless home loan approval.
Using a Mortgage Loan for Debt Consolidation
Cash out refinance transactions for debt consolidations is a popular mortgage transaction. Cash out refinances represents a large portion of mortgage refinance transactions each year. For consumers that own a home and have a fair amount of consumer debt, a cash out refinance for debt consolidation purposes is well worth considering.
Sometimes a person can get into debt problems without much effort at all. Perhaps you have even experienced credit problems and are showing various signs of damaged credit do the debt overload. If you are willing to be disciplined, in a serious fashion and you own a home, one way out may be a cash out refinance to consolidate these debts. This may help you solve your credit and debt situation despite some of the inherent risks involved with such a home loan.
It may be possible to refinance your mortgage that you currently have with a loan amount greater than the existing loan balance. This is called cash out refinance. The extra money obtained from the new refinance transaction can be used to pay off other bills and debts. A cash out refinance for debt consolidation loan gives the home loan borrower money to pay off their existing debt, resulting in just one monthly payment and quite possibly a lot less stress. With discipline, this home loan makes it much easier to manage your budget since you only have to worry about a single monthly mortgage payment schedule. This type of refinancing option means you will pay a longer term and subsequently more mortgage interest over the life of the debt.
When applying for refinance for debt consolidation, make sure you explain this to the mortgage lender and loan officer. During the qualifying process for a refinance, the debt ratios the mortgage lender will evaluate are as if the new mortgage loan is in place. When this mortgage loan is for cash back to pay off consumer debt the application will not consider the existing payments of the debt being paid off to calculate the debt ratios.
The three key factors in evaluating your loan request will be the debt ratios, the loan to value and your credit report. In order to make sure the debt ratios are not excessive, it is important that the mortgage loan application does reflect the debts to be paid off otherwise the home loan application could result in a loan denial for an excessive debt ratio.
When you consolidate various high interest rate debts into one mortgage loan the results can be very attractive and appealing. With a debt consolidation mortgage, you do not have to pay different interest rates to creditors, or pay your creditors at different times of the month. A debt consolidation mortgage refinance combines your debts into one loan payment a month, one that you should be more manageable.
Since mortgage loans are secured by real estate, the interest rate or mortgage rate is generally much lower than that of credit cards and personal loans. And in most cases, the interest paid on a mortgage is tax deductible. With discipline, you can now budget better to increase savings or prepay on the new refinanced mortgage and extinguish all of your debt early.
Be careful; do not use the freedom of lower monthly payments to avoid getting your financial house in order. Do not increase in your unsecured debt after you consolidated through a mortgage refinance. Pay strict attention to your financial outlays and use the home loan to improve your financial health.
Benefits of a cash out refinance for debt consolidation include:
The ability to take all different types of high interest loans and combine them into one lower interest mortgage when you enter into a refinance. This pays off the higher interest debts.
Improves your credit rating by reducing the amount of outstanding debts per account.
Most mortgage loans allow prepayment without penalty, allowing the borrower to have the option of not only consolidating many consumer debt payments into one but also to pay a higher monthly mortgage payment if they choose and reduce the total debt early.
By paying off debts that may have been outstanding, you stop and eliminate debt collection activities, foreclosure, bankruptcy, and other potential negative actions that affect your overall credit status.
The process to get a debt consolidation mortgage is fairly simple. Research and shop around for repayment plan that meets your budget and risk, and find the lowest mortgage rate and closing costs that you can. Be cautious before signing anything and make sure you understand all the repayment terms, mortgage rates, and costs of the refinance transaction. Use the mortgage calculators to evaluate the mortgage rates and mortgage payment options.
Using a cash out refinance mortgage for a debt consolidation can make sense, and help overcome severe debt problems, but it does result in higher interest and higher fees. It will take discipline to make sure the new payment amount is handled in a timely fashion. You will have a longer mortgage term and pay more over the length of the loan. It is often smart to restructure your debt this way, but this does result in a larger single debt amount. For this reason it’s smart to investigate shorter-term mortgage options to try and avoid paying a larger amount of money over time.
Home Loan Delinquency and Foreclosure Help
The mortgage foreclosure pandemic has not yet abated. While investors talk about a rebounding stock market 1000’s of new foreclosure filings continue to be processed.
For some home owners the foreclosure process can be a bitter end to poorly fitting monthly mortgage payment. In these cases, the mortgage amount and monthly commitment probably never matched the household income. Servicing the mortgage payment combined with the new homes expenses and recurring monthly living expenses was a budgeting nightmare the day the mortgage loan was signed. But for others, the late mortgage payments and impending foreclosure are not a product of risky lifestyle decisions and too much consumption but standard income stresses like the loss of a job, divorce and unexpected financial calamities.
The economic crisis has made it hard for a number of homeowners who were not having trouble in prior months finding it hard to now make ends meet. For some of these people who were finding it difficult to make their mortgage payments, they have been able to save their home from foreclosure. For those borrowers who do nothing, they could lose their home if they continue to ignore the problem and do nothing
If you are having trouble making your payments, sift through the mess to understand what the underlying financial problem is and seek help sooner rather than later. The longer a home loan borrower waits to call, the fewer options they will have.
One of the first steps to make in times of financial distress and when experiencing payments problems is to analyze your monthly expenses and income and to see where savings can be made. Dramatic savings made have to made, if necessary. As your try to fix the household budget leaks, make sure to understand then consequences of mortgage payment delinquency and the foreclosure process so you know what you are up against if you can not realign your budget.
Review the mortgage loan contract you signed when your mortgage lender loaned the money necessary to buy the house or more likely, the last home loan refinance transaction since that will be the mortgage that is secured against the house. The mortgage loan agreement will cover the terms under which you agreed that if you can’t repay the home loan, the mortgage lender can foreclose to take ownership of the house. If you do not pay your monthly mortgage payment, you are technically in default on your mortgage.
State laws vary, but generally, a mortgage loan that is as little as 90 days delinquent can be considered in foreclosure and the process of foreclosing on the home may begin. Your mortgage lender may send a notice indicating that they are starting foreclosure proceedings, but a homeowner should not wait fro this document to arrive. It is important to take steps to prevent a foreclosure as soon as you realize you are having trouble paying the monthly mortgage payment.
The good news is that there has been a tremendous amount of pressure applied to banks and mortgage lenders that originate and service mortgage loans to take prudent attempts to find solutions for homeowners having trouble making their mortgage payments. Contact your mortgage loan servicer (the company that collects your monthly mortgage payments) to discuss your options as early as you can. Many home loan servicers are expanding the options that have made available to their borrowers. It is certainly worth calling your mortgage loan servicer even if you had a request that was denied in the past. Mortgage loan servicers are getting a tremendous amount of calls from distressed borrowers. Be persistent and try to be patient but by all means find out what your home loan lender or servicer can do for you.
While you will want to discus any and all options the mortgage lender may have, one option that is being sponsored by the present administration is home loan modifications. Many home loan servicers implemented new loan modification programs in 2009 to assist homeowners experiencing financial difficulties by lowering their monthly mortgage payments. Plus, many home loan servicers are participating in the government’s Making Home Affordable Program as well as working with non-profit counseling agencies through HOPE NOW.
In a mortgage loan modification, the home loan servicer and the home loan borrower agree to permanently change one or more of the mortgage’s terms to make the monthly mortgage payments more manageable for you. The changes could include reducing the mortgage rate, extending the term of the loan, creating a forbearance on the past due interest or forgiving principal, or a combination of these factors.
With the government sponsored loan modification program in order to be eligible, the home must be the primary residence, the mortgage loan balance must be no more than $729,750 for a single-family home, the monthly mortgage payment (on a first mortgage) must be more than 31 percent of the borrower’s gross monthly income, and the homeowner must either be having trouble meeting mortgage payments or be at serious risk of falling behind. Don’t worry if you had a bankruptcy filing, this does not automatically disqualify a homeowner from participating in a loan modification program.
With this program, the participation of home mortgage lenders and home loan servicers is voluntary. However, the U.S. Treasury added incentives to mortgage loan servicers to modify loans to make them affordable. Part of the program includes the ability to reduce the mortgage rate to as low as 2 percent, and next, if needed, to extend the length of the loan to 40 years. If that isn’t enough to make the mortgage loan affordable, the home loan servicer may defer repayment on a portion of the mortgage loan, which may result in a large balloon payment that will be due at the end of the home loan term. Another option under the home loan modification program is be for the home loan servicer to forgive some of the loan principal, but technically there is no requirement for the home loan servicers to make the concession.
If the mortgage rate is modified under the program, the modified interest rate will remain in place for five years, and then it will increase gradually by up to one percent per year until it reaches a cap prescribed by the program.
The web site www.makinghomeaffordable.gov provides homeowners with detailed information about the programs. The Web site can help home loan borrowers determine if you may be eligible fro the program, but be aware that even with government pressure, only the home loan servicer of your loan can tell you if you qualify.
In general, you may qualify for a loan modification under the Making Home Affordable Modification Program (HAMP) if: your home is your primary residence; you owe less than $729,750 on your first mortgage; you received your mortgage before January 1, 2009; your monthly payment on your first mortgage (including principal, interest, taxes, insurance and homeowner’s association dues, if applicable) is more than 31 percent of your current gross income; and you can’t afford your mortgage payment because of a financial hardship, like a job loss or medical bills.
If you meet these qualifications you must contact the mortgage loan servicer. Once you start communication with the mortgage loan servicer you will need to provide some documentation for the mortgage servicer or mortgage lender that may include: information about the monthly gross (before tax) income of your household, including recent pay stubs, your most recent income tax return, information about your savings and other assets, your monthly mortgage statement, information about any second mortgage or home equity line of credit on your home, account balances and minimum monthly payments due on your credit cards, account balances and monthly payments on your other debts such as student loans or car loans and a completed Hardship Affidavit describing the circumstances responsible for the decrease in your income or the increase in your expenses.
The government has also sponsored a program called the Home Affordable Refinance. This part of the program is intended to help homeowners who have been unable to refinance into mortgages with a lower mortgage rate because their homes have decreased in value.
In general, to qualify for a mortgage refinancing under this program, homeowners must have an existing mortgage owned or guaranteed by Fannie Mae or Freddie Mac (government-sponsored enterprises that help ensure funds are available for home buyers at affordable interest rates), be current on their mortgage, and have a first mortgage that does not exceed 105 percent of the property’s current market value.
The interest rate and any refinancing fees will be set by each mortgage lender. It will be necessary to call your mortgage lender or home loan servicer to find out if your loan is eligible. For those home loan borrowers who already know that their mortgage loan is held or guaranteed by Fannie Mae or Freddie Mac, these organizations can be contacted directly at 1-800-7FANNIE or 1-800-FREDDIE to see if you qualify for this program.
The bottom line is that homeowners who currently have a hard time making their monthly mortgage payments should contact their mortgage loan lender or mortgage loan servicer or a reputable counseling agency as soon as possible to discuss options. Home loan borrowers who are in distress should also be very careful in dealing with organizations that encourage borrowers to cease making payments or walk away from their home while also promising to repair their credit.
Here is a partial list of mortgage foreclosure prevention resources:
Government Mortgage Modification Programs:
Making Home Affordable
www.MakingHomeAffordable.gov
www.FinancialStability.gov
Hope for Homeowners (H4H)
http://portal.HUD.gov
(800) CALL-FHA or (800) 225-5342
Foreclosure Assistance and Counseling:
U.S. Department of Housing and Urban Development (HUD)
www.HUD.gov
www.HUD.gov/offices/hsg/sfh/hcc/fc
(800) 569-4287
Homeownership Preservation Foundation (HopeNOW)
www.995hope.org
(888) 995-HOPE or (888) 995-4673
NeighborWorks America
www.FindaForeclosureCounselor.org
www.NW.org/network/home.asp
FDIC Foreclosure Prevention Website
www.FDIC.gov/foreclosureprevention
(877) ASK-FDIC or (877) 275-3342
Home Mortgages and the 4 C’s of Lending
All you need to do to make sure you have a better success rate in getting your home loan application approved at the terms you want is education and preparation regarding the process the lenders go through to approve your request. When evaluating your request for a mortgage loan, a mortgage lender will assess the application you have filled out with the supporting documents you have submitted. This process is referred to as underwriting the home loan. During this stage, the mortgage lender investigates the integrity of the data and evaluates the risks in order to qualify the applicant.
The home loan application is a summary of your assets, credit and income position at this particular point in time. It does not measure your character nor does it measure potential future changes such as potential employment changes or debts that maybe incurred or satisfied.
In order to evaluate your present position the mortgage lender will review your financial position, take inventory of your assets, income and credit profile. This procedure is accomplished by verifying your employment, verifying the funds you have on deposit with financial institutions, verifying the equity in the home by appraising the property, reviewing your debts outstanding and analyzing your credit history. This process has become highly automated with computer modeling and approvals but the underlying process is basically the same.
These criteria that are evaluated were once referred to as being the four C’s of lending or collateral, capacity, credit, and character.
Collateral - Collateral is a measure of the value, condition and marketability of the property. The mortgage lender will order an appraisal to determine the market value of your home. From here the loan to value or equity position in the property is determined. Loan to value is the ratio of loan amount to the appraised value. If the borrower is agreeing to down payment of $10,000.00 on a $200,000.00 home, the loan to value will 95%. This formula works on the refinance as well. If a borrower wishes to refinance an amount of $100,000.00 on a $200,000.00 home, the loan to value will be 50%. Loan to value (LTV) and the appraisal are the biggest factors in measuring collateral. Lower loan to values leave more equity in the property and is inherently less risky for the mortgage lender since it not only cushions the mortgage lenders risk but leaves more at stake for the borrower.
Capacity - Capacity is short for capacity to pay. In regards to mortgage qualifications the capacity to pay is measured by housing and debt ratios. The mortgage lender will ascertain the borrower’s gross monthly income first. The new housing payment on the mortgage requested is calculated as well as a summary of all contractual debt payments. Capacity is then measure by dividing the monthly mortgage payment by the gross monthly income to obtain the housing ratio and then dividing all contractual debt payments by the gross monthly income to get the total debt ratio. For example, if the total obligations of the borrower were $1,400 ($1,000 for housing expenses and $400 for other credit obligations), the housing ratio would be 25% ($1,000/$4,000 = 25%) and the debt ratio would be 35% ($1,400/$4,000 = 35%). Lower housing and debts imply greater capacity to pay a home loan back and hence lower risk.
Credit - Credit is evaluated by reviewing the credit report and the credit score. With the use of credit scoring, credit evaluation has become one of the simplest attributes of a loan request to measure. The credit is broken into three primary categories. Mortgage lenders will use credit scores, known as FICO scores, to determine the overall credit risk of the home loan borrower. From here a review of the public records such as, tax liens, bankruptcy filings, and judgments will be assessed. Finally, the individual accounts or trade lines in the credit report will be reviewed for delinquency, credit amounts, depth and length of time on accounts. Generally speaking, the higher the credit score the better the credit risk.
Character - Character is a qualitative measure of a borrower’s stability, integrity and honesty. Measuring character was mostly a measure of a borrower’s commitment to their credit and the new debt they intend to take on. Character may be classified as a measure of responsibilities with the loan commitment. Since mortgage lending and underwriting is almost entirely based on quantitative analysis, character is predominantly ignored. Since it is difficult to evaluate the risk and to even measure a borrowers character, in residential mortgage lending this gauge is rarely used.
Qualification for most mortgage loans and the mortgage rate a lender will charge depends on these three main factors. Understanding the basic guidelines and having knowledge of what a mortgage lender looks for in analyzing your loan request will make your mortgage application and homeownership experience and far smoother and less nerve racking experience.