FHA Mortgage Rates July 15, 2010
FHA mortgage rates along with conventional mortgage rates remain at historic lows. According to the most recent survey of FHA mortgage rates performed by Findlocalmortgagerates.com, the average 30 year fixed rate FHA home loan remained in neutral. The average FHA mortgage rate from the top five bank mortgage lenders fell by a slim margin but was countered by a small increase in the average pints charged.
The average rate on a 30 year fixed rate FHA home loan dropped down to a rate of 4.625%, down from the prior week’s average rate of 4.65%. The average points charged came in at 0.65 points, an increase from last week’s average points of .625.
FHA loans offer a number of benefits in today’s mortgage market. FHA loans offer fixed rates, lower down payments and more liberal underwriting guidelines compared to conforming mortgage loans. FHA mortgages have also become very competitively priced compared to conforming mortgage loans.
Potential mortgage loan borrowers may benefit firm the loan guidelines and current rate available on FHA Loans whether they are first time home buyers, stepping up to buy another home or seeking a mortgage refinance to lower their mortgage interest rate.
The top five bank mortgage lenders in the FHA mortgage rate survey performed by Findlocalmortgagerates.com include; Bank of America Home Loans, Wells Fargo Home Loans, US Bank, SunTrust Mortgage and HSBC Mortgage.
The results of the survey including the individual bank FHA mortgage rates, points and APR’s are listed below.
The Bank of America 30 year FHA mortgage rate is 4.625% with 1.25 points and an APR of 4.770%.
Wells Fargo FHA mortgage rate on a 30 year loan is 4.625% and 1.0 point and a 5.364% APR.
US Bank 30 year FHA mortgage is 4.750% with zero points and a 5.271% APR.
SunTrust FHA mortgage rate on a 30 year term is 4.375% with 1.375 points and a 4.936% APR.
HSBC Mortgage FHA mortgage rate is 4.750% with no points and an APR of 4.931%.
FHA mortgage rates and points listed are for owner occupied single family properties with a loan amount of $200,000.00. Mortgage loan programs, mortgage rates, terms and conditions are subject to change without notice. All home loans require bank approval, additional conditions and some restrictions may apply.
The bank FHA mortgage lenders listed offer a variety of mortgage loan options and mortgage loan programs. For additional information on the FHA mortgage rates and bank mortgage lenders listed:
Bank of America 800-586-9861
Wells Fargo Home Loans 877-937-9357
US Bank 888-831-7524
SunTrust Mortgage 800-634-7928
HSBC Mortgage 800-975-4722
NJ Mortgage Rates with Atlantic Stewardship Bank
Good service combined with competitive mortgage rates with a local bank in New Jersey is not always easy to come across. Of the over 1000 state banks in New Jersey, Atlantic Stewardship Bank is one that offers good service and very competitive rates on mortgages in the state.
Atlantic Stewardship Bank is a New Jersey based bank that operates its main office in Midland Park, New Jersey, and has an additional twelve bank branch offices in the area.
Atlantic Stewardship Bank provides commercial and retail banking services to small and medium sized business and individuals in Bergen, Morris, and Passaic counties of New Jersey.
Atlantic Stewardship Bank offers a wide range of mortgage loan products and mortgage rates in NJ for home purchases or an existing mortgage refinance of a primary residence as well as for second homes and investment properties.
Residential mortgage loan products available in New Jersey from Atlantic Stewardship Bank include: conventional mortgages, jumbo mortgages on both fixed and adjustable rate mortgages as well as first time homebuyer’s program.
A sample of the current mortgage rates in New Jersey and mortgage loans offered by Atlantic Stewardship Bank include:
A 30 year fixed rate conforming loan on a loan amount of $100,000 to $417,000 has a mortgage rate in New Jersey of 5.000% with $450.00 in points and fees and an APR of 5.194%.
A 15 year fixed rate conforming loan on a loan amount of $100,000 to $417,000 has a mortgage rate of 4.375% with $450.00 in points and fees and an APR of 4.870%.
The rate on a 30 year jumbo mortgage with a loan amount of $750,000 to $1,500,000 has a mortgage rate in New Jersey of 5.750% with $0.00 in points and fees and an APR of 5.812%.
The bank offers a variety of adjustable rate mortgages including a 5/1 ARM that has mortgage rate in NJ of 4.375% with no points and an APR of 3.691%.
This is a sample of current mortgage rates in NJ by Atlantic Stewardship Bank, other rates, options and terms are available on some of the listed home loan products.
The NJ mortgage rates and annual percentage rates (APR) listed are based on a loan amount of $100,000 with a 20% or larger down payment on a single family owner occupied home with excellent credit. Mortgage rates are current as of this publication, rates are not guaranteed, all mortgage rates and mortgage loans in NJ offered by Atlantic Stewardship Bank are subject to change and bank approval.
For more information on mortgage programs and current mortgage rates offered by the bank call the Atlantic Stewardship Bank mortgage department for details at 1-877-844-2265.
Mortgage Rates in Texas with Amegy Mortgage
Finding mortgage rates in Texas is not difficult with the plethora of mortgage lenders and banks offering mortgage loans in the Lone Star state. Among the long list of mortgage lenders is Amegy Mortgage headquartered in The Woodlands, Texas.
Amegy Mortgage is a wholly owned subsidiary of Amegy Bank of Texas. This mortgage lender offers a wide assortment of different loan programs. Amegy Mortgage services include the origination and servicing of commercial and multifamily real estate loans, single family residential loans, and single family construction loans. The mortgage lender offers single family home loan products with competitive mortgage rates throughout Texas.
The mortgage lender has an online pre-qualification process for those prospective borrowers not sure how much of home they can afford or if they qualify for a mortgage refinance.
The main loan products offered by Amegy Mortgage in Texas are fixed rate loans. Fixed rate mortgage loans are one of the most popular loan options and are especially in demand when interest rates are low. Fixed rate mortgages result in a monthly mortgage payment of principal and interest that does not change over the life of the loan.
A 30 year fixed rate loan provides a low monthly payment without the high interest costs of longer term home loans. The 15 year fixed rate loan has a higher monthly mortgage payment but generally offers a slightly lower interest rate and substantial interest savings over the life of the loan.
A sample of the current mortgage rates available in Texas from Amegy Mortgage includes:
A 30 year fixed rate mortgage rate in Texas is 4.875% with no points and an APR of 5.002%.
A 15 year fixed rate mortgage rate is 4.250% with no points and an APR of 4.467%.
These sample Texas mortgage rates are based a 20% down payment for a single family home with a borrower that has excellent credit. Mortgage rates are subject to change and additional conditions will apply to obtain these rates. Texas mortgage interest rates and fees will be based on the borrower’s credit history, down payment, income, and other factors and may be different than the mortgage rates listed above.
The interest rates, annual percentage rates (APRs) and points shown are subject to change without notice. For additional mortgage programs and Texas mortgage rates, contact an Amegy Mortgage representative at: 281-297-7800 or 877-562-6662.
US Bank Home Mortgage Arkansas Heber Springs
US Bank home mortgage loan officer contact for Mountain Home, Arkansas. US Bank’s mortgage division can assist with a variety of mortgage loan needs through the local loan officer, on the bank website or via the home mortgage toll free number at 888-831-7524.
U.S. Bank National Association provides various banking and financial services in the United States. U.S. Bank home mortgage offers a range of mortgage loans and mortgage services throughout the United States.
In addition to traditional home loan purchases, jumbo home loans and FHA loans, US Bank offers a number of mortgage refinance options such as fixed rate and adjustable rate mortgage refinances, streamline refinancing for current US Bank home mortgage customers and FHA streamline refinance loans.
Brandon Clemons
Mortgage Sales Manager
U.S. Bank Home Mortgage
821 West Main Street
Heber Springs, AR 72543
Office: 501-362-7346
Cell: 501-831-5034
Fax: 501-362-2132
Brandon.clemons@usbank.com
Along with the information that is available from the local loan officer, there is a abundance of information available on the bank website to help consumers make informed choices about the best options regarding home loans mortgage services.
For consumers in the market for a new home or seeking to refinance, you can learn about every step in the mortgage process, from pre-qualifying to closing the mortgage loan from the bank website, the local loan officer or the toll free number for US Bank home mortgage at 888-831-7524.
Mortgage Loans and Ownership of Real Property
When a potential home owner obtains a new mortgage loan, how the ownership of the home will be held at the time of the purchase or the time of a mortgage refinance is important for the home owner of the property as well as the mortgage lender. Mortgage lenders have to make sure the form of ownership is an acceptable legal method to hold title and that the titled owners match the requirements of the home loan.
It is necessary for the mortgage lender to understand the different forms of ownership. The different forms of ownership determines how a home loan borrower holds title and dramatically influences or even prohibits the property use as security for mortgage loan.
Real property can be owned by one person or by a group of two or more people. Ownership by a single person or entity is referred to as sole ownership or ownership in severalty. Severalty means to sever the property or to own it separately from anyone else. Ownership by two or more people or entities is referred to as concurrent ownership. Mortgage lenders will provide home loans in either of these cases. Sole ownership is easier to process and leaves little room for error but may not be appropriate for all borrowers.
The major types of concurrent ownership are: tenancy in common, joint tenancy, tenancy by the entirety and community property.
Tenancy in common and joint tenancy is the two most common types of concurrent ownership. The major difference between these two forms of ownership is the treatment of a co owner share at the time of his or her death. In a tenancy in common, each owner’s share of the property will be distributed to his or her heirs upon their death. In a joint tenancy, the surviving co owners have the right of survivorship. The right of survivorship means that when the co owner dies, the surviving co owners take over his or her share and the share dos not enter the deceased owner’s estate or pass to his or her heirs.
Tenancy in common, the simplest form of concurrent ownership, exists when two or more persons each have an undivided interest in the whole property without a right of survivorship. Each owner may hold title to equal or unequal shares, of the property while all owners share equal use and access to the entire property. Upon the death of an owner, the deceased owner’s interest passes to his or her heirs or beneficiaries and not to the surviving owners.
Mortgage lenders prefer to have all owners agree that a property can be pledged as security. In some instances, however, mortgage lenders may accept the pledge of an interest held in a property as a tenant in common, since the title held by each owner is independent of other owners.
Joint Tenancy
Joint tenancy differs significantly from tenancy in common. The major difference is that each owner of the joint tenancy has the right of survivorship. This means that the joint tenancy owner gives up the right to determine who will get the property at the time of his or her death. Each time a joint owner dies the remaining joint owners continue own the entire property until there is only one owner left. The last surviving owner becomes the owner in severalty.
Laws have been established in a way to protect individuals from inadvertently becoming involved in a joint ownership and unknowingly losing their right to include the property in their estate at the time of their death. To create a joint tenancy, the law requires four unities:
Possession – Equal rights of possession for each owner.
Interest – Equal interests for each owner.
Title – Each owner must acquire his interests from the same conveying instrument.
Time – Each owner must acquire his interest at the same time.
Mortgage lenders accept the use of property held in joint tenancy as security so long as all the property owners pledge their interests; however, mortgage lenders rarely accept the pledge of a single owner’s share of a property held in joint tenancy since the ownership actually terminates upon the death of that owner.
Tenancy by the Entirety
Tenancy by entirety is a type of concurrent ownership reserved for married couples. The husband and wife are considered to be a single legal entity that owns the entire estate. Tenants by the entirety have the right of survivorship. The special feature of a tenancy by the entirety is that it protects the property from foreclosure by the creditors of either spouse individually. The property can only be encumbered by the joint action of both spouses. In other words, no spouse may singularly acquire, dispose of, draw equity from, or transfer the property. The agreement of both spouses is needed for any action that could, or does, affect the ownership of the property. If a divorce were to occur, both spouses would automatically become tenants in common.
Community Property
Community property is another type of concurrent ownership that is reserved for married couples. In fact, some states compel this form of ownership upon a husband and wife. In states that do not compel community property laws, there are two legal classes of property for married couples: separate property and community property.
Separate property consists of all property not acquired by the efforts of either spouse, including gifts and inheritances received during the marriage and properties owned before the marriage which have been kept separate.
Community property, on the other hand, consists of all property earned through the efforts of either spouse during the marriage. The property is considered to be owned by both of them as equal partners. Community property is most similar to tenancy in common. Each spouse owns his or car her half of the property and each spouse’s interest will be left to his or her heirs at the time of death.
It is always best to consult an attorney before deciding how the title to real property should be held in order to properly protect your interests as long as the form of ownerships complies with the needs of the mortgage lender in order for the mortgage lender to perfect the mortgage on the home.
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.
Mortgages from the Dark Side, the Rebellion has Started
The trouble in the mortgage lending industry was first revealed to me shortly after accepting my first job in finance. Upon graduating college with a finance degree I took the first finance job available. Since I had bills to pay and the job market was weak I took the first employment opportunity offered. The job was an assistant finance manager at a local finance company not far from my apartment. The company was engaged primarily in the origination and collection of personal loans and mortgages, mostly second mortgage or home equity loans. This finance company was a division of what is now the eight largest bank in the nation. Not the best job but far from the bottom.
Shortly after the training concluded, I learned that there were three activities you took part in at the finance company. You sold the consumer loans, you closed loans and you collected the loans or the payment on the loans. We ate lunch and used the facilities too, but other than that we sold loans, we closed on the loans and we collected the loans. The reason we spent so much time collecting loans was that the delinquency rate at finance companies is fairly high and it is necessary to stay on top of the customer in order to make sure the client makes timely payments.
Nothing overtly wrong with these lending activities. Except, there were at least two glaring immoral deeds that we committed. One was that we spent a third of our time on the phone selling loans. Let me shed some more light on what I did. I was on the phone selling loans to your neighbors constantly. These sales calls had a strong pitch and were performed with unrelenting tenacity by myself and peers in the industry. Sure it was a fairly high interest rate since this was a consumer finance company and we did not offer the most competitive interest rates and your neighbor really didn’t need to be bogged down with more debt, but I was selling money. I sold a consumer loan, either a personal loan or second mortgage to help your neighbor buy a new car, go on a family vacation or maybe even consolidate debt.
It isn’t necessarily cocky to tell you your neighbor didn’t stand a chance. I sold the low monthly payment, hell I couldn’t sell the outrageous interest rates, I sold the neighbor how he can use this money for the vacation his wife and kids deserved, I sold an escape, a low monthly payment escape that your neighbor was entitled to. He didn’t stand a chance; he couldn’t say no. He took the loan. I wasn’t going to let home say no. Sometimes that took 10-15 phone calls until they said yes.
Once I closed the loan, which is lending speak for having the customers execute and sign the appropriate loan documents and disclosures, and some timely monthly payments were made, I picked up the phone and sold your neighbor more money. I sold the benefits of refinancing and taking out more cash on top of the existing loan so he can finish the patio and buy the new grill and eat some tasty USDA prime rib eyes. He went for it. Hey, he didn’t stand a chance, I was good at it, and we were selling money.
Sales rule number one in most businesses is that the present customers and former customers are your best candidates for additional sales, in our case that would be additional loans or larger loans to the existing accounts.
After a few years or even one or two years, I may have refinanced this customer three times and elevated his debt load significantly. Eventually, this loan and the other debts your neighbor has are killing him. He can’t make all the monthly payments. His wife is now pissed given that she can’t use her credit card at the grocery store since the credit card limit has been reduced because they can no longer make their payments on time. And after numerous sleepless nights, the neighbor finally decides to go for a fresh start and files bankruptcy.
This is a situation I witnessed every year in consumer finance and mortgage origination’s, equity extraction with first mortgages and home equity loans as well as consumers loans and excessive credit card use was letting consumers live well beyond their means. These individuals and families were making $75,000.00 ( as an example ) and when I would pull their credit report one year later they had an additional $15,000.00 in debt. That doesn’t sound crazy at first except you have to consider that these are mature workers who are not likely to be looking at large pay raises in the foreseeable future. So, Mr. & Mrs. Jones are making $75,000.00 and I add their new debt and it appears they are spending $90,000.00.
The easiest solution for them was to incur more debt with a home equity loan or mortgage refinance and keep the party going, never paying attention to the fact that they spend more than they make almost every single month of the year. And this was common.
Eventually, the music stops and these people can no longer borrow more money or consolidate what they have to a lower payment and it times to pay the piper. Their house of cards built on easy money comes to end with bankruptcy, foreclosure and other unpleasant outcomes. Some customers run to file bankruptcy to eliminate these consumer debts or create a new manageable payment plan, but most of my customers agonize for months over the thought of bankruptcy. It tears their family apart and it weighs them down terribly.
The company I work for has a position on bankruptcy that is similar to most mortgage lenders, banks and credit card companies which is that bankruptcy is evil and should be restricted. At the Dark Side Lending Company, we even attended the bankruptcy hearings. This is a very uncommon practice. Chase Bank, Chrysler Financial, Countrywide, none of these creditors would normally attend a personal bankruptcy hearing. We do, basically to shame the customer into making payments or reaffirming the debt with us.
There I am, the man who may be the most responsible for driving this family into bankruptcy because of my sales skills and the incredible marketing support of Dark Side Lending. Boy was I ashamed. I see this family in bankruptcy court and my heart falls into stomach. I can recall all the sales calls I made to them over the past couple of years. Not a few sales calls, but sales calls every other month, every year. Telling them how great it would be to take another loan.
I wake the next morning and do this all over again. Over sell the loans, close on the new loans and collect the payments one way or another. It got to the point where I took a shower before I went to work and I took a shower when I get home to clean the filth of the industry off of me. A practice I repeated at various lending institutions I worked at for the next twenty years.
These families, your neighbors, which are struggling with payments for a whole host of reasons one of which is because I sold home loans they could not afford. Sure they had responsibility. But, I can not emphasize enough, I am good at my job. I can sell loans. You don’t stand a chance, you try to say no but I’ll get you eventually. And it wasn’t just me. Lenders whether they are mortgage lenders, banks or credit card companies across the nation market and advertise in the mail, on the phone, on the Internet on prime time TV and late night TV. You can’t escape the marketing muscle of the Dark Side of Lending.
One day when I was watching the Bears play with my dad and we had a discussion on consumer debts and bankruptcy. At this time, one of the bankruptcy reforms bills was working it way through congress. During this discourse I told him that bankruptcy statues exist because of me. After he laughed for quite some time, he asked for a little elucidation on that statement. I explained that consumers file bankruptcy because of sales men, or finance managers like me who shove these loans down the consumers’ throat and bankruptcy is a necessary evil to even the field against the marketing muscle of the Dark Side of Lending. I assure you the force on the Dark Side is strong.
Why do we have bankruptcy reform to make it harder for the consumer to escape the likes of me, it’s simple. The banks fill the congressional coffers with cash. Oh yeah, the other side of the story is that somehow congress thought bankruptcy reform was good for the nation and the American people. Wow. How is that possible?
Ever since that time, if a friend or a friend of friend asks me about filing bankruptcy and the impact on their credit, etc…my reply is always the same, file and file often. Stick it to the lenders. Run the credit card up and file bankruptcy. It’s your duty as a citizen to make up for all the misdeeds performed by consumer finance companies, mortgage lenders and credit card companies by wiping out the debt and handing a loss to the lenders and bankers.
This was a start of long career working with the Dark Side of Lending. This was just the beginning.
Getting a Mortgage for Home Improvements
If you are sitting in your home pondering a major expansion in the kitchen, finishing the basement, or completing key repairs of the home, a new mortgage is one potential source of funding for such a project. Of course, there are many sources of funding for these undertakings. Cash on hand, credit cards, or even personal loans can be used to help pay for work on your property.
The key advantage of mortgage funds is that the rate you pay on a mortgage is almost always the lowest rate for consumer borrowing. In addition, the interest paid on mortgage debt is generally tax deductible (seek the advice of your financial planner or tax advisor). Furthermore, if a borrower is to take a mortgage to extract equity or cash out of the property, one of the best uses for this cash is improvements that help increase or secure the value of that property.
The three main choices for getting cash out of your property for home improvements are: a cash out refinance, a second mortgage ( including a home equity loan and a home equity line of credit ) and specialty mortgages such as the FHA sponsored 203K loan and FNMA and FHLMC home loans that are periodically introduced to assist with home improvement financing. Since the 203K loans are a seldom used product and specialty loans come in and out of favor, these home loan types will not be covered.
Before discussing the various home loan options it is important how a mortgage lender determines the equity in your home. The equity in your home is the difference between the value or price of the house and the amount of mortgage loans you owe against it. A house that is valued at $200,000.00 with an existing first mortgage balance of $145,000.00 has $55,000.00 in available equity. Though this may seem like a fair amount of equity, a mortgage lender will provide a new home loan for only a percentage of the homes total value not all of the value. If a homeowner in this scenario were to obtain a cash out refinance for 85% loan to value, the amount of money obtained would be approximately $25,000.00. This is calculated by taking 85% of the home’s value or $170,000.00 and then subtracting the existing first mortgage balance to arrive at a lendable equity figure of $25,000.00.
Mortgage refinances are one of the most common methods for obtaining cash for home improvements. Refinance transactions are often 50% or more of all the loans originated across the nation every week with a great deal of variation depending on the level of mortgage rates. A measurable percentage of these refinance transactions are to extract cash from the property. This cash is used for an assortment of purposes; most mortgage lenders will tell you almost legal purpose is acceptable for a cash out refinance.
Fannie Mae and Freddie Mac do not establish rules on the home improvements a borrower may or may not finance with a new mortgage loan. Therefore an existing homeowner can obtain a cash out refinance to finish the basement, do repairs or add a new room to the structure. There are no limitations on the minimum amount or maximum amount of financing that needs to be spent on repairs. If a borrower obtains a cash out refinance to pay for home improvements the main consideration of the mortgage lender is the condition the property is in as well as what the funds will be used for.
Standard conventional home loans are made based on the existing condition of the property. This approach results in a standard new home loan qualifying based on the as is value of the property not the as-completed value. Deferred maintenance is the term mortgage lenders use to describe a property that is in disrepair. Minor deferred maintenance does not often raise any red flags. Significant deferred maintenance will usually have to be addressed by the appraiser when they inspect your property. The appraiser will generally attribute a dollar value to the amount of deferred maintenance.
If a property is presently in disrepair the mortgage lender will not a grant a conventional loan. If the property is going to have a significant structural change the mortgage lender may also be concerned about approving the home loan. Questions may arise as to who is performing the work as well as how and when it will be completed. Oddly, even though the mortgage lender based the decision on the home loan on the existing property condition and value if a new mortgage loan is going to impact the lenders collateral significantly, they will want to make sure precautions are taken such as a licensed contractor is performing the work. The improvements should be performed by contractors who are licensed, registered, or certified or have the highest level of certification required.
Other than the limitations on the loan to value for a cash out refinance the structural changes that may be performed, a mortgage refinance is straight forward and the guidelines are the same as they are for a purchase regarding credit, income and debt ratios.
Home equity loans and second mortgages are also an option and are considered interchangeable terms. These loans are mortgages you get after you already have a mortgage loan on your property. There two distinct different types of home equity loans or second mortgages, the home equity line of credit and the home equity loan.
The home equity loan is generally a fixed rate loan that taken out for a predetermined amount and is disbursed to you at one time. The home equity line of credit is also a predetermined sum of money but instead of getting the money all at once you are given a checkbook to access the available balance of the loan. Most all home equity lines of credit are based on a variable or adjustable rate.
These loans will have similar qualifying standards as first mortgages. The borrower’s income, debt ratios, credit and the amount of the loan relative to the property value or loan to value will be evaluated. When measuring the loan to value for a home equity loan the mortgage lender will add the first mortgage amount plus the propose second mortgage amount and divide that figure by the home’s value to come with a ratio called the CLTV or combined loan to value. If a homeowner has a home valued at $200,000.00 with a first mortgage of $125,000 and requests a home equity loan of $30,000.00 the original loan to value is 63% and the combined loan to value will add the home equity loan and would be 78%.
One of the main disadvantages of home equity loan is the mortgage rate on these home loan products is higher than the mortgage rates found on first mortgages. A second mortgage home loan is considered to be a more risky loan for a mortgage lender or bank. The mortgage lender charges a higher mortgage rate over a home loan that is in first position.
Aside from acquiring the loan you may need, make sure you pay attention to the increased expenses of home remodeling. Get at least three quotes and stay within a budget. Taking cash out of your property for home improvements is generally one of the best uses of the equity, often the cost of home improvements do increase the value of your home on a dollar for dollar basis.
There is an ample supply of mortgage lenders that will offer home improvement loans available. It is up to the homeowner to decide which one is the most suitable for their needs and budget. The first step should be to find out as much as possible about potential mortgage refinancing, home equity loans and the mortgage lenders. Utilize the mortgage calculators to help determine debt ratios, loan to values and monthly mortgage payments. Closely consider important factors such as mortgage rates, and closing costs. Shop and compare home loans carefully before making a long term commitment.
Q. If I am concerned about getting approved for a mortgage loan, what should I do?
A. Of course, the first answer is to do your research. The number one way to help the mortgage loan approval process is to be prepared and understand how the mortgage loan process unfolds.
This may sound too simplified, but with the creation of credit scores and automated underwriting, the home loan approval process is based on the analysis of a series of numbers. Numbers such as, the amount of the down payment, the loan to value ratio, the borrower’s credit scores, debt to income ratios and more are all quantified and evaluated to come up with home loan approval or denial.
What is not included is subjective analysis. Number based assessments help to eliminate discrimination since color and race is not part of the input process. But, numbers can also hurt those borrowers that fell on tough times and are now putting their financial house in order. The mortgage loan approval and application is based on your debts, income, assets and credit at a point in time. Another words, you are approved or denied for a home loan based on your credit and income and other figures today, not where you will be tomorrow.
Mortgage lenders use an automated underwriting program, usually the one’s established by either FNMA of FHLMC, and input data about your current financial situation including your credit, income, debts and assets into these systems. Taking all the necessary information, the mortgage lender determines mortgage affordability. The key to any one individuals loan approval is be prepared and have the prettiest set of numbers for the mortgage lender to input in the automated underwriting system.
One of the most important numbers input or evaluated by the automated underwriting program is the borrower’s credit score. The credit score is one of the primary indicators of your ability to repay the mortgage loan, so it’s a good idea to know it before you apply with a mortgage lender. For the most part, if your score is above 760 you can expect to get the best mortgage rate a mortgage lender has to offer; if your score is below 660 you may have trouble getting approved until you improve your credit and credit score. You can obtain a free copy of your credit report annually at www.annualcreditreport.com.
Debt ratios are another key number quantified by the mortgage lender. Debt ratios are simply a measure of affordability. Debt ratios are measurements of affordability expressed as the percent of a borrowers income used to pay for debt. Mortgage lenders want to make sure a borrower’s monthly mortgage payment does not exceed 28 percent of their income before taxes. The mortgage lender will also look to see that total monthly debt payments including the mortgage payment, car payments and credit cards doesn’t exceed 36 percent of total gross monthly income. These two debt ratios are referred to as the front end and back end ratios in the mortgage industry.
Do the math calculations on your own with one of the mortgage calculators to see how your debt ratios stack up against these guidelines. The web site, www.selectcalculators.com is great site for mortgage calculators. If your proposed housing expenses or monthly mortgage payment is greater than 28% and total debt payments, car loan, student loans and other loans, is greater than 36 percent of your gross income, you may have trouble qualifying for new home loan. In tight situations, you may want to see is if there is a way to reduce some of those monthly debt payments before you apply for a home loan.
The down payment, assets and loan to value are all related measurements. The loan to value measure the loan amount in relation to the value of the home. An 80% loan to value mortgage equates to a home loan that 80% of the home’s value. For a purchase transaction, which would mean the borrower is putting 20% down or a 20% down payment.
The assets the mortgage lender is evaluating are the funds held by the borrower needed to cover that down payment, closing costs and reserves. The reserves are a measure of funds left over after paying for down payment and closing costs as a cushion or safety net. At least two months reserves will be mandatory. This is defined as two months worth of monthly mortgage payments. More reserves will make the home loan approval easier. Once again, the mortgage calculator and a look at your own finances can tell you where your loan to value will be as well as the number of months of monthly mortgage payments you have in reserve.
All of these numbers, debt ratios, credit scores and loan to value are evaluated by the mortgage lender via the automated underwriting program. The better any of the numbers are the easier the home loan approval process will be. Really high credit scores will be approved with less paperwork than lower scores. Larger down payments are processed faster. Low debt ratios will facilitate the approval process as well.
In a perfect world you want to save for a large down payment, improve your credit score and lower your debt-to-income ratio. But, in light of that, you may simply want to know where your weak spots are regarding these factors and see what you can do to improve on them before you apply for new mortgage loan. This is a good rule whether you are applying for a purchase or a mortgage refinance.