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Even More Homebuyer Mortgage Tips To Make It Happen

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purchase-homeworkMore Home Loan Hacks For First Time Homebuyers

Homebuyers should shop around for mortgage bargains; not all terms and conditions are the same, but chances are, there’s a mortgage out there that’s right for you. Not all interest rates, closing costs, and terms are the same.

Banks and the other financial institutions that underwrite home loans use diverse business models to decide which investments to make; there is probably a mortgage out there that is just right for you.

Reducing The Costs Of Closing

One unique feature of the U.S. home lending market is the ability for borrowers to pay an interest percentage upfront in return for lower interest payments on the balance of the loan, these are points.

The custom is to pay points to get the lowest rate on monthly payments as the default offer from the lender. If you ask, you can often reduce the points or sometimes pay extra every month to cash out points up front.

Seller Financing

Sometimes people who are selling a home don’t need the money immediately; they would rather have the funds earning interest. The return on a second mortgage will be higher than any savings account or bank CDs.

An example would be where you agree to purchase a home, and you qualify for a conventional loan, but you don’t have the cash for the deposit of twenty percent down. The seller might agree to take back a note for the deposit as a junior loan secured by the property.

Your first lender would have to accept this as a deposit, but banks do agree to such things. Typically, sellers will amortize a junior loan over thirty years but require a balloon payment for the balance in five years, which means smaller payments of principal and an interest rate higher than your first mortgage, and you will have to refinance or sell within the five year period. However, this might get you into a home now and then you can take advantage of rising home values.

FHA And VA For Low Down Payments

For homebuyers of modest means or veterans of the United States military or Coast Guard, there is help with the deposit. Several different government-backed home loan programs make it possible to purchase homes for low interest, low down payments, and low closing costs.

Grants For Buyers

Across the country, there are grants for homebuyers and supplemental funding. Such programs are often created to address issues that communities deem worthy. These programs are diverse sources of grants and subsidized loans that might help based on your situation or the condition of the property. Your agent will be happy to help you find out what is available in the area in which you want to settle.

The Ultimate Homebuyers Hack

As they say, “If there’s a will, there’s a way,” this works for homebuyers as much as any other situation. If you take the time, you will find that there are always better options than the one that the bank offers you initially. Mortgages and buying real estate are complicated issues, talk to your agent about purchasing the right new home for you.

Back To Basics – What Goes Into A Mortgage Anyway?

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Home Mortgage BasicsOwning your home quite and accomplishment and one to which many people aspire. Most consumers have to do this by taking out a mortgage against the home they purchase. So let’s go back to basics to review what it is that makes a mortgage anyway.

A Mortgage Contract Is A Matter Of Public Record

A mortgage is how most consumers acquire the cash to purchase homes. You secure the mortgage with the property you purchase, you usually repay a combination of interest and principal until the balance is zero. After that, you own the home outright or you can refinance and take the wealth you have accrued. As the borrower, you enter a contract with a bank or finance company that lends you the money. The lender has a right to the title of the home if you do not make your scheduled repayments.

Every state has laws and regulations governing how to deal with this kind of contract. Technically, your home loan is either a mortgage or a non-judicial trust deed certificate with a simplified path to foreclosure. Whether you sign a mortgage or a trust deed depends on your state. The documents for the title to your home and your mortgage are both included in your state’s public record.

These Are The Mortgage Basics

Home Loan Approval – Your lender advances the principal of the loan based on an assessment of your credit reports and the verified value and condition of the property. Your credit history and other factors in the policies of the bank determine the interest rate that you pay. Conventional home loans are either fifteen or thirty-year terms of monthly payments.

Your Equity – The value of the property that is greater than the mortgage is your share. Equity is your deposit and the principal that you pay during the term.

The Deposit – Lenders want at least twenty percent as a deposit or insurance and third party guarantees. Government programs guarantee loans with small deposits; you have to pay an insurance premium on low deposit loans

Escrow and Closing – There will be fees for loan origination and third-party services that confirm the quality of that you either pay when you close on the home or which will add to the balance of your loan. You will purchase title insurance against any claims by previous owners or their heirs.

How it works – The funds go from the lender to the seller via the escrow or title company along with your deposit contribution. You have set payments that pay interest on the balance you owe and a small amount to repaying the principal of

When you start paying a new mortgage the interest takes most of the payment, only a small part contributes to your repayment of principal. As time goes by, your principal accumulates as equity; the interest becomes a smaller fraction, and you repay more principal each month. Toward the end of the term, you are paying mostly principal, and the balance diminishes until there is no more interest to pay and you are done.

When Is A Reverse Mortgage The Right Choice For You?

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Reverse Mortgage BasicsWhen is a reverse mortgage right for you? The short answer is that reverse mortgages are for seniors. However, you deserve a better answer, and that will take a little explaining. First, there are two categories: FHA Home equity conversion mortgage (HECM) and private company loans.

Since a reverse mortgage pays you instead of the other way around, you need to have sufficient equity in your home to qualify. Additionally, like conventional home lending, reverse mortgages require that the property meets structural requirements.

The HECM Lump Sum Or Annuity

The Federal Housing Administration (FHA) provides the backing for HECM reverse mortgages and reverse annuities and place rules that are much like those of FHA repayment loan requirements. Homeowners over the age of 62 are eligible for HECMs and HUD restrictions apply for property values; these also have the lowest rates of interest for balances. Borrowers don’t have to meet any income threshold.

When is an HECM the right choice? If you need income or access to tax-free funds that don’t compel you to meet income requirements. The payout comes either as a lump sum or an annuity, similar to a home equity line of credit, but without the need to make payments as long as you or your spouse remains in the home.

Private And Jumbo Reverse Mortgages

Privately originated reverse mortgages don’t require that homeowners meet the HUD qualifications for lending. When your home value is greater than the HUD loan limit, you may wish to access oversized “Jumbo” loans. The terms can be more flexible but are often more expensive than an HECM in practice.

When is a private reverse mortgage right? If you have a property that is above the limits for HECMs, you might choose this option, although the interest rate will likely be higher. It may be suitable if you need to pay for long-term care or life insurance.

Use Care And Foresight In Choosing A Reverse Mortgage

There are some risks associated with reverse mortgages, serious hazards that could result in you losing your home right when you are at your most vulnerable. Ask yourself a few hard questions before you commit to a reverse mortgage. Can you find a cheaper alternative? How much will it cost to arrange a reverse mortgage? How will you pay insurance and property taxes? What are your long-term plans?

If you have savings or other investments, they may provide a less expensive alternative. If you have income producing assets such as municipal bonds, you will earn interest and pass them on to future generations as part of your legacy. Reverse mortgages give your assets to Wall Street ultimately.

As with any financial option, there are costs involved in setting them up. The usual title search, appraisal, and other miscellaneous third-party charges apply. There will be an initial mortgage insurance premium and origination fees.

There will be monthly fees that add to the outstanding balance for servicing and insurance. Property taxes are also a consideration and other factors. For example, your ability to maintain the property on a fixed income; if you cannot manage the upkeep, you may risk foreclosure.

If you need funds and can meet the general requirements for a reverse mortgage, make sure to investigate carefully whether it really is the best option available to you. However, if it is the right financing for you, it could be an excellent option that keeps your home a happy one and gives you peace of mind for many years to come.

 

 

Real Estate Disclosures – When Notification Delivers Protection

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Home Purchase ProcessBecause Sellers Should Tell Buyers Certain Things

Sellers have a growing list of disclosures they are required to make to buyers before selling their properties now. However, caveat emptor is still the word of the day when it comes to real estate. Sellers may attempt to cover up defects in a property or misdirect buyers with attention-grabbing furnishings.

Over time, states have created regulations to force sellers to confess a variety of sins, because of the efforts of victims, activists and well-connected buyers who become righteously annoyed. State governments, counties, and cities write the regulations and prescribe the forms of disclosure to prevent acts of deception. Where states force sellers to document defects buyers can be more confident of not having ugly surprises at some later date.

Paperwork By Order Of Your State

Disclosure statements refer to physical property defects or dangers. Alternatively, they can be notifications of some issue within the community or natural hazards. Disclosures can cover anything from criminal activity to radon gas or pollution. Each state has a list of disclosure requirements that accumulated over decades.

Your real estate professional will have all of the information you need as to what applies in your region. State, county and city rules and regulations prescribe the content of disclosures, but agents have boilerplate forms, which come from legal stationers. Like many legal and real estate forms, the structure has to be precise and complete. The National Association of Realtors provides many of the standard documents for the industry, including for disclosures.

Standardized forms reduce the cost and ensure that the parties can comply with the rules correctly. These forms have the relevant standard statements and tick boxes where the seller makes the appropriate indication. Sellers also have requirements to disclose where neighbors, agents and prior owners have informed them about defects that may be present.

Disclosures Differ From Independent Inspections

Third party inspections are not the same as disclosures. As a buyer, you are responsible to get all of the necessary inspections done on your own initiative. If you apply for a mortgage from a bank or other lender, the institution will make it a requirement to show that you have had the inspections by a suitable professional.

Depending on where you are shopping for a home, the seller will present the disclosures, up front or when they have received an offer. It helps the seller to get disclosures done as soon as possible. If buyers are likely to back out, as they have the right to do, it is best to get it over with before the seller has invested too much time and effort.

Extra Effort That Protects Everyone

Disclosure requirements do modify the free market dynamics to some degree. Failure to disclose defects or issues of some king might easily result in litigation or, in extreme cases, prosecution. So sellers rely on their agents for advice and take an abundance of caution to avoid penalties.

Documenting all disclosures on the appropriate forms also protects the seller, they may have to demonstrate their compliance after the fact for any reason. Buyers have to sign off on disclosures too as part of the paperwork that goes with the purchase. So, disclosure statements show for the record that the seller gave proper notification and that protects everyone. Sometimes a bit of additional work during the process makes the outcome better for all involved.

Vacation Home Or Rental Finance – Choose The Right Loan

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Real Estate Investment BasicsDid You Want A Vacation Home Or An Investment?

If you are in the fortunate position of considering the purchase of property while retaining your home you are doing well. Do you want a vacation home you can enjoy exclusively? Or do you want an investment you can drop in on occasionally? The goal of your expanded real estate holdings will determine which form of vacation home financing is right for you.

Either you want a vacation home, an investment property, or a bit of both. The difference is in how you finance the purchase. With the cash, you will be doubly blessed; the home will be free of lender-imposed restrictions, so you can do whatever you want. A cash buyer has the power to negotiate the best deal from sellers.

However, if you need to leverage your cash equity with a mortgage, you have three options. You will choose from either a second home loan, non-owner occupied loan, or, with a twist, a conventional residential mortgage.

Vacation Home Finance With Second Home Loans

When you purchase a second home, you can finance at the same interest rate as your primary residence. You will have to provide the equity for at least twenty-percent down payment for a loan; there is no option for private mortgage insurance.

You will have to state your full monthly housing cost plus the cost of the second home to qualify for a second home loan. Only you, your friends, and family can occupy this home. Second home loans are restrictive; the note attached to such a loan will have a rider addendum that dictates that you must not rent out the home.

Buying With Finance Like An Investor

Loans for non-owner occupied properties or rental property loans will carry an interest rate that might be more than 0.375 percent higher. Lenders will have varying policies about using rental income in qualifying for the loan.

The advantage of non-owner occupied loans is that you can both rent out the property and use it yourself. Such flexibility means that you can create a rental lease agreement and use the income to cover your costs.

Backing In With A Residential Mortgage

There is a third option. You can finance a second home with a conventional home loan and live in it for one year. If you have been in your first home for more than a year, rent out that home and move into the new one. After one year, you could join an online marketplace like Airbnb to earn income from short-term vacation rentals and use it yourself between bookings.

Funding your vacation home with a second home loan may seem like a way to save some cash by just not telling your lender, but it puts the property at risk along with your credit reputation. Banks are likely to call in your second home loan immediately if they find out that you have tenants. A demand for payment-in-full could come at an awkward time and result in foreclosure if you cannot quickly find the cash to pay it off.

Digging Up The Hidden Costs Before They Trip You Up

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Home Purchase BasicsBuying a home usually comes with hidden costs, bills that pop up at some point in the process. While these may be unexpected if you are unprepared, a little research before you buy can save you hassle later on. Even once you have closed, picked up your keys and settled in, some expenses can appear like magic.

However, you are not the first person or a person to buy a home, whatever your unexpected cost, someone else has probably had to deal with it before. This simple fact means the information you need is out there somewhere, and this post will tell you about where to find it.

Costs At Closing Are The Least Of Your Worries

You expect that there will be costs at closing. The point of sale gives you the advantage of having professionals around who depend on the deal going through. The cost of closing and homeowners insurance are very predictable and you settle them as part of the escrow process.

Improving The Property

You need a clear understanding of what it will take to make the house or condo habitable and you can move in. If the property has been in regular habitation until you purchase it, the basics should be in place. On the other hand, if your new home has been vacant for an extended period there could be a variety of problems waiting for you. Most of the faults and failings in the structure and fixtures of your intended home should reveal themselves during the building inspection.

When The Sellers Take The Kitchen Sink

Even if the building is sound according to the experts, you might find that the seller grabs everything that they can when they prepare to exit. Foreclosed properties often lose fixtures and fittings, doors, countertops, plumbing, and so on.

While at some point it could be necessary to bring in the authorities or an attorney, minor issues of snatch and grab will be annoyances. The seller might take the appliances with them or replace luxury faucets with cheap ones. Be ready for minor replacement issues that don’t warrant litigation but will cost you out of pocket all the same.

The Higher Cost Of Owner Occupation Versus Renting

Renting has costs that are predictable, with landlords paying out of pocket costs and factoring them in monthly rent payments. Many of the costs that they handle can come as surprises for first-time homeowners. Disbursements will include some of the more critical costs as mortgage impounds, such as property tax and monthly insurance payments.

You will no longer have a manager or landlord to call about leaky pipes or heating problems; these will be your problems to fix and expenses to pay. It is very likely there will also be additional utility costs that landlords pay, these include water rates and trash collection.

Make Research Part Of Your Buying Strategy

Once you find a home that you decide to purchase you can research the costs that you can expect for the property. You will base this estimate on the condition of the home, the way you want to change and upgrade it, and the expenses for that particular neighborhood. A little careful research is the difference between the satisfaction of owning a new home and the shock of dealing with hidden costs for which you had not previously accounted.

Income Stability Gets The Mortgage Done Better Here Is Why

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Mortgage Pre-Approval BasicsIncome stability is the key attribute that mortgage underwriters wish to see in a home loan applicant. When you begin the process of buying a home and applying for a mortgage, your lenders review your financial history very carefully.

Based on the policies of the bank, what they know about risking large piles of cash, and what they can determine about you. Loan officers will look at both you the property that will secure the mortgage, particularly if it is a conforming loan.

Impressing Your Mortgage Decider With Income Stability

It all comes down to lenders liking what they see in your background. Banks have financial targets and specific definitions about the kinds of loans they want to make and to whom. Competition in the lending market limits how much profit bank can make, but they can control much else of what they want to lend.

The critical point is when your application goes to the person who releases the funds, the underwriter. Mortgage underwriters know their typical borrower exactly, and any deviation will cost you at closing, and in the interest rate, you pay for the privilege of borrowing to buy a home. A record of stable income of at least two years will usually be sufficient.

Get Ready For An Inspection

So, what does income stability look like to a mortgage underwriter? It is a regular, recurring payment in cash, check direct deposit, or wire transfer. Banks have experience lending money and the data to determine if you are a sound investment or not.

Consumers that have stable histories of earning a living and making payments tend to go the course in the long run. Your credit history with the three major reporting agencies will show how responsible at making your payments.

However, credit agencies do not indicate how much income you have or if your paychecks come through regular employment channels. Lending underwriters want to inspect both sides carefully, income and spending to determine how much of a there is that you might not make all of your payments on time.

Dealing With Income Hiccups

Income stability is not the only factor that goes into the lending decision. There are a whole set of factors that lenders review before they make the final credit decision. Gaps in your income can happen for many reasons; don’t lose hope just because you have short gaps in your history.

Situations that might cause concern are missing a few months of income, changing jobs frequently, or being self-employed. Banks and mortgage brokers work with income variations and credit statuses of every description. It is unlikely your situation has never occurred before.

Get advice on how to proceed in financing your future home before you start house hunting. Discuss your income history with your agent or broker. However, you will get a prime mortgage package if you can demonstrate at least two years of income stability.

Foreclosures Are Still Hot But Wait! Read This First!

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Foreclosure BasicsForeclosed Homes Are Still Waiting For Buyers

Perhaps you have heard that the potential for building a real estate empire from foreclosures is as good now as it has been in recent years. They say you can make the proverbial killing in real estate by buying foreclosed homes as investments. The question is: Who is “They”?

Banks have a strong motivation to get defaulted homes off the books. They still have large numbers of foreclosed homes to dispense with like they need the ultimate cure for a bad hangover.

Experienced investors will tell you that, with the right team to support you, you can make a very respectable return in foreclosures, as they have done themselves. However, for the novice investor and individual looking to get a killer deal on a new home it might be a steep learning curve.

  • How do you analyze the structural condition of a derelict home if access is restricted? Foreclosure buyers need to know how to get past that and how much of a gamble to take.

Rolling The Dice Of Profit And Loss

Buying foreclosures is an extended process that has specific technical and legal concerns and a wheel of fortune element of risk that means there will be random obstacles and unexpected issues throughout the process.

That is why there is the possibility of reward, by dealing with the risks and doing all of the work an investor gets the reward. Considering the extra risk and all of their work the possibility is an extra large reward.

  • What if the former owner delays the process with a court action? You have to be able to hold your nerve through an uncertain and extended battle.

The Foreclosure Box Of Chocolates

Buying foreclosures as investments is not for everyone. If you are new to homeownership or you are hoping to just find a bargain fro your first home this may not be the way to tackle it.

The hazards are complex and varied and competition comes from investors who hold all of the cards. When you finally get past the front door you really never know what you are going to get.

  • Can you get the jump on the sharks that have piles of cash, tons of experience and the aggression to grab the best deals? Determine if the market is large enough for another shark to jump in the pool.

An Adventure Or A Fiasco: You Decide

Attempting to purchase a foreclosed home from a bank is not an easy task. If you do have your mind set on winning a home via this process then you are going to have to start by building a team of professionals who will work with you and help you to overcome the obstacles.

Determine if the risk is something that you can handle and you have the reserves to ride out a storm to win the deal you want. The irony is that you need to be in a position of strength to earn the largest rewards. If you still think you should dip your toe in the shark-infested waters of foreclosed homes then you should do so. But precede with caution you adventurous soul.

Jumbo Loans For Luxury Homes – Going Beyond The Conforming Limits

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Jumbo Mortgage BasicsConforming Versus Non-Conforming Loans

So, where are the limits in conventional home lending and why do they matter? It certainly matters if you are seeking a luxury home that exceeds the limits for conventional home loans as defined by the FHA. Or if you have a high income, and you would like to live in a home that is more distinctive than the ordinary, whether you define that by location, style, or historical significance.

Why Do Loans Conform To Anything Anyway?

The division between conforming and non-conforming loans defines the structure of the home lending market, or at least the upper edge of it. It is the terms guaranteed by agencies such as Fannie Mae and Freddie Mac that give the home loan finance industry its internal structure, by guaranteeing the initial loans and then purchasing the paper and bundle the income streams of many loans into bonds that they hold or sell to institutions as investment securities.

The price to be a part of this government-backed system is the requirement that lenders “conform” to a set of regulatory standards that have become a fundamental part of home finance. The purpose is to help Americans become homeowners at affordable prices. The constraints are that borrowers must meet conditions such as credit score, down payment, and loan value.

Institutional Investment In Luxury Lending

Lenders act as mortgage originators, by signing up house buyers, advancing the funds at closing, and collecting the initial payments, then selling the rights to the cash flow on the paper. The maximum amount for single unit properties on conforming loans is $417,000 and in Alaska and some high-cost territories up to $625,500.

Jumbo loans lie above the conforming limits; Fannie and Freddie will not consider purchasing jumbo loans for their portfolios of securitized debt. Banks do securitize jumbo loans, but they expect higher yields on non-conforming loans. That, in turn, means higher interest rates for the consumers who make the payments on them. Jumbo mortgage interest rates have historically been about a quarter percent higher than their smaller conforming equivalents.

Differences In Lending Details

The demand for jumbo loans comes from the high-earning consumers that take them out to buy luxury homes. Banks look for borrowers with the ability to make at least a twenty percent down payment, have a low debt-to-income ratio, and a high credit score. Whereas conforming loans require six months of cash left after closing jumbo loans are more stringent; requiring twelve months of liquid reserves after the loan closes.

High earners often have significant portions of their income as bonus payments or shares and lenders will consider lowering installments as the balance drops, so the borrower can have the flexibility of making lump-sum payments when their proverbial ships come in.

If you have the income and the cash to set up a jumbo loan, you can purchase a distinctive home. Jumbo loans facilitate closing for properties that grace the covers of magazines and featured on television shows about the lives of celebrities. Whether you want a cottage in the most exclusive suburbs, a mansion in the hills or a distinguished townhome that expresses your status, a jumbo loan is a sensible alternative to tying all of your cash up in real estate.

Hard Money Basics

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Mortgage BasicsWhat Is A Hard Money Loan?

Hard money loans are financial tools for sophisticated buyers who need to take drastic measures to secure real estate. The sources of such secured lending are usually private investors or syndicates of investors; this type of lending usually has a one-year term; this might extend up to five years in extreme cases.

Hard money is a resource that discretely supports real estate investment and development in communities across the country. Investing in debt secured against real assets is one way that investors can earn income from their capital. It is also one method that developers and real estate investors can use to get the leverage they need to purchase the assets they believe will increase their wealth.

Why Use Hard Money?

Hard money investors put up the cash for properties based on their experience and knowledge of the market. A hard money transaction is a contract that funds real estate purchases in return for a defined rate of interest, points, and other terms stated in the contract.

It is a method to get access to funding for real estate that is faster than the conventional route of applying to a bank or mortgage company for the funds. In return, hard money lenders charge higher rates of interest that reflect the perceived greater risk involved.

Hard money loans can be a way to secure real estate deals that just cannot wait. You might find a property to fix up and flip for a quick profit; hard money would be suitable in this case. Other instances would be for construction loans, land loans, where your credit history might preclude lending or you just need to move quickly to secure a bargain offered by a motivated seller.

What Do Hard Money Lenders Want?

Lenders focus on the value of the real estate property against which you will secure the loan, but they will expect you to have equity in the property. For example, if you own land and wish to build on it to sell at a profit later, a hard money construction loan will add to the value of the undeveloped land.

If you have cash for a significant down payment, and you need financing, but cannot go the conventional route for any of the reasons discussed above you can borrow the funds you need from a hard-money lender.

Lenders will provide two-thirds to three-quarters of the equity in the property. Some investors may consider the extra value added by improvements but most will take a conservative stance and would demand interest rates of fifteen percent or more and as much as six points to extend more than the basic. An Internet search will reveal who the local lenders for hard money are in your area. You may also find them at local investment club meet-ups.

The Hard Money Reality

Hard money is not for everyone; if you have the time and financial resources to source conventional lending, then you most likely will not choose it. However, if you need funding quickly to close at a discount to market value, or you just have no other source of finance, hard money lenders can make the deal happen for you at a price. Used wisely, hard money can be an excellent tool for making deals happen in investment real estate.

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