Financial Planning Tips » Loans and Mortgages

All About FHA Loans For First-Time Home Buyers

FPT Guy — Mon, 09 Jan 2012 20:54:34 +0000

Getting FHA Loans for First-Time Home Buyers

FHA loans have become popular in recent years due to the crash of sub-prime lending following the economic crisis. Although it has been harder to get approved for home loans since then, it’s still easier to get approved for an FHA loan than a conventional mortgage. Individuals who haven’t had an FHA loan and are purchasing a home for the first time can expect approval if they meet the qualification requirements. When considering insurance for an FHA loan, it’s a great resource to check is InsuranceQuotes.org for reliable pricing information. These loans have several advantages, which include the following:

Credit
This is the most important requirement for any loan in today’s world. FHA is much more understanding than conventional lenders are about credit history blemishes. While most traditional lenders won’t accept explanations for credit imperfections, FHA will. As a general rule, FHA will excuse past blemishes if recent credit history shows a pattern of financial responsibility. However, tax liens, defaults and federal liens are grounds for denial. While conventional loans require a credit score of 720 for approval with a prime rate, FHA requires a score of only 620.

Debt To Income Ratio
This amount is calculated by adding all debts and the projected mortgage payment. The amount is then divided by monthly income. Individuals with current student loans, credit cards or auto loans can still qualify. Whether individuals are confident to buy because of an expected raise or a loan that will soon be paid off, FHA allows a debt-to-income ratio of 50 percent.

Interest Rates
Since FHA offers some of the lowest interest rates for 30-year mortgages, monthly payments are very affordable. This means less money is spent over the life of the loan.

Application Process
If individuals have steady employment, enough money to make a 3 percent down payment and decent credit, approval is very likely. The entire process is much easier than the application process of a conventional loan.

Down Payment
This is one of the biggest advantages of an FHA loan. Many lenders are treading on thin ice today, so they often request the full 20 percent down payment. However, FHA only requires 3 percent. In addition to this, FHA allows the seller to pay up to 6 percent of the closing costs.

Since these loans are designed for the benefit of buyers and lenders, homeowners insurance and mortgage insurance are required. Homeowners insurance is factored into the monthly mortgage payment along with estimated real estate taxes. Mortgage insurance is required to protect the lender from potential losses.

Again, to get the most accurate insurance quotes, we recommend you visit www.InsuranceQuotes.org. This web site is provided by a non-profit organization, so this means that the information is current, accurate and consumer friendly.

The Difference Between Mortgage Prequalification, Preapproval And Final Approval

FPT Guy — Mon, 03 Jan 2011 19:36:27 +0000

This is a guest post provided by Ben from BankAim.com.

My friend here at Financial Planning Tips asked if I would write a guest post and I gladly accepted. If you read BankAim many of you know that I spent 5 years of my life as a loan officer. One of the common mortgage questions I receive is…

What is the difference between Prequalification, Preapproval and Loan Approval?

These three aspects of a loan are the 3 main steps in the mortgage process.

When you contact your bank or broker the first step is to get prequalified.

Prequalification is the most basic and simple part of the process. The Loan Officer will take a look at your credit and judge whether you will qualify for a loan based on bits of information you verbally provide. Information like income, assets, debt and other financial obligations will help loosely determine if you will qualify.

In most cases this step in the process is a green light. Only if credit is very bad, or there is absolutely not enough income will you be denied at this point.

Preapproval is when all the income documentation is gathered and submitted to the lender for approval. At this point the lender reviews all information in the file. Once your loan is approved you have pre-approval. I know it sounds funny; the loan is approved so you have pre-approval. Well when the loan gets approved by the lender there are a few more things that have to be collected before we get final approval.

The lender will write up a list of conditions and require that an appraisal be ordered to determine the value of the home. The conditions list may include a variety of things the lender wants to see before clearing the loan for funding. This could be verification of assets, verification of employment, bank statements, etc.

Final Loan Approval happens once all conditions are met and the appraisal is approved. At this point the loan will be sent to funding. If you are doing a refinance chances are you will have to wait 3 days for what is called the 3 day right of rescission. If you decide that you want to back out of the loan you have 3 days to do so (During my 5 years as a loan officer I had 2 people rescind during the 3 days… all that work for absolutely nothing. They went through all that work for a $400 appraisal bill.). For a purchase you will not have the 3 day right of rescission. Once the loan funds your stressful mortgage loan experience is over.

I hope you have an opportunity to visit BankAim and see our finance articles including mortgage info, cd rates and personal finance tips.

Common Questions About Mortgages Answered

FPT Guy — Fri, 15 Oct 2010 16:53:05 +0000

There is a plethora of questions people have when they are about to buy a house for the first time. This is understandable. Buying a house is the single most important investment a person or family will make in their lifetime. Questions about interest rates or how long to carry mortgages are some of the most common asked. Where to apply for financing and which realtor to use are some others. Many of these questions can be answered with free online tools like the mortgage rate calculator. It can tell you how much your monthly and indicate whether the purchase is affordable. What are some of the other more common questions?

How To Find A Lender?

Whether looking for a new loan or a mortgage refinance – shopping for a loan is like shopping for any other major purchase in your life. Shop around for interest rates because a half a percentage can equal a lot of money over the course of a 30-year loan. Different lenders will have a different fee structure as well. You are qualified real estate broker can advise you about which lenders in your area and what they are offering. Of course, you could find a lender from advertisement or phone book and then interview each one about their interest rates and loan process.

How Much Of A Down Payment Will I Need?

This will depend on many factors. First, remember that a larger down payment can significantly reduce the monthly cost. The price of the house and its market value along with the type of mortgage used can determine the down payment. Other factors such as credit history can also play a role for down payment. In general, conventional mortgages will require 10 to 20% of the purchase price as a down payment. However, FHA loans only require 3 percent while military-veteran home loans require zero down. There are special cases where you only have to put 5% down as in the case of 95 mortgages.

What If I Have Bad Credit?

If you fail to qualify for conventional mortgages there are many federal mortgage programs available. Contact the Department of Housing and Urban Development to find their counseling agencies that can help you look over your options. Sometimes your local government will offer home buying programs geared to help the people in their community. This information can usually be found at the mayor’s office. Then, there are private investors that will finance property for those with less than perfect credit however expect high interest rates. Be sure to use your mortgage rate calculator to decide you can afford a payment with a higher interest rate.

What About HUD Homes?

Homes that have been repossessed by the Housing and Urban Development Department can sometimes be a very good deal. They are sold at market value as quickly as possible because the Department does not want the homes on their books too long. This makes them a very motivated seller. You can check out how to buy a HUD at their website or contact your local real estate broker for more information. The paperwork process will be intense but do not let that discourage you because interest rates are low and the price will be right.

95% Mortgages Briefly Explained

FPT Guy — Sun, 10 Oct 2010 23:24:08 +0000

For first-time borrowers, it might be a good idea to obtain a 95% mortgage rates. The rationale behind 95% mortgages is that the borrower gets a loan while the lender receives a 5% deposit on the outstanding amount. A “first-time borrower” is a person who has not purchased a new house within the last three years. As such, the potential homeowners who can qualify for 95% fixed rate mortgages are numerous. This mortgage is also known as an LTV, or loan to value of up to 95 percent, and is extremely well-utilized in the UK. Such a mortgage is also advocated for first-time borrowers by the state of California.

LTV mortgages tend to be subject to a fixed rate. However, there are lenders who offer a more advantageous interest rate if a 90% LTV is involved. On the other hand, mortgage income multipliers for 95% mortgages tend to be lower than that of a 90% mortgage.

Drawbacks

While the 5% deposit on a 95% mortgage appears attractive at first, a hefty back-end fee can be tacked on to the total mortgage. Some consider this fee to be a lending charge, and it eventually drives up the sum owed to the lender. This means that while the initial amount may be modest, the interest accrued by the extra fee over the next 25 years or so can burn a real hole in the borrower’s pocket. As such, some borrowers opt to pay the fee immediately to avert these charges. Making sure you get a good rate is one of the best money saving tips out there.

Mortgage Multipliers

Most new borrowers would not know what these are. Sometimes, they are also known as income multipliers, which are used during a loan assessment process where the lender estimates how much a borrower can be loaned. The sum is usually generated from household income. A multiplier based on the income of a single wage earner potentially qualifies an applicant for a mortgage of up to 3 times his or her yearly income. For dual-income households, the multiplier might deem the potential mortgage to be worth 2.5 times the household’s income.

If the LTV ratio is low though, then the use of a high multiplier is relative. Banks and similar lenders tend to use another multiplier to determine loan amounts – a person’s credit score. A person with an excellent score stands a better chance of being able to borrow a higher amount than a person with an average credit score.

Another Downside

Other than the lending fee, another drawback to 95% mortgages is, despite fixed interest rates, the overall interest charged is greater than that of mortgages where larger down payments are involved. Additionally, a lender might also limit the amount that can be borrowed if an applicant opts for a 95% mortgage.

Final Decisions

Where refinancing is concerned, a mortgage can be used to improve the home, raise cash, meet education expenses, consolidate debt, and enable property and vacation purchases. However, many mortgages are 95% mortgages which are more suited to first-time home buyers. This demographic usually does not have the cash for a down payment on a new home.

Bank Mortgage And Remortgage Services

FPT Guy — Mon, 20 Sep 2010 15:17:02 +0000

Whether it is at your current bank or at the competition there is a huge range of mortgage and remortgage services available at most banks today. They are services that cater to a wide range of needs and various lifestyles. Some institutions or banks even offer savings and checking account promotions like offering a second chance checking account. Here we explore just a few that you may consider discussing further with your choice of lender or remortgage company.

Without knowing what you need to ask about you can sometimes be taken for a ride and be subject to poor service. It may help to do a little research online or speak with other people about what they see as good service and products from their bank, or perhaps what they wish they could change.

Banks obviously don’t only offer mortgage and remortgage services, they have a wide range of accounts, credit cards, 2nd chance checking, insurance and more they can offer you as their customer. A big benefit of having a mortgage with a bank is that it can often mean you could receive added benefits on your other accounts or policies with them. Lower account fees, discounts on premiums or regular cash backs are just some of the incentives some banks provide customers who hold a mortgage or remortgage with them. Why spread your accounts and policies around a number of companies when you can keep it simple with just one, and receive added benefits at the same time!

As the banks are much larger institutions than small time lenders they can often allow their customers a little more freedom. A fantastic service to have when you need it is a payment holiday. This means that you can apply to have a break from your mortgage payment. Subject to their credit teams approval this could give you the opportunity to save a decent amount of money over a short period. This might allow you to pay off a few unexpected bills, take a much needed holiday or complete some overdue home renovations. Once the payment holiday is over you just resume with your regular payments again. Often this type of service is only available once every 12-24 months though, so use it wisely!

When you obtain a mortgage or decide to remortgage this is a good time to assess all your finances, especially if you are looking for debt advice to consolidation loans and pay off other debt at a lower interest rate. If you have other debt the bank may allow you to consolidate that debt into your mortgage. This service is a wonderful help to ease the stress of having more than one creditor to answer to and is also a fantastic help with keeping to a budget. Having one payment each month is much easier to keep track of and this type of arrangement almost definitely makes it easier to save money.

The mortgage and remortgage services that banks offer can really make your life a lot easier and your finances much easier to manage. Some lenders in the UK can also offer buy to let mortgage advice if you choose to go that route, to purchase the rental you are currently living in, depending on your credit and financial situation. It’s just about knowing that the services are there and not being afraid to ask about them. The competition out there for banks is huge and they are all eager to get your business so give them the opportunity to tempt you with what they have to offer!

Self Employed Loans for Entrepreneurs

FPT Guy — Thu, 16 Sep 2010 18:41:00 +0000

Working for a boss is a challenge and many of us want to start our own business. When you want to become an entrepreneur you will need self employed loans to get things rolling.

Money does make the world go round and even if you have a sensational idea you are going to need money to bring it to the market for customers to be aware of things. There are a few sources of loans available since the economic down turn and the credit market is starting to flow again. You can get access to cash for your business but you need to get some leg work done now so when the opportunity presents itself you can seize it.

First and foremost – this cannot be stressed enough – you need a well designed business plan. You are selling the concept of your business and why the lender should invest their dollars in you instead of some other venture. If you have never drafted a business plan before then seek out the help of an accountant. The reason I mention an accountant is they deal with a wide range of businesses on a daily basis so they have the skills and knowledge to write up a professional plan. Secondly is if the accountant likes your concept they may be able to help you find potential lenders as well.

The process of securing self employed loans involves sourcing in many different areas. You can investigate various government programs to find access to loans or loan guarantees to help get things rolling. You should be prepared and able to put some of your own money into the venture. Imagine if you are a lender and someone asks you to risk your money in their business but they are not putting any of their money into it. You wouldn’t go for it and neither will other lenders. What is the minimum amount to put in is a question that varies depending on the type of model but you must have something in there otherwise the deal will not happen.

Since you are self employed the loans you do secure will not be conventional ones that you experienced as an employed person. Self employed clients are perceived as a higher risk to lenders so the underwriting process is lengthier. Be prepared to have your credit and financial documents reviewed in detail before getting an answer from the lender.

When looking at self employed loans do not take the first offer since the terms may not be to your liking. There are some deals that are great and some aren’t and if you take the first offer out of fear you will not get any others you are putting yourself in a precarious situation.

If you do not know where to find these loans you can either check with members of your local chamber of commerce or online on options available. When you are able to secure the funds you will be one step closer to realizing your dream of being the boss.

Steps To Securing A Fast Remortgage

FPT Guy — Fri, 10 Sep 2010 17:29:32 +0000

We all want things done well and fast, why should financial products and services like fast credit repair and fast remortgage be any different? If you want to do a fast remortgage then you will need to understand what will be required at each and every step, especially when dealing with remortgage companies which may not be looking out for your best interests.

The first thing you need to do is decide why you want to do a remortgage. Are you looking for get a better interest rate or pay off debt? Are you looking for a consolidation remortgage for debt management purposes? Maybe you want to lock in a low rate now for a home loan remortgage because you feel interest rates will go up in the future. Your reasons are valid and when you know the “why” then the rest becomes easier.

Next thing to do on your list is contact your local mortgage expert who can secure a no obligation quote from various lenders all fighting for your remortgage business. You want to get the most flexible remortgage terms that you can find. Remember that these quotes are no obligation but do come with conditions so ask your mortgage expert about the underlying conditions of each deal. Some of these deals may have a teaser rate to hook you in but you end up paying more in fees over time. This is where your mortgage expert saves you time and a lot of money. They understand all the finer nuances of a remortgage and will sift the deals to find one that is closest to your requirements.

You are required to do your part as well which involves getting your documentation ready. First on the list is your income documents. Are you self employed or employed ? The difference in the documentation required is vast. A salaried person just needs a salary slip or employment letter or a combination depending on the lender. A self employed person will need income tax assessments and other banking documents to show both their gross and net taxable income.

There are more lenders who are reaching out to self employed clients but not enough yet to make the playing field truly level between self employed and salaried people. Once you have your financial documents in place the next item on your fast remortgage agenda is to check out your credit report. Your credit is very important since having a low score may increase your interest rate or make it so you cannot remortgage at all.

Just like a brand new mortgage a remortgage lender is looking closely at the equity you have in the property as the make or break factor on a deal. If you have a lot of equity in the property but a lower credit score the lender may be able to work out a deal. So what is equity? It is the difference between what your property is worth today (also known as the “fair market value”) minus all debt attached to the property. If the balance is positive, that is your equity. If it is negative then your mortgage is considered “underwater”.

When trying to do a fast remortgage if you have your documents ready and equity in the property it can take place in a very short amount of time provided everyone is on the same page. Also finding a great remortgage specialist is key to finding a great deal while simultaneously processing your loan application quickly.

How A Consolidation Remortgage Works

FPT Guy — Thu, 09 Sep 2010 19:11:56 +0000

There has been a paradigm shift in this country from one of big spenders to big savers. Many home owners are now looking at a consolidation remortgage to cut down their debt load to a more manageable size. If you have not looked at this option before now would be a good time to get in touch with a remortgage specialist and learn about your options.

There are so many mortgage terms out there that it can get a bit confusing so lets understand what this type of remortgage is designed for. If a person is carrying a lot of consumer debt with credit cards, personal lines of credit the interest rates – it’s possible that the interest rates on these debts can be over ten percent. When you remortgage your home you are taking the available equity out to pay off these high interest bills. This saves you a lot of money over time since you are paying a much lower rate on your mortgage plus it is one payment to make instead of trying to pay many lenders at different times. You are basically getting a debt consolidation quote from your lender and not some scammy debt service – where a regular lender always preferred if you absolutely have to consolidate your payments.

Now that we understand what a consolidation is we need to figure out how to find one. The best way to get access to a consolidation remortgage is by speaking with a remortgage expert. They are able to source the marketplace and negotiate with different remortgage companies for the best possible terms available. These experts do not work for a bank or a particular financial institution – they in fact work for you. Since mortgages like anything else in life are open to negotiations, you never want to take the first offer. Your expert will do their best to find you the best terms. However they are not the ones lending you the money it is the lending institution which must offer up a solid deal.

All mortgage lenders now must adhere to a strict underwriting guidelines to prevent the chances of having another housing loan meltdown like that United States underwent a few years ago. What this means to you: before you can secure the funding for your remortgage you need to be able to prove that you are earning what you claim – so finding a more flexible remortgage to suit your needs can be more difficult. Also the lender needs to show that you are a good credit risk by getting a copy of your credit report which will show if you have had credit issues in the past seven years.

Since you are looking to consolidate your debts there is a fair chance that your credit score has suffered from carrying a high debt load. It is not enough to just pay the monthly minimum, if your credit cards are nearly or totally maxed out then your credit score will continue to drop making it even harder to get a good rate on a remortgage, and will also determine if you can get a fast remortgage over a longer and more drawn out process.

Your credit score and income are factors that are part of a consolidation remortgage however nothing weighs more on whether or not a deal happens than the equity in the property. Equity is the amount of value the property has after all liabilities against it have been paid off. For example if your home had a mortgage of fifty thousand dollars but its fair market value is ninety thousand dollars then you would have up to forty thousand dollars in equity available.

In order to find out how much equity you have available for your consolidation remortgage you will need to have your home appraised by a qualified and licensed appraiser. They will be able to let you know what your house could reasonably sell for in the current marketplace. A lender will base the maximum amount you can borrow based on this report. So the sooner you know where your property stands, the better informed you will be to determine if a consolidation home loan remortgage makes sense for you.

Business Credit & Loans For Phoenix Small Business Investing

FPT Guy — Wed, 08 Sep 2010 21:45:03 +0000

There is a sting that comes along with having bad credit. It is a financial affliction that affects millions of people in various ways. Some people cannot finance the home of their dreams, others must ask friends or family to co-sign for their cars, while others are forced to pay super high deposits for things like cellphones, apartments, and more. These are just a few of the drawbacks associated with having bad credit. Phoenix small business investing experts point out that bad credit also painful for entrepreneurs and small business owners.

Phoenix small business loans professionals know that getting a business loan is no easy task, and that it is even more difficult if you have bad credit. And unfortunately, money is one of the first things needed to get a business up and running. Phoenix small business investing officials highly suggests that business owners in this situation try to establish business credit rather than get a bad credit business loan.

Establishing Business Credit
Phoenix small business investing experts state that there is a simple reason for this: your business credit, if properly established, is not connected to your personal credit. This means that your personal credit will not be checked if you apply for a loan under your business name in the future. It also means that if your business and business credit suffer, you will further damage your personal credit and finances. Here are simple tips on how you can get started building business credit.

Formalize Your Business
Establish an LLC, sub chapter S-corporation for your business. This will help lenders clearly identify your company as a business that is completely separate from your personal finances.

Business Phone Line
Next, Phoenix small business investing experts suggest getting a phone line that is in the formal name of the company. Call phone companies and make sure that you sign up with one that reports their customers’ payment history to the credit bureaus.

Business Checking Account
Establish a business checking account that is also under the formal name of the business. Make all business transactions with this account and not your personal accounts.

Vendor Credit
Set up trade or vendor credit by finding companies who are willing to finance you for supplies or equipment, for which you can pay them off over time. Find a company that does not need your social security number or any personal information that can be tied to your personal finances. Everything should be done with the business’ information and business finances.

Business Credit Cards
Finally, Phoenix small business investing officials state that you should get a minimum of three business credit cards–also under the company’s formal business name (see a pattern here!). It is important to ensure that the companies you go with also report their accounts, payment history, and so on to the credit bureaus. And just as with vendor credit, make sure that the cards do not have to be tied to you or your personal finances. It may take some hunting to find company’s that do not require this, but it is well worth it to search.

What Is A Stated Income Mortgage?

FPT Guy — Thu, 02 Sep 2010 06:09:25 +0000

Most of us are familiar with the standard process of a mortgage or loan application. We are often sent away to obtain piles of documentation confirming we are who we say we are, confirming our address, our bank account details and most importantly, confirming our income. A stated income mortgage, otherwise referred to as a ‘liar’ mortgage, ‘no doc mortgage loans’ or a ‘low doc’ mortgage, is a mortgage that can be approved with the bare minimum of documentation.

While most mortgage applications are accompanied by a stack of paperwork, a ‘low doc’ mortgage isn’t. There is to a degree a higher risk for lenders offering these types of loans. Dishonest people can end up claiming they earn way more than they actually do, simply to secure the loan and purchase the home they want. While this might be a quick fix for them, they in the end will be the ones penalized. If they do not meet their mortgage repayments the worst case scenario is they could end up loosing their home, other assets, destroying their credit score and filing for bankruptcy.

However a stated income mortgage is not something that is designed to trap dishonest people. There are plenty of genuine cases where this type of mortgage is more suitable than any other.

Self employed business people can often have trouble documenting their exact annual income. Business debts could be held against them in the application for a personal mortgage, or they may not wish for their business profitability to be known by the bank. For these people this type of mortgage would be ideal.

Those people who generate their income from investments, particularly property investments could be declined your average mortgage on the basis of their debt to income ratio, even though they could be earning large sums of disposable income each year. They would not have any problem making the required mortgage repayments however because of other current finance they could actually be turned away. These people would look to applying for a ‘low doc’ mortgage.

Privacy, especially financial privacy is more important to some people today than it ever has been before. The simple fact that you don’t want to give out so much personal and financial information to a third party is reason enough for a lot of people to apply for a stated income mortgage. Whatever the reason is, it is nice to know that buying a home is not solely dependant on documenting every single detail of your life.

Note to military personal: always check out the possibility of a VA loan first, before trying to apply for standard consumer mortgages.