Posts Tagged ‘Mortgage loan’

Understanding Home Loan Types

When it comes home loans, there are many types to choose from. Figuring out which loan is best for your new property purchase can be confusing. So here are some of the most popular home loan types.

Mortgages:

Conforming Loan: When a loan conforms to the guidelines of FNMA/FHLMC (Fannie Mae/Freddie Mac) in both terms that may be purchased by FNMA or FHLMC it is conforming (currently up to $612,950 in San Diego county). Loans that do not match these guidelines are obviously non-conforming loans. If the loan does not conform due to its amount, it is a Jumbo Loan. Conforming loans may have either fixed interest rates or adjustable interest rates.

  • Conventional Mortgage Loan: When the loan amount is within the FNMA/FHLMC guidelines, and the federal government does not insure or guarantee the lender payment through the FHA or VA, the loan is conventional). They can have either fixed interest rates or adjustable interest rates.
  • FHA Insured Loan: Loans insured by the Federal Housing Administration. Borrowers must meet specific criteria to qualify. FHA loans often require lower down payments of normally 3.5% and will go up to $612,950 in the amount borrowed.mortgage broker or direct lender
  • VA Loan: A VA loan is a mortgage loan offered to American Military and veterans guaranteed by the Department of Veterans Affairs (VA), typically at preferred interest rates with little or no down payment required.

Specialty Loans

Reverse Annuity Mortgage or reverse mortgage is a special type of mortgage created for retirees on fixed incomes. They use the loan to generate income from the equity in their homes (and thus adding it to their principal balance). They continue to live in the home but ownership goes to the lender when the last borrower moves from the home.

Mortgage Rate Terms

  • Fixed-Rate Mortgage: A loan secured by real estate that has a fixed interest rate and payment amount for the term of the loan (usually 15 or 30 years) is a fixed rate mortgage.
  • Adjustable Rate Mortgage also called ARM or variable rate mortgage: ARMs have interest rates that can vary or adjust at pre-determined yearly intervals. The starting rate and payment is lower, allowing borrowers to qualify more easily. The adjustment basis is an index, often the LIBOR (London Interbank Offered Rate), or on the prime rate—the lowest rate of interest banks will offer their most credit-worthy customers.
  • Fully Amortizing Mortgage: A fully amortizing mortgage is a mortgage with scheduled uniform payments that will fully pay-off the loan over the term of the mortgage. At the beginning of the loan term, most of the loan payments go towards interest payments. As time goes on, more of the payment amount goes towards paying off the principle balance.
  • Balloon Mortgage: This was most popular before the housing collapse of 2006. Balloon mortgage have balloon loan mortgageshort terms (only a few years) with fixed principal and interest payments at a reduced rate that do not fully amortize (or pay off) the loan. At the end of the term, the entire balance of the mortgage is due in a single payment. Balloon mortgages offer lower payments during the term, because the big lump sum is due at then end. A balloon is useful for buyers that hope to sell within the term or expect to be able to pay the full amount or qualify for a better loan by that time.
  • Graduated Payment Mortgage (GPM): A graduated payment mortgage has payments that are lower in the early years but increase on a scheduled basis until they reach a level of amortization and the borrower can (hopefully) afford to make larger payments.

Short-Term Loans

  • Bridge Loan: When a buyer is also selling and the purchase of the new property depends on the equity in the old property, a bridge loan allows the purchase to complete before the sale is complete. Once the older property sells, the borrower must repay the bridge loan.
  • Construction Loan: Short-term loans to funds construction or improvements are construction loans. Typically, the construction loan is repaid with the mortgage.
  • Home Equity Loan: A home equity loan (or a home equity line of credit) is a loan made against the equity in a home. The borrower may utilize some or all of the loan and pays interest only on the portion used.
  • Nonrecourse Note: A nonrecourse note is a type of note in which the borrower has no personal liability for payment.
  • Open-end Mortgage: An open-end mortgage is a mortgage that may be refinanced without rewriting the actual mortgage contract.
  • Refinancing: Refinancing are the proceeds of a new loan used to pay off an existing mortgage on the same property. This is often done by a homeowner to lower their interest rate and monthly payments.

Any good lender will help walk you through the complicated mortgage world and fit you into a loan program the best fits your needs!

 

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com
Visit my Website: http://ryanyourrealtor.com

Credit Reports – What You Need To Know

Credit reports and the “secret formula” for calculating one’s credit score remains a mystery for most people. When a lender “runs your credit,” that means the bank is getting your credit information from one of three independent national credit reporting bureaus–Equifax, Experian, and TransUnion.

what is my fico scoreCredit reporting bureaus collect information about your credit card use, rental history, loan history, including vehicle and student loans. They then analyze the results and tabulate them into credit scores, using software created by the Fair Isaac Corporation. Your lender can purchase the reports, as the FICO scores to serve as summaries of your credit history. Your FICO score is the middle of the 3 scores.

Each of these credit reporting bureaus collects and analyzes its own data which results in 3 different scores. The bureaus don’t share information between each other, so if you want a true picture of your credit, you have to check with all three bureaus.

If you have a mistake on your credit report from one bureau, the same problem may not appear on the other bureaus’ reports. You have to get the negative item removed by sending a copy of your proof, full payment, release of lien, or other evidence.

Getting one of these items removed can take as long as 30 days, which will delay your loan. That’s why it’s best to clear these things up before the lender brings them to your attention. If your lender sees something negative enough to decline the loan, they will tell you to fix it. Lets say you may have had a dispute with a contractor that resulted in a lien on your home. It doesn’t matter who was right, you’ll have to pay the debtor, obtain a release of lien or payment in full receipt, whichever applies.

This evidence should go into the loan file. Make sure to keep multiple copies of the lien release or payment in full. Why? Because that lien can always reappear on another credit report. Property liens from the IRS are particularly hard to eradicate because the proof of payment has to come from the IRS, along with the county where you owned the property, which must record the release of lien.

You may see a problem in your credit report that’s over 10 years old. An account in collections can stay on your credit report for much longer than 7 years; which is the length of time it takes for bad accounts to drop off your credit record. When the debtor finally gives up trying to collect, that’s when the 7 years begins.

FICO credit scores can be in the range of 300 to 850. To get the best mortgage rate, your score must be as high as possible. Today, most lenders will give you their best rates if your credit scores are 750 or higher.

Factors that make your FICO score and credit historyYou can raise your credit scores by managing your credit the way that generates the highest scores. About one-third of a FICO score is your payment history (paying on-time). Another third is based on how much of your available credit-line you use. You can improve both areas by paying down your debts down as quickly as you can. If you are only making the minimum payment on your accounts, you’re living beyond your means and thus lowering your credit score. Don’t max out any credit card.

You can also improve your scores if you pay debts off early and avoid late payments. Data in your credit report includes the loan terms, payment history — on time, early or late payments, unpaid monthly balance rollovers, payment amounts, minimum payment history, income-to-debt ratios, and percentage use of available credit. Always pay off those credit cards that charge the highest interest first. Try not to incur new debt.

Managing your debts well does more than earn you a great mortgage rate. It ensures lenders that you are more likely to buy wisely within your affordability range. And that will make any lender view you as a good risk.

You’re entitled to a free copy of your credit reports once/year. You can contact all 3 credit bureaus or visit AnnualCreditReport.com.

 

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com
Visit my Website: http://ryanyourrealtor.com

Direct Lender or Mortgage Broker–What’s the Difference??

Suppose you were in the market to buy a new car. Would you go to a single dealership and expect to find the perfect car at the perfect price simply because you’re buying directly from the dealer? Of course not. It is very similar with mortgages and mortgage lenders.

There are countless mortgage programs based on countless ‘guidelines’ for determining acceptance. The variety of programs and rates varies greatly from lender to lender. Because of this, the odds are very much stacked against you finding the ‘perfect’ mortgage from a single direct lender. Direct Lenders have one group of programs. That’s it.
direct lender mortgage brokerBut why are direct lenders in favor right now over mortgage brokers and mortgage bankers?  One word-SPEED. Since direct lenders are using their own money and their own guidelines (most mortgage brokers will need to go through two sets of guidelines-the bank’s and the investor’s), they can close loans very quickly. They normally have their underwriters in-house. Closing loans quickly (or at least on time) is huge, especially on short sales. When a lender(s) approves a short sale, it has an expiration date. If the transaction doesn’t close by that date, an extension has to be requested (which isn’t always easy to get). That can lead to problems with appraisals, credit reports, and financial statements being outdated.

The advantage of a mortgage broker is that they can choose from the thousands of lenders to select the program that offers the lowest rate for your specific loan. Brokers will counsel borrowers on the loan options available from these different lenders and find the best “fit.” Some people fear higher costs by using a broker as opposed to a Direct Lender. This is sometimes the case. What must be kept in mind, though, is that Direct Lenders make their money off of the interest you pay on the loan– over time,  the amount of interest will far surpass your closing costs. In other words, closing costs must be viewed in relation to your interest rate. In fact, interest rates are more important than closing costs (especially since there are laws in place that prevent excessive loan charges). So sure, sometimes a direct lender offers lower closing costs. The interest rate, however, is rarely lower and that is what will affect you the most over the coming years.

My best piece of advice? Shop around for a loan before settling on one lender.

 

For more information on this topic:

619.384.2248
RyanYourRealtor@gmail.com
Visit my Website: http://ryanyourrealtor.com

Steps to Buying a Home

If you are buying a home for the first time, buying a second home or considering investment property, taking some simple steps to protect your investment and financial health. No matter what type of property you’re eyeing, here are some basic precautions as you navigate the process of purchasing any home.

Before Shopping for Property:

Look at your finances. Before contacting a real estate agent and starting to look for a new home, steps to buying a home in san diegofigure out what you can afford. Taking a simple inventory of your wallet can help your understand your financial ability and speed up the mortgage pre-approval process. A mortgage affordability calculator can help with this.

Know your credit card limits and review your usage to prevent loan approval issues. According to Equifax, the closer you get to using all your available credit, the less likely you are to have a good credit score or seem like a low-risk mortgage candidate to a potential lender.

Start with financing. Obtaining pre-approval for a loan will make the process of negotiation and loan approval process smoother from the start. Most sellers may even require you to be pre-approved before they accept an offer anyway, so doing this step ahead of time is a no-brainer.

Find a real estate agent. The seller is the one who pays the commission to both agents, so there’s no reason not to get the professional guidance of an agent. Look for a professional who is both familiar with the local area you’re considering and its property values. A good agent will also be well versed in the laws, timelines and deadlines in your state. This can be the difference between losing your dream home, deposit, and time.

Before Making an Offer:

Visit the city/county planning department. There one in every city and county. If the home you’re interested in is within city limits, you should visit the city planning department. Homes in rural unincorporated areas will normally fall under the control of county planning departments. The planning department can present any permits for the home you are interested in, and investigate that neighborhood. You can learn about what building applications are in the works (more homes, commercial buildings, industrial parks) and which schools your children would attend (it’s not always the school nearest your prospective home). There will also be information on traffic, crime reports (which can affect auto insurance prices), and more.

Review past utility bills. The monthly mortgage payment isn’t your only expense. Ask to review past utility bills before putting in a purchase offer to understand how heating and cooling the house will affect your finances.

During the Negotiation Process

Read the contract. When you’re ready to submit a purchase offer, your real estate agent should review the purchase contract with you. If the agent moves through it too quickly, ask to get an explanation of every paragraph (or at least the most important parts) of the contract. Have your Realtor explain in detail the circumstances in which your deposit can be withheld or kept, the contingency periods, and buyer expenses.

Ask for exact dates. Your contract might state you have 17 days to perform your inspections or 30 days to fulfill all contingencies. Ask your Realtor for the exact dates, not just the number of days, to make sure you don’t miss any important deadlines. This will also tell you when you’re supposed to receive various documents and reports.

get it in writing steps to purchasing a homeGet it in writing. If you negotiate any extras (the seller will leave various furniture or appliances, you can move into the house the day before closing, etc.) make sure that they’re documented in writing and that all parties sign off on these items.

Have a home inspection. Home inspections can spare you from a purchasing a unknown “fixer.” Have an inspection, even if the property appears to be in great condition or is relatively new. Without catching problems during the inspection period, any potential for negotiation with the seller will be lost.

The Bottom Line:

Don’t do it alone. Purchasing real estate is a large financial investment. Having the right professionals on your side, along with some common sense, can spare you costly mistakes.

 

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com

San Diego Housing Market Update August 2014

The end of summer is here and inventory levels (the number of homes on the market “actively” for sale) continues to climb. This San Diego housing market update shows there are currently 8350 active listings in San Diego county, up slightly from 8295 last month.

Activity Snapshot:

One-year change in closed sales

One-year change in median sales price

One year change in homes for sale

-23.7%

8.3%

-4.8%

How's the market 2According to Bankrate.com, interest rates are currently at 4.20% for a 30-year fixed loan. This is well below the historical average of 6% or so, which is great for home buyers. To calculate your potential mortgage payment, go HERE. Finally, as you will see on the chart below, prices are starting to take on a more normal pattern. There are much more modest changes than the previous year, with a 8.3% increase in median prices, compared to over 20% a few months earlier. However, these higher prices are now resulting in a slow-down of the number of homes sold over a year ago.

The San Diego Association of Realtors analyses housing market date for San Diego county every month. Below is their monthly report. The figures combine both condos and townhomes, as well as single-family homes.

San Diego House Market Stats August 2014

Click for full size

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com
Visit my Website: http://ryanyourrealtor.com

Things To Know Before Buying A House

Purchasing a home can be confusing, overwhelming and make buyers feel completely broke by the time they get the keys. However, being freed from a landlord and throwing away rent payments can also be extremely liberating. From finding the best Realtor to making it through a bidding war, here are 10 things homeowners wish they knew about taking the big step into being a homeowner.

1. Get pre-approved first.

It might be tempting to start hitting open houses every Sunday, but before beginning your search, get pre-approval letter for a mortgage. The last thing you want it to fall in love with a place before being prepared and able to put offer in on it. Without this pre-approval letter, no seller will take you seriously as a pre-qualified buyer.things to know before buying a house

Research recommendations on trustworthy mortgage brokers, then set up a time to talk with each one. If they won’t provide firm information about their rates and fees, or if they start giving advice before fully understanding your financial situation, keep searching. Any good loan officer will save time and money by researching loan terms and rates that work in your best interest

2. Work with an experienced agent.

Before buying a house, going through online listings is a great start. However, don’t underestimate the value of working with an experienced real estate agent. They will help navigate the confusing process of buying a home, and once you find a place you love, they can research comparable listings, advise on what your opening offer should be and negotiate for you. And since home sellers pay all broker commissions, having an agent represent you as a buyer is FREE!

To find the best one, make a short list of possible agents based on word-of-mouth recommendations and/or internet research. Then meet with them to get a feel for their personality and their knowledge on the neighborhoods.

If you are new to the home buying process, stick with a buyer’s agent. They will negotiate, point out any problems with the house that they see, and handle potential issues whenever possible.

3. Don’t be turned off by an ugly bathroom.

A funky paint color or outdated design can cause a buyer to overlook a home that’s otherwise has tons of potential. Remember, cosmetic changes are easy to make once move in, and pointing out any dated features can actually help the negotiation process.

Instead of focusing on the pink-tiled bathroom or that ugly light fixture, pay more attention to the layout of the property, the view, the amount of sunlight rooms get, ceiling height, outdoor space and of course, the location.

4. Find out about the neighbors.

Once you find a home you love, walk the neighborhood to make sure it will be a livable situation. It also helps to visit the neighborhood at different times of the day and week to get a better feel of what life there is really like. Talk to neighbors and get their take on the area as well.

5. Be prepared to move fast.

The best properties receive multiple offers after the first open house, so it’s possible to miss the chance to submit an offer. Your agent will include your pre-approval letter in the offer so the seller knows it is serious. If there is a lot of interest in the home, write a letter to the seller explaining why you’d be the best next owner. You can even included a picture of your and your family. This is also referred to as a “seller love letter” and can work wonders to getting your offer accepted.

6. Be careful about overbidding.

If you plan on financing your home and get caught in a bidding war, beware that overbidding can come back to bite you. Your bank will require an appraisal of the home. If the appraisal comes in under the amount of the loan you need, you might have to make up the difference in out-of-pocket cash in order to complete the deal. Before you make an offer, research comparable listings or ask your real estate agent for advice. If you can, consider increasing your down payment instead of going up higher in price. Cash is king, so putting more money down can give your offer an edge over other buyers.

what to expect when buying a home7. Expect a ton of paperwork.

When applying for a loan, be ready to provide a ton of paperwork, including tax returns, pay stubs and proof of your current assets. You may also be asked to provide updated information on some of the same documents right before closing. This is not the best time to switch jobs or buy a new car, since your income and credit will be closely scrutinized.

8. Hire a home inspector.

Protect yourself and hire a professional inspector to look over the home before you compete the purchase. For $300-400, their inspection will help expose potential problems that could cause you problems and a ton of money down the road. A good inspector will attend to seemingly insignificant details. It also provides a negotiation point to ask the seller for any repairs to be made at their expense.

9. Expect to feel like you are hemorrhaging money.

It’s surprising how quickly costs add up. Fees of $200 here, and $150 there can be unexpected. Besides the down payment, there is the deposit, appraisal fee, home inspection, moving, and more expenses besides the actual buying price. Additionally, most lenders ask that a buyer has enough to cover at least two mortgage payments after closing, which means there needs to be cash in the bank. Go over all of the closing costs with your lender and agent to avoid surprises.

10. It will feel like it will never happen.

Buying a home is not easy. Finding a great place to live takes time, and once you find it, you can easily get outbid. Just remember that new listings are always coming onto the market and, eventually, there will be something you love.

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com
Visit my Website: http://ryanyourrealtor.com
This theme is sponsored by California along with Texas, Radio and corporate office contact address
Sitemap