How To Choose The Right Mortgage Lender

Shopping around for home loan lenders is just as important as picking out for the right home. You want to choose a lender who is working with your best interest in mind. There are so many lenders that are available and many various types of loans.  So what’s the best for you?

First you need to understand your goals, situation, options and preferences.  Are you a first time homeowner? If so, you want to seek out mortgage lenders who offer FHA home loans and who are willing to work with you step by step to understand the home buying process.

It may be better to choose a local home loan lender with a physical location to help to better accommodate your needs by meeting you in person and discussing all of your questions and explain the home buying procedure step-by-step as you are filling out the paperwork.

Online mortgage lenders often have more competitive rates and could be a better option for borrowers that are familiar or are comfortable with financing a mortgage with a lender that doesn’t have a physical location.

Online lenders are great sources for equity home loans with very competitive interest rates. Online lenders are commonly a little faster because everything is done at the touch of key instead of having to use paper throughout a process.

Mortgage brokers can be a great source for linking borrowers with the right mortgage lenders. They can help you find a lender if you have poor credit or other rare circumstances.

Mortgage brokers work off of a commission and therefore are more likely to make the near impossible possible. The important thing is to choose a lender that offers the kind of home loan you want such as FHA and VA loans, as well as offering the best interest rate for your situation, but you have to be reasonable.

If your credit is less then perfect, you can’t expect to get the same interest rate as an individual with perfect credit. But some home loan lenders are willing to lend money to risky investments and some aren’t. So shop around and see what lenders are out there for you.

Mortgage Points

Mortgage points are financing charges or prepaid interest. One point is equal to one percent of the mortgage amount. The mortgage lender who uses the loans interest rate and current market conditions in determining the mortgage points due helps to determine mortgage points.  The points are collected at the time of the closing. The more points you pay the lower your interest rate.

If you intend to keep your house for longer than three years it is advisable to pay the mortgage points up front to save money with a smaller interest rate if you can afford it.

The two biggest benefits of mortgage points are lowering your interest rate and tax breaks for the home owner.

If you don’t intend to stay in the home for more than 2 1/2 years you might want to look into rebates or negative points. This is where the loan company gives you money for taking a high interest rate. Anything more than three years though and you would be paying a significant amount of interest and are no longer profiting from the rebate because this option is only beneficial for short time home owners.

Negative points are used to finance the settlement cost of the home loan process. You cannot use these points as part of a down payment. Therefore, you should never agree to a higher interest rate whose negative points exceeds that of your settlement cost.

The disadvantage of negative points is often that mortgage lenders who sell their negative points packages using independent mortgage companies. The loan officers and mortgage brokers of these companies some times will take advantage of the situation and raise prices for higher commissions.

Unfortunately it is difficult to identify these discrepancies because it is hard to track those who are raising the negative points. Your best bet is to do your own research and educate yourself about the current negative points packages that are availabe to you to find out if you are getting the best deal.

Most people however find it to be a great investment to pay mortgage points to secure a lower interest rate. The savings that’s produced from this investment gets larger the longer you remain in the home.

Refinance Your Mortgage?

There are a number of reasons regarding refinancing your mortgage. The current interest rates may be lower to switch from an adjustable rate mortgage to a fixed rate, to avoid paying a balloon payment, to eliminate private mortgage insurance or to retain cash from the homes equity. In any circumstance there’s a few steps you want to follow in the process of refinancing your home loan.

Also things you will be needing for the refinancing process are W-2s, tax returns, bank statements, credit card, brokerage account statements, proof of home owners insurance and the title and purchase agreement, along with other requested documents.

First you should take into cosideration how long you would reside in the home in question. If you do not plan on staying in the home for more than 3 years you should consider financing the home loan. It normally takes this length of time to have any financial gains from refinancing.

Also you want to be sure that you’ll save at least one percent on your new APR to have any benefits from refinancing. Don’t forget to count the fees and costs associated with refinancing the mortgage to make sure that you are benefiting from the refinance.

Second you should try refinancing through your current mortgage lender to possibly save on the closing costs. Plus the mortgage lender already hasthe proper files on the property and can expedite the refinancing much quicker than trying to go through a new lender. Also, be sure to lock your interest rate from the beginning of your application procedures so you won’t be affected if rates goes up during that time.

The last thing you should consider when refinancing your loan is the term that you want to refinance for. It is recommended to refinance for all of the remaining months that you currently have remaining on the loan. Although extending the mortgage loan term while refinancing the mortgage can lower monthly payments, it can cost you more in the long run by extending the time in which you are paying on the mortgage.

About The Bi-Weekly Mortgage Program

The Bi-Weekly Mortgage Program is an accelerated mortgage program that enables a 30 year loan to be paid off in as little as 23 years.

The bi-weekly program is normally set by the mortge lender or a third party agency in which an automatic electronic funds transfer is made from the borrowers banking account every two weeks for the amount of half of the monthly mortgage amount owed.

To put in more simple terms, the borrower pays thirteen months instead of twelve months.

The Bi-Weekly Mortgage Program is set up so that the extra principle payments that it collects are gathered in the escrow account and used to pay the principle at the end of the year. It is uncertain on who is benefiting from the interest that is accrued on these monies while they are sitting in the escrow account.

This program is a good choice for someone who wants to pay off his/her mortgage earlier than 30 years but does not want to be hassled by trying to handle a self implemented accelerated program. Basically, the payments are conveniantly automatically withdrawn every couple of weeks so there are no late payments and confusion to the borrower.

You might want to think about trying to implement a bi-weekly mortgage loan program on your own. This is where the borrower applies the above plan without officially doing so through the mortgage lender or third party agency. Just be sure that the extra money is going toward the principal.

This is more versitle because you can adjust the additional amount every month depending on your finances for that month. It’s also advantageous because you avoid the fees associated with bi-weekly mortgage programs.

On the other hand, the bi-weekly mortgage program by a lender or agency may be more effective in the long run because you aren’t able to be tempted skip the additional payments because they are automaticallydeducted from your account.

What About The Mortgage Downpayment?

It’s the bigcompelling question that pops in our minds every time we think about purchasing a home. Where are do we come up with enough for the down payment?  Most people don’t have 20% for the down payment sitting in their bank accounts.

Those people who do are most likely already sitting pretty in a nice home. So where does the average Joe come up with the down payment and why is it so important. Well down payment is important because it shows a lender you’re serious about the home loan you are about to make.

The larger the down payment, the better your interest rate will be. The borrower is much more likely to pay the monthly mortgage on a home that he has invested thousands dollars in. A down payment is viewed as a borrowers insurance that the loan will be repaid.

The fact that this greatly reduces the chances of the borrower defaulting on the monthly loan payments, makes the loan less risky and banks therefore reward the borrower with a lower interest rate. Down payments also decrease the amount of money that needs to be borrowed.

Because interest will be accrued on less principle, the borrower can significantly lower the monthly mortgage payments and total interest paid with the larger down payment.

This is all good, but where do we come up with the money for the down payment?   Some ideas would be to set up a monthly electronic draft to where the funds are automatically drafted from your checking account into your savings. This way you’ll be forced budget for it and it won’t be tempted to use the funds towards something else.

Another idea is to save money from tax returns, bonuses and other extra sources of income to help to finance a down payment. Also, some investments will allow investors to dip into their investment accounts to help finance the buying a home with little or no penalty.

There are no quick solutions. Preparing to purchase a home will take planning and preparation. These ideas are just a few of the ways to effectively save for a down payment.

What’s A Jumbo Mortgage?

Ever wondered how some people purchase those 1,000,000 dollar homes? Although many people put down sizeable down payments, many folks finance a mortgage just like the rest of us. These highly priced home loans are known as Jumbo and Super Jumbo Mortgages.

Jumbo mortgages are loans that surpass $417,000 as of 2006. Super Jumbo loans are mortgage loans that are typically $750,000 or more. These limits are adjusted yearly to reflect the latest market changes.

Jumbo mortgages are also known as non-conforming loans because they do not comply with FHA underwriting loan limits that are set each year. Fannie Mae and Freddie Mac agencies purchase the majority of mortgage securities from the original loan lenders.

They have a upper limit on the maximum dollar value of each mortgage they will buy that complies with the FHA underwriting mortgage limits. In 2006 it was raised to $417,000. Insurance companies and large banks normally help to finance the excessive mortgages like Jumbo and Super Jumbo mortgages that can go up to six million dollars.

Jumbo and Super Jumbo mortgages commonly have somewhat higher interest rates than that of a normal mortgage. Interest rates on these non-conforming loans may also vary according to the home value and property classification.

If you are interested in a Jumbo or Super Jumbo loan you can go to jumboloans.com and fill out a form. Afterwards up to four lenders will reply with their best offer. Filling out this form does not require your social security number. It is also not an application for credit, but connects you to the top mortgage lenders that serve your area.

Afterwards you can contact one or all of these home loan lenders to find out more information about home loans, requirements, and interest rates estimates for the home you potentially want to purchase.

The 80-20 Mortgage Loan

Many people do not have the down payment for homes. They are stuck paying a monthly rental fees and unable to save efficiently for a down payment. There are loans out there to accommodate those individuals who can’t afford to make a down payment.

The 80-20 loan is a mortgage loan that requires two mortgages. One of the mortgages is for 80% of the principle and the other loan is for twenty percent of the loan. The twenty percent loan is also known as a piggyback loan.

The 20% interest rate is commonly a little higher than the 80% loan amount. You can even opt for the interest only on the twenty percent loan to lower the monthly payment.

The 80-20 home loan also exempts the borrower from having to pay the private mortgage insurance or PMI. PMI is needed for any home loan that is over 80% of the value of the home. The 80% mortgage and 20% loan added together is still usually cheaper than one mortgage loan with the PMI insurance. Also home loan interest can be written off on taxes, but not PMI insurance, so the borrower would also be coming out ahead there. Mortgage companies and lenders set up these loans several different ways.

Because the 20% loan is viewed as an equity line of credit it should be refinanced every three to five years. You should compare lenders to learn of the different methods that are used to finance the two mortgage loans and which is the best choice for you.

80-20 loans can help many people. While it is usually popular with those people who do not have the savings for the down payment, it can benefit those who do have the funds, but do not want to dip into their savings or investments. The only money that is due up front by the borrower is the closing costs.

Mortgage – Loans Qualifying

You’ll need to meet a list of qualifications with any type of mortgage loan you apply for. Home mortgage lenders want to make sure they’re going to get their funds back before lending money to a potential customer. There are a couple key qualifications that lenders will have access to find out if you’ll need to qualify for a home loan.

One of the main qualifications is credit history. What’s your credit rating? Do you have any accounts that are presently in default or have you had late payments on any other loans or accounts within the past twelve months?

What’s the amount of outstanding revolving credit (credit card balances)? They use credit checks to help gauge the likeliness that you’ll pay the loan back on time.

All these variables plays a factor in determining if you will get a loan and what kind of interest rate you get. Bad credit can result in not qualifying for a loan or getting a high interest rate because the lender sees you as a high risk investment.

The other major qualification is employment. Are you currently employed? They find out how long you’ve worked, how stable your current job and income are. Your employment information to evaluate your ability to pay off the loan.

An individual who shows a record of numerous job changes with short durations and periods of unemployment between each will be evaluated as someone who is unlikely to have the funds to pay the monthly payments. Whereas someone who has been employed with their current profession for several years and makes a set income shows the ability to make monthly payments on time.

To help expedite your mortgage loan process quicker it would be helpful to have some documents ready such as pay stubs, verification of employment and length of employment. Be ready by checking your credit history in advance to make sure you’ve taken care of any delinquent accounts or things that might cause problems and that everything is correct on your credit report.

Prime and Sub Prime Mortgages

There are two different lender markets, prime and sub prime mortgage lenders. Unfortunately it’s hard to identify these markets from one another except that sub prime mortgage lenders are usually higher than prime mortgage lenders.

Sub prime lenders usually will qualify borrowers that prime lenders turn away. Some lenders offer both prime and sub prime mortgages and usually have the best option because they’ll first try to get the loan autorized for a prime mortgage loan before a sub prime mortgage.

A sub prime lender bases its rates similar to that of a prime lender in accordance to credit ratings, history and the amount of the downpayment. But unlike prime lenders, sub prime lenders aren’t required to carry escrow on loans to cover hazard and fire insurance premiums, mortgage insurance premiums and property taxes.

Sub prime lenders normally will have higher interest rates and fees because they take on a risky market. More sub prime loans falls into foreclosure than those of prime loans. They also have to charge higher fees and interest because more of the applications are processed and doesn’t meet qualification and marketing costs are typically more for sub prime lenders.

Although sub prime lenders benefit borrowers who won’t get accepted for prime loans, that can be a disadvantage to borrowers who do qualify for prime loans. The best way to avoid this is to check with several lenders. Don’t be quick to jump on the first one that makes an offer, especially if they aggressively marketed the loan to you.

Many sub prime lenders are aware that borrowers qualify for prime loans, but these lenders work on a commission and will process a prime borrower for a sub prime loan. It’s up to you, to make certain you don’t get fooled and wind up paying more on interest rates and your home loan.

Should You Get A HUD Home?

The Department of Housing and Urban Development (HUD) is a governmental agency that heads another agency, the Federal Housing Administration better recognized as the FHA, which was produced to lower the restrictions and costs for first time home buyers.

When lenders are forced to foreclose on FHA properties, HUD normally pays off the home loan and keeps ownership of the property.

The Department of Housing and Urban Development then takes the house and sells them in a auction type process. They determine the beginning price from a professional estimation of the value of the home. The home is marketed for 10 days and only occupied owners may bid during this time.

After this time investors may begin placing bids on the home until HUD finds an attractive bid is made which is determined on the opening bid date. HUD homes usually sell above the starting price that was established by HUD to begin the bid.

In some regions an earnest money deposit is needed. The amount can vary depending on the location, but can amount up to fifty percent of undeveloped land. This deposit must be made in the form of bank checks, cashiers checks, or money orders, which are all certifiable.

FHA loans requires you to finance ninety seven percent of the homes value that’s obtained through a HUD bid. This means that the buyer is responsible for the difference between the bid and the homes value plus the three percent required for the down payment.

HUD homes are attractive because there’s a lot of room for negotiation and the opportunity to make a profit off of the purchase. You can find these properties on the Web by management companies that are contracted by HUD to manage the properties. HUD homes are normally available at discounted prices to certain professions such as police officers and teachers as well as non-profit organizations.