mortgages http://www.wisebread.com/taxonomy/term/7866/all en-US Everything a First-Time Home Buyer Needs to Buy a House http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/everything-a-first-time-home-buyer-needs-to-buy-a-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_home_buyers_000062916622.jpg" alt="Couple learning what they need to buy a house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The number of people buying homes for the first time is falling, according to the most recent data from the National Association of Realtors.</p> <p>According to the association's 2015 Profile of Home Buyers and Sellers report, only 32% of buyers in 2014 were purchasing a home for the first time. That's the second-lowest percentage of first-time buyers since the survey's start in 1981, beating out only 1987's survey, in which just 30% of all buyers were first-timers.</p> <p>However, this still means that plenty of first-timers are in the market today. And they are entering a housing market in which prices in major markets are continuing to rise.</p> <p>What do these buyers need to successfully land that first home? Here are five of the most important advantages that a first-time buyer can bring to the house hunt.</p> <h2>A Large Down Payment</h2> <p>Mortgage interest rates remain at historically low levels. According to Freddie Mac's Primary Mortgage Market Survey, the average interest rate on a 30-year fixed-rate mortgage loan stood at 3.59% as of April 7. That's the lowest this figure has been in 2016.</p> <p>But to qualify for such a low rate, first-time buyers &mdash; and all buyers, really &mdash; will need a solid down payment. In general, the larger the down payment you can provide, the lower your mortgage interest rate will be.</p> <p>There's a reason for this: When you have more money invested in your home at the start, lenders believe that you'll be less likely to stop paying your mortgage should you run into financial challenges. This makes lending you mortgage money less of a risk. And when you're less of a risk, lenders don't need as high of an interest rate to protect themselves.</p> <p>Ideally, you can come up with a down payment of 20% of your home's purchase price. That's a lot of money, though; for a home costing $200,000, such a down payment would cost $40,000. Fortunately, you can still qualify for solid rates even with a down payment as low as 5% of your home's purchase price, if your other financials are strong.</p> <h2>A Good Credit Score</h2> <p>Your FICO credit score is a key number when buying a home. Lenders rely on this number to gauge how well you've handled credit and paid your bills in the past. In general, lenders consider a FICO credit score of 740 or higher to be a good one.</p> <p>Realtor.com reports that the average FICO credit score of approved mortgage borrowers stood at 718 during the last six months of 2015 and the first three of 2016. If your score is near that level, then, you should have a good chance of qualifying for a mortgage loan.</p> <p>The higher your score, the lower your interest rate will be. Getting to that 740 level isn't always easy. According to Realtor.com, the average U.S. adult with a credit score had a score of 695 during the last six months of 2015 and the first three of 2016.</p> <p>A host of factors determine your credit score. The <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">key to a good score</a>, though, is relatively simple: Pay your bills on time every month, cut down your credit card debt, and never close a credit card account, even when you don't use it.</p> <h2>Plenty of Cash</h2> <p>You'll need plenty of cash to buy your first home. First-time buyers, in fact, typically need <em>more </em>available funds because unlike repeat buyers, they can't count on any cash from selling a home.</p> <p>You'll need cash for your down payment, of course. But you'll also need it for closing costs. Closing costs are the fees that lenders and other third-party sources, such as title companies, charge for closing your mortgage loan. Closing costs can vary, but in general they average about 2.5% of your home's purchase price.</p> <p>If you are buying a home that costs $180,000, you can expect to pay about $4,500 in closing costs.</p> <p>The good news? You can accept gifts from relatives or friends to cover your closing costs. The key, though, is that these gift funds have to truly be gifts. The person gifting you the dollars can't expect you to pay them back. Otherwise, your lender will count your gift as a loan, and that will boost your monthly debt obligations.</p> <h2>A Low Debt-to-Income Ratio</h2> <p>Your debt-to-income ratio is another key number when you're buying a home. As the name suggests, this ratio compares your monthly debt obligations with your gross monthly income. Lenders today want your total monthly debts, including your estimated new mortgage payment, to equal no more than 43% of your gross income.</p> <p>If your debt-to-income ratio is too high, you'll struggle to qualify for a mortgage. Lenders will worry that adding a mortgage payment to your already high debt obligations will boost the chances that you'll fall behind on your home-loan payments.</p> <h2>A Steady Income</h2> <p>Lenders prefer that you have a work history of at least two years at your current employer or, at the least, in your current field. Not having this history isn't usually a deal-breaker, but it can cause lenders to hesitate before approving you. And if you have any other financial challenges &mdash; high debts or a middling credit score, maybe &mdash; a shaky job history will increase your odds of a mortgage rejection.</p> <p>When you apply for a mortgage loan, you'll have to provide lenders with a signed letter from your employer stating your position and annual salary. Lenders want to make sure that your monthly income is high enough to support the addition of a mortgage payment.</p> <p><em>Anything we've overlooked? What else does a first-time buyer need to buy a home?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-a-30-year-mortgage-is-a-smart-financial-choice">Here&#039;s Why a 30-Year Mortgage Is a Smart Financial Choice</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-times-you-shouldnt-rush-to-pay-off-your-mortgage">5 Times You Shouldn&#039;t Rush to Pay Off Your Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit score debt down payments first-time buyers mortgages new homeowners Thu, 28 Apr 2016 10:01:08 +0000 Dan Rafter 1697849 at http://www.wisebread.com You've Defaulted on Your Loan. Now What? http://www.wisebread.com/youve-defaulted-on-your-loan-now-what <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/youve-defaulted-on-your-loan-now-what" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_stressed_bills_000080184545.jpg" alt="Woman figuring out what to do after loan defaults" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You never planned on missing those mortgage payments or falling behind on your student loan obligations. But maybe you lost a job, or maybe you didn't land that higher-paying position you imagined when you first took out your loans.</p> <p>Now, you're in default &mdash; behind on your payments. You've received warning letters from your creditors, and collection agencies are leaving messages on your voicemail. What can you do?</p> <p>There are steps you can take to dig your way out of default. None of them are pleasant, but if you're willing to work, you can stop the calls from collection agencies, pay back what you owe, and move on to better financial times.</p> <h2>When Are You in Default?</h2> <p>There's a difference between being late on your loan payments and in default. Official default varies according to loan. You're considered in <a href="https://www.consumer.ftc.gov/articles/0194-trouble-paying-your-mortgage">default on your mortgage</a> payment if you're more than 30 days late. You're not officially in <a href="https://studentaid.ed.gov/sa/repay-loans/default">default on your student loan</a> payments until you're 270 days late.</p> <p>Being in default can be costly. Your lender will start charging late fees, and your credit score will plummet by at least 100 points.</p> <p>If you miss too many mortgage payments, your lender will eventually begin the foreclosure process, which could end up with you losing your home. If you go into default on your federal student loans, the consequences can be equally severe: The government could begin garnishing your wages, automatically deducting up to 15% of your paycheck to recover what you owe. The government can even <em>sue </em>you for what you owe. You can't even discharge your federal student loan debt through bankruptcy.</p> <p>And no matter what type of loan on which you default, you'll face additional fees charged by the collection agencies tasked with forcing you to pay up.</p> <h2>What Can You Do?</h2> <p>It's obvious, then, that being in default is bad news. But what can you do to alleviate your financial suffering if you've already fallen into default?</p> <h3>Talk to Your Creditors</h3> <p>The first step, no matter what debt you are facing, is to call your lender. Yes, that's not an easy call to make. But your lender might offer solutions to your debt problems. Your mortgage lender might offer to lower your interest rate to make your monthly payments more affordable. It might even offer a modification, in which it changes the terms of your loan so that you end up with a payment that fits more comfortably in your budget.</p> <p>The lender behind your student loan might offer you a debt-consolidation program, in which all of your loans are consolidated into one monthly payment that you can afford.</p> <h3>Don't Ignore It</h3> <p>If you don't call, and if you try to ignore your debt, the problem will only grow. Don't expect your creditors to forget about you. They'll simply keep adding to the fees they're charging you. At the same time, your credit score will continue to drop.</p> <p>If you're in default on a federal student loan, you might qualify for the Federal Loan Rehabilitation Program. This is a one-time chance to remove the default from your federal student loans from your credit reports and to start making your payments over again with a clean slate.</p> <p>Call your student-loan lender to request this program. Once you are in rehabilitation, if you make nine on-time payments within a 10-month period on your federal student loans, your default status will disappear from your credit reports. This will be a big help to your credit score. You can then work with your lender to select the right repayment plan for you, hopefully leaving you with a monthly payment that you can afford.</p> <p>This option isn't available on other loans on which you've defaulted, of course. And if you can't work out a repayment plan with these lenders, then you'll have to face the consequences. If you default on your mortgage, this means potentially losing your home. If you default on your auto loan, your creditors can repossess your auto loan.</p> <h2>Rebuild Your Credit</h2> <p>After these consequences happen? Your next move is to rehabilitate your credit score. This is an important step: You'll need a strong credit score to qualify for credit cards and future loans. Lenders today consider a FICO credit score of 740 or higher to be a good one. If your score is too low, lenders will either deny your requests for loans or charge you high interest rates.</p> <p>Repairing damaged credit isn't complicated, but it does take time. Make all of our monthly payments on time. Pay down your credit card debt &mdash; but don't close credit card accounts that you've paid off and no longer use. Doing so reduces the amount of credit available to you and will cause your score to fall. (See also: <a href="http://www.wisebread.com/what-are-secured-credit-cards?ref=seealso">How Secured Credit Cards Can Rebuild Your Credit</a>)</p> <p>You'll have to be patient here. It can take months, a year, or longer of paying your bills on time and slashing your credit card debt to repair your credit score. The effort, though, is worth it. It's not until your credit score is a healthy one that you can truly say that you've put your loan default behind you.</p> <p><em>Have you ever defaulted on a loan? How'd you bounce back?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/youve-defaulted-on-your-loan-now-what">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you">15 Surprising Ways Bad Credit Can Hurt You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/save-70000-or-more-with-4-simple-credit-score-boosts">Save $70,000 (or More!) With 4 Simple Credit Score Boosts</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-easy-ways-to-raise-your-credit-score-this-year">7 Easy Ways to Raise Your Credit Score This Year</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-botch-up-then-peddle-back-to-good-credit">How to Botch Up, Then Peddle Back to Good Credit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance building credit credit score default late payments mortgages owing money student loans Wed, 06 Apr 2016 10:00:12 +0000 Dan Rafter 1683676 at http://www.wisebread.com The Fed Raised Rates — Then Something Weird Happened http://www.wisebread.com/the-fed-raised-rates-then-something-weird-happened <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-fed-raised-rates-then-something-weird-happened" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_concerned_computer_000038377234.jpg" alt="Woman wondering what happened after Fed raised rates" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In December of last year, the Federal Reserve Board raised its benchmark Federal Funds Rate for the first time in more than a decade. Before the move, economists warned consumers to brace for a jump in the interest rates they pay on mortgage loans, auto loans, and credit cards.</p> <p>But a funny thing happened: pretty much nothing.</p> <p>Consumer interest rates haven't jumped much, if at all, since the Federal Reserve's move. That's good news for consumers who haven't had to pay more to borrow money. But it does lead to a big question: How long will the low interest rates on mortgage loans and other debt last?</p> <p>That's a question that no one can accurately answer. And, as now apparent, it's one that the Federal Reserve Board might be able to influence but won't be able to directly control.</p> <h2>The Fed's Move</h2> <p>The Federal Funds Rate is important: It affects the interest rates that banks charge on important consumer products such as mortgage loans, personal loans, auto loans, and credit cards. But the Federal Funds Rate only <em>influences </em>these rates. They don't directly set them.</p> <p>That's why consumers haven't seen, for instance, mortgage interest rates budge much from the historic lows at which they still remain.</p> <p>The Federal Reserve Board had set its funds rate at zero since 2008. Back then, the Fed took this move as a way to help the economy survive the Great Recession. But as the economy has slowly improved, members of the board's Federal Open Market Committee &mdash; which guides and sets the Federal Funds Rate &mdash; late last year decided it was finally time to increase this key rate.</p> <p>In December of last year, the Federal Reserve raised the funds rate by 25 basis points, moving it from 0% to 0.25%.</p> <p>And that's when financial experts predicted significant jumps in the interest rates that consumers pay. We're still waiting for those big jumps to happen. Why?</p> <h2>Influencing, Not Setting</h2> <p>It comes down to the difference between influencing and setting.</p> <p>Consider mortgage interest rates. Many believe that the Federal Reserve Board sets the interest rates that consumers pay on mortgage loans. It doesn't. Instead, mortgage interest rates are determined by mortgage backed securities, which are indirectly linked to the yield on 10-Year Treasury notes. When yields fall on Treasuries, so does the interest rate on mortgages. Treasury yields fall when demand for notes goes up, such as when the stock market declines (as happened in early 2016) or when the international economy stumbles (as has also happened).</p> <p>This doesn't mean that the Federal Reserve doesn't have any influence over whether mortgage rates rise or fall. After its meetings, the Federal Open Market Committee releases statements that list the opinions and feelings about the economy that its members hold. If the committee members say that the economy is strong &mdash; and their opinions about it are mostly positive &mdash; mortgage interest rates tend to rise.</p> <p>If the committee members instead express negative opinions about the economy, mortgage interest rates will usually fall.</p> <h2>Interest Rates Mostly Stable</h2> <p>Mortgage interest rates have remained at historically low levels for a long time. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage stood at 3.71% as of the week ended March 31. The average rate on a 15-year fixed-rate mortgage loan was at 2.98%. Last year the 30-year stood at 3.70% and the 15-year was 2.98%</p> <p>The New York Times on March 18 reported that the average interest rate on a 60-month loan for a new car stood at 3.15%. That's up only slightly from a year ago, when this rate was 3.11%.</p> <p>Variable-rate credit cards have seen their average interest rates rise from December of last year, but only slightly. Bankrate reported that as of Dec. 30 of last year, the average interest rate on a variable-rate card stood at 15.80%. As of March 30, the site said that this average had risen to 15.96%. (See also: <a href="http://www.wisebread.com/the-best-low-interest-rate-credit-cards?ref=seealso">Best Low APR Credit Cards</a>)</p> <p>So, yes, the Fed's rate hike might have had a slight impact on some interest rates but it has had no impact on others. The lesson here? Consumers should pay attention to what the Federal Reserve is doing when it comes to its Federal Funds Rate. And any increase in that rate might influence lenders and banks to raise their own rates.</p> <p>But consumers shouldn't panic, either, when the Fed does raise this benchmark rate. A higher Federal Funds Rate might not mean skyrocketing mortgage, auto, and credit card interest rates, because lots of others factors are at play.</p> <p><em>Have you benefited from low interest rates?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-fed-raised-rates-then-something-weird-happened">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-you-need-to-know-about-credit-scores">5 Things You Need to Know About Credit Scores</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-is-how-much-the-feds-interest-rate-hike-might-cost-you">This Is How Much the Fed&#039;s Interest Rate Hike Might Cost You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-the-fed-is-keeping-rates-low-and-what-it-means-for-you">3 Reasons the Fed Is Keeping Rates Low (And What It Means for You)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-surprising-ways-bad-credit-can-hurt-you">15 Surprising Ways Bad Credit Can Hurt You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/oh-noes-inflation">Oh noes! Inflation!</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance federal reserve interest rates loans mortgages the fed Tue, 05 Apr 2016 09:00:07 +0000 Dan Rafter 1682551 at http://www.wisebread.com Here's What Happens to a Mortgage in a Divorce http://www.wisebread.com/heres-what-happens-to-a-mortgage-in-a-divorce <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-what-happens-to-a-mortgage-in-a-divorce" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_new_house_000008511772.jpg" alt="Couple learning what they need to know about divorce and mortgage" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Divorce is a messy and emotional situation, and it can wreak havoc on your finances. One of the major assets that couples share is their home mortgage. Handling your mortgage correctly in the divorce will help you and your ex go your separate ways on the right foot financially. (See also: <a href="http://www.wisebread.com/5-money-moves-to-make-the-moment-you-decide-to-get-divorced?ref=seealso">5 Money Moves to Make the Moment You Decide to Get Divorced</a>)</p> <h2>1. Selling Is Often the Best Option</h2> <p>Your best option is usually to sell your home. This is easiest done if you have equity in the house, and the house can be sold and the profit split. Emotionally, selling will not always be the easiest, especially if you raised your children in that home or have other fond memories. From a financial and logical standpoint, selling the home and splitting the profit is the cleanest way to deal with the mortgage.</p> <h2>2. Decide if One Spouse Can Take Over the House Payments</h2> <p>If one spouse wants to keep the home, then they can refinance the home under their own name. In order to do this, they will need to qualify for the refinance with just their income.</p> <p>It is not wise or advised to trust that your ex will make the mortgage payments. Even if your name's not on the deed, as far as the mortgage company is concerned, you and your ex spouse are both fully liable for the mortgage costs each month. Therefore, if your ex misses a payment, or if something happens to them, such as disability or death, you will still be held accountable for the payments.</p> <p>Even if your ex is the most trustworthy person, having your name tied to that mortgage loan means that you will not be able to get another mortgage unless you have enough income to qualify for another mortgage. It might even prevent you from getting a place to rent, since many landlords want to be sure you have enough income to pay for the rental.</p> <h2>3. Should You Sign a Quitclaim Deed?</h2> <p>A quitclaim deed is a legal way to transfer interest of real property. Signing this deed means the person is forfeiting their claim and right to the property. Signing this deed in divorce gives the other party full rights to the home, but your name still remains on the mortgage. You will still be held accountable for any missed mortgage payments and your credit score will be affected.</p> <p>Remember, the deed and mortgage are two different things, and the quitclaim deed cannot remove your name or responsibility from the mortgage.</p> <p>Another important thing to know about quitclaim deeds is that if you sign one, you are forfeiting the right to sell and profit from your home sale. For example, say you sign a quitclaim deed because your ex wants to pay the mortgage, but cannot afford to refinance. Now that your name is off the deed of the home, your ex can sell or refinance the house any time and will not owe you anything.</p> <h2>4. When You Can't Afford to Sell</h2> <p>While selling the home is the cleanest solution, things get complicated when more is owed on the mortgage than the house is worth. Couples that cannot afford to sell the home during the divorce can try one of these three options.</p> <h3>Short Sell the Home</h3> <p>A &quot;short sale&quot; is a home sale in which the mortgage lender agrees to accept less than the full value of the property and cancel the debt. A short sale will negatively impact your credit score and it can have tax implications, as the debt cancellation offered by the lender is viewed by the IRS as income. (Note that a law passed in 2007, and subsequently <a href="http://eyeonhousing.org/2015/12/tax-extenders-bill-what-the-housing-industry-needs-to-know/">extended through 2016</a>, exempts debt cancellation income.)</p> <h3>Rent the Home</h3> <p>If both you and your ex can agree on renting the home out for a period of time, then you can delay the sale of your house until you have more equity. Renting does buy you time and prevents a short sale, but renting comes with a host of responsibilities &mdash; which you'll share with your ex.</p> <h3>Continue to Live Together</h3> <p>This option is for only a select few couples who can live peacefully under the same roof. While the situation is not ideal, it can save both parties money, since it allows them to wait until the house market goes up. (See also: <a href="http://www.wisebread.com/post-divorce-finances-7-steps-to-rebuilding-your-financial-house?ref=seealso">Post Divorce Finances: 7 Steps to Rebuilding Your Financial House</a>)</p> <h2>5. What to Do When Things Get Complicated</h2> <p>Divorce can bring out the worst in people, and many times, an ex spouse will not be willing to sell the home or some other issue. This is why it is important to consult with a divorce attorney. A divorce attorney can help you understand your legal rights when it comes to the mortgage and protect you from doing something unwise.</p> <p>It is a good idea not to finalize the divorce until your mortgage issues are settled. Be prepared to get court orders to make your ex remove your name off of the mortgage through selling or refinancing.</p> <p>No one buys a house with their spouse with intent on getting a divorce. Unfortunately, these things happen. It is best to protect yourself and your assets by making decisions based on logic rather than emotions.</p> <p><em>What do others need to know about their mortgage during a divorce?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/heres-what-happens-to-a-mortgage-in-a-divorce">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home">Ask Yourself These 5 Questions Before Buying a Home</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/six-options-if-youre-underwater-on-your-mortgage">6 Options if You&#039;re Underwater on Your Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing deeds divorce house payments lawyers marriage mortgages splitting up Tue, 29 Mar 2016 09:30:23 +0000 Ashley Eneriz 1677287 at http://www.wisebread.com 5 Things Lenders Look For in a Loan Application http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-lenders-look-for-in-a-loan-application" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_magnifying_glass_000036490728_0.jpg" alt="Man learning things lenders look for in a loan application" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Banks and lenders take a risk whenever they approve someone for a mortgage loan. There's no guarantee, after all, that the borrower will pay the loan back in time.</p> <p>But there are five key financial factors that lenders look for when approving loan applications. And if you have these key financial positives, your odds of qualifying for a mortgage loan will increase dramatically.</p> <h2>1. A FICO Score of 740 or Higher</h2> <p>Your three-digit FICO credit score certainly ranks as one of the most important numbers for loan applicants. This number tells lenders how well you've managed your credit in the past.</p> <p>Plenty goes into your credit score. But here are the basics: Late or missed payments on credit cards, auto loans, student loans, and other forms of revolving credit linger on your three credit reports &mdash; you have one maintained by each of the national credit bureaus of Experian, Equifax, and TransUnion &mdash; for seven years. And they'll cause your score to drop, often by 100 points. Bankruptcy filings and foreclosures will remain on your credit report for seven to 10 years, and will cause even more damage.</p> <p>So if you want a <a href="http://www.wisebread.com/7-ways-to-increase-your-credit-score-quickly">strong FICO credit score</a>, pay your bills on time and pay down your credit card debt. Lenders today consider a FICO score of 740 or higher to be a top-tier score. If your score is too much lower, you'll struggle to qualify for a mortgage loan. And when you do, you'll pay a higher interest rate.</p> <h2>2. A Debt-to-Income Ratio of 43% or Lower</h2> <p>Credit scores get much of the press, but your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">debt-to-income ratio</a> is another key number when applying for a mortgage. Lenders today prefer working with borrowers whose total monthly debts, including their estimated monthly mortgage payments, equal no more than 43% of their gross monthly income.</p> <p>If your debt-to-income ratio is too high, you'll again struggle to qualify for a mortgage loan. Lenders will worry that you won't be able to afford a monthly mortgage payment in addition to your other debts.</p> <h2>3. A Credit Report Free of Negative Judgments</h2> <p>Lenders get nervous when they see bankruptcies or foreclosures on your credit reports. They worry that you'll again run into financial trouble and not be able to make your monthly mortgage payments.</p> <p>The big challenge is that these negative judgments remain on your credit reports for a long time. A foreclosure remains on your reports for seven years, as does a Chapter 13 bankruptcy filing. A Chapter 7 bankruptcy filing doesn't fall off your reports for 10 years. And while the impact on your FICO credit score lessens over time, lenders can still see &mdash; and stress over &mdash; these negative judgments.</p> <h2>4. A Two-Year Employment History in Your Field</h2> <p>Lenders want to be as certain as possible that your income won't disappear. After all, if that happens, the odds that you'll stop making your mortgage payments will soar. That's why lenders prefer working with borrowers who can show that they've worked in their field for at least two consecutive years.</p> <p>It <em>is</em> possible to get a mortgage loan without this. But having a stronger work history can only help boost your odds of qualifying for a mortgage.</p> <h2>5. Savings</h2> <p>Taking out a mortgage isn't inexpensive. You'll need thousands of dollars to cover your loan's closing costs. And you'll need even more for a down payment. A down payment of 5% on a mortgage loan of $200,000 comes out to a hefty $10,000, for example.</p> <p>But being able to afford these upfront costs is only part of the puzzle. Lenders also want you to have savings in reserve. That way, if your regular monthly income stream dries up because of a job loss or pay cut, you'll have enough money in savings to keep paying your mortgage while you rebuild that income.</p> <p>How much savings you'll need varies by lender. Most lenders, though, will require you to have from two to six months' worth of mortgage payments &mdash; including the money you are paying for property taxes and insurance each month &mdash; saved up.</p> <p><em>Would you qualify for a mortgage according to these guidelines?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-an-fha-home-loan-right-for-you">Is an FHA Home Loan Right for You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit">3 Terrible Things Foreclosure Does to Your Credit</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-prepare-for-a-home-purchase-in-2010">How to Prepare for a Home Purchase in 2010</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit score debt-to-income ratio employment history fico lenders loans mortgages Wed, 02 Mar 2016 10:30:28 +0000 Dan Rafter 1665555 at http://www.wisebread.com 5 Ways to Strengthen Your Finances Before Retirement http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-strengthen-your-finances-before-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/thrifty_woman_money_000033605098.jpg" alt="Woman finding ways to strengthen her finances before retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If retirement is only a few years down the road, hopefully you already have the right <a href="http://www.wisebread.com/how-much-should-you-have-saved-for-retirement-by-30-40-50">retirement savings</a> in place. And nothing can beat a well-funded retirement account that was started early in your career.</p> <p>There <em>are</em> a few more moves you can make before you close the door on your career for good, though. Doing these five things will ensure you have a more comfortable retirement and help stretch your nest egg a little further. (See also: <a href="http://www.wisebread.com/6-retirement-products-that-arent-worth-your-money?ref=seealso">6 Retirement Products That Aren't Worth Your Money</a>)</p> <h2>1. Get Rid of Debt</h2> <p>How much debt do you have right now besides a mortgage? If you have any credit card or other loan debt, now is the time to take serious steps to getting rid of it. Once you move to a fixed income, you do not want your precious savings to fund debt repayment or to be <a href="http://www.wisebread.com/when-to-do-a-balance-transfer-to-pay-off-credit-card-debt">wasted on interest payments</a>.</p> <p>Treat your debt seriously. Taking debt into retirement is like entering a marathon with a broken leg. You will exert too much energy dragging your bad leg around, and might not even cross the finish line.</p> <p>First things first: calculate how much debt you have. Consider transferring your high-interest credit card debt to a promotional credit card that offers 0% APR and <a href="http://www.wisebread.com/the-best-0-balance-transfer-credit-cards">0% balance transfers</a>. This will allow you to pay more towards your debt without wasting money on interest payments. A word to the wise, however: Only transfer as much debt onto our 0% APR card as you can pay off during the promotional period. Otherwise, you'll find yourself in the same position again once the 0% APR promotional period ends and your rate rises.</p> <h2>2. Rethink Your Mortgage and Home</h2> <p>Take a look at your current home and assess it. How much do you still owe on it &mdash; and is it too much house for your retirement needs? Will this be a good home for you when you are in your 80s and have difficulty going up and down stairs?</p> <p>Before you retire, consider the benefits of downsizing your home and mortgage. A smaller home will be less work to maintain and cost less to live in. Not only do smaller houses generally come with smaller mortgages, but they also cost less to heat and cool.</p> <p>If your home is the right fit for your retirement needs, then focus on the mortgage. Paying off your mortgage before retirement is not a small task, but it will free your budget significantly each month.</p> <h2>3. Build an Emergency Fund</h2> <p>Just because you're retired doesn't mean you don't have a need for an emergency fund any longer. Your Social Security benefits, retirement savings, and/or pension are meant to cover your daily living expenses. But how will you pay for an emergency, such as an unexpected hospital visit or car expense? Even a $1,000 emergency can derail your budget and land you into debt if you aren't careful.</p> <p>While you're still working, start saving money in a separate account for emergencies. This money should be easily accessible for small financial disasters that occur before and after retirement.</p> <h2>4. Boost Your Retirement Savings</h2> <p>If you have five to 10 years left until you retire, you still have the special opportunity to boost your retirement savings. Of course, your retirement savings will have seen the most benefit from investing in your 20s and 30s, but taking advantage of catch-up contributions are also wise.</p> <p>Once you turn 50, you become eligible to make additional catch-up contributions to your retirement plan of up to $6,000 more per year. Take advantage of this opportunity to correct for lackluster retirement savings.</p> <p>Remember, temporary cutbacks now can mean a more comfortable and worry-free retirement. Don't forget that contributing the full $24,000 each year after you turn 50 allows you certain tax benefits that can make the extra contributions less burdensome on your budget.</p> <h2>5. Draw Up a Budget and Do a Trial Run</h2> <p>When you first enter retirement, $1&ndash;$2 million dollars can seem like a luxurious amount. But retirement isn't the time to throw out your budget. In fact, your should stick closely to your budget to ensure you don't outlive your money.</p> <p>Once you draw up a realistic retirement budget, try adhering to that budget before you actually need to. Work out your budget kinks before you retire.</p> <p>While many individuals have established retirement savings funds, many have also underestimated what their financial needs will be during the last 20&ndash;30 years of their life. Applying these principles before entering retirement can ensure that your finances stay strong and healthy.</p> <p><em>What are your plans to better yourself before you retire? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/5-ways-to-strengthen-your-finances-before-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-warning-signs-youre-sabotaging-your-nest-egg">6 Warning Signs You&#039;re Sabotaging Your Nest Egg</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account">5 Questions to Ask Before You Borrow From Your Retirement Account</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k budgeting debt emergency funds IRA mortgages savings Fri, 26 Feb 2016 10:00:12 +0000 Ashley Eneriz 1661857 at http://www.wisebread.com 3 Terrible Things Foreclosure Does to Your Credit http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-terrible-things-foreclosure-does-to-your-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_foreclosure_sign_000016301916.jpg" alt="Learning what foreclosure does to your credit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're about to lose your home to foreclosure. Will it destroy your credit? Unfortunately, yes &mdash; your three-digit FICO credit score will plummet following, and leading up to, a foreclosure.</p> <p>There is hope, though. Even after a foreclosure, you <em>can </em>rebuild your credit score. You'll even be able to qualify for a mortgage loan again one day. Just be prepared to wait.</p> <p>&quot;If there is a bright side to foreclosure, it is that credit scores will recover with time and reestablishing a good payment history,&quot; said J.D. Crowe, president of Lawrenceville, Georgia-based Southeast Mortgage and president of the Mortgage Bankers Association of Georgia. &quot;The most important thing for people to know about a foreclosure absolutely, without question, is to always pay everything on time, especially a mortgage payment.&quot;</p> <h2>The Credit Score Drop</h2> <p>Lenders of all kinds rely heavily on your FICO credit score to determine whether they should approve you for a loan, and at what interest rate. If your FICO score is too low, lenders will hesitate to loan you money. When they do, they'll charge you higher interest rates to make up for the risk.</p> <p>Today, most lenders consider a FICO score of 740 or higher to be a good one, indicating a borrower with a history of paying bills on time and not running up too much credit card debt.</p> <p>How far will your FICO score drop if you suffer a foreclosure? There's no one single answer. The actual fall your score takes depends on what your score was before you went through foreclosure, how many missed mortgage payments you accumulated, and whether you had any other missed payments on your credit reports.</p> <p>In general, though, a foreclosure will drop your credit score by at least 100 points &mdash; usually more. And typically, consumers' credit scores have already taken a hit before foreclosure. That's because they usually miss several mortgage payments before lenders start the foreclosure process.</p> <p>Crowe estimates that depending on your individual circumstances, your FICO credit score will fall by 100 to 300 points. If you started with a solid 750 score, it could fall to the low 500s by the time your foreclosure closes.</p> <p>That foreclosure will remain on your credit report for seven years. This means that borrowers will see it every time they pull your credit during this period.</p> <h2>Waiting for Another Mortgage</h2> <p>Don't plan on applying for a new mortgage anytime soon after a foreclosure. First, your credit score will probably be too low. Secondly, mortgage lenders impose mandatory waiting periods for borrowers after a foreclosure.</p> <p>If you want to apply for a conventional mortgage loan &mdash; one not insured by the federal government &mdash; you'll have to wait at least seven years after a foreclosure. You might be able to qualify for a conventional loan after just three years if you can prove extenuating circumstances led to your foreclosure, such as a job loss, illness, or divorce. However, Crowe said that it is very rare for lenders to shorten the mandatory waiting period no matter what you list as the cause of your foreclosure.</p> <p>If you want to apply for a loan insured by the Federal Housing Administration, better known as an FHA loan, you'll have to wait three years from your foreclosure. However, if you can prove that a job loss led to your foreclosure, you will only have to wait one year to apply for a new FHA loan. You will have to prove, though, that the job loss reduced your regular income by at least 20%. You'll also have to provide documents showing that your income has since returned to its previous level or higher.</p> <p>You can apply for a loan insured by the U.S. Department of Veterans Affairs as soon as two years after your foreclosure. But you do have to meet the eligibility requirements to qualify for a VA loan.</p> <h2>Rebuilding Your Credit</h2> <p>Once your score has fallen, it's time to start rebuilding. You can do this by paying all of your bills on time and cutting down on credit card debt. Don't close any unused credit cards, though. Having available credit that you aren't using actually <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">improves your credit score</a>.</p> <p>Over time, your score will slowly improve. And lenders will care less about your foreclosure as the years move on, as long as you don't make any other late or missed payments.</p> <p>Eventually, and usually before the seven-year wait for foreclosures to fall off your credit reports, you will again be able to qualify for auto loans, credit cards, and other loans as long as you show that you are now managing your finances responsibly and paying your bills on time.</p> <p>See also: <a href="http://www.wisebread.com/what-are-secured-credit-cards?ref=seealso">Sign Up for a Secured Credit Card to Raise Your Score</a></p> <p>&quot;If you have had a foreclosure, accept responsibility, pick yourself up, and move on with your life,&quot; Crowe said. &quot;It is not the end of the world. What you must do from this point forward is to pay every creditor on time.&quot;</p> <p><em>Have you gone through a foreclosure? What steps did you take to repair your credit?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-money-moves-to-make-for-tomorrows-mortgage">6 Money Moves to Make for Tomorrow&#039;s Mortgage</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-it-makes-sense-to-apply-for-a-mortgage-loan-without-your-spouse">When It Makes Sense to Apply for a Mortgage Loan Without Your Spouse</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-an-fha-home-loan-right-for-you">Is an FHA Home Loan Right for You?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit reports credit scores FHA fico foreclosures loans mortgages Mon, 22 Feb 2016 10:30:22 +0000 Dan Rafter 1656523 at http://www.wisebread.com Is it Safe to Re-Finance Your Home Close to Retirement? http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-it-safe-to-re-finance-your-home-close-to-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_payments_money_000007934078.jpg" alt="Learning if it&#039;s safe to refinance your home close to retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Lower mortgage rates can save you hundreds of dollars on your monthly payments. Refinancing your mortgage to a new one with a lower rate would then seem to make sense.</p> <p>But what if you're approaching retirement? Is refinancing a smart move when you're planning to leave the workforce in five years or less?</p> <p>Not surprisingly, the answer depends on your unique financial situation and your goal from a refinance. (See also: <a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a>)</p> <h2>Consider the Time Factor</h2> <p>If your main goal is to reduce your monthly costs, refinancing might make sense. But if you plan on moving from your home shortly &mdash; in, say, less than five years &mdash; then a refinance might not be the best option. That's because refinancing a home loan isn't free. The typical refinance costs thousands of dollars &mdash; money that you'll usually roll into your new loan amount and pay off over time when you make your regular monthly payments.</p> <p>It might take you several years to save enough money each month to recover the closing costs. If you're moving too soon (and retirees often move from their homes sooner than they originally planned), you might not generate enough monthly savings to even pay back those initial closing costs.</p> <p>Then there's the time factor. A refinance, unless you are reducing the term of your loan at the same time, means that you'll be paying off your mortgage for a longer number of years. As a retiree, you might instead prefer to pay off your current mortgage in a shorter amount of time.</p> <p>&quot;One consideration is the length of the term on the new loan,&quot; said Arvin Sahakian, co-founder and vice president of BeSmartee, a start-up designed to help consumers search for mortgage loans online. &quot;When people refinance their mortgage, they are re-setting the loan term and essentially starting over again.&quot;</p> <p>As an example, if you are paying off a 30-year fixed-rate mortgage that you have been making payments on for 15 years, you'll have an additional 15 years left to pay off that loan. If you refinance that loan to a new 30-year one, you've just increased the lifespan of your mortgage by another 15 years. Do you want that monthly payment hovering over you for another 15 years, even if refinancing will result in immediate monthly savings?</p> <p>That's not an easy question to answer, especially when you consider how much of your payments on a new mortgage loan, even one with a lower interest rate, will go toward interest instead of principal.</p> <p>&quot;The first few years of mortgage payments on a new loan are designed to go toward the interest, and less towards the principal,&quot; Sahakian said. &quot;As the years go by, more of the monthly payments go toward the principal, and less toward the interest, so this is another important consideration.&quot;</p> <h2>What the Numbers Say</h2> <p>It's important for every homeowner to crunch some numbers before deciding to refinance. But it's <em>especially</em> important for those nearing retirement who might need to recover their refinancing closing costs in as few months as possible.</p> <p>Say you owe $150,000 on a 30-year fixed-rate mortgage with an interest rate of 5%. Your monthly payment, not including insurance and taxes, will be about $805. If you refinance that same amount to a 30-year fixed-rate loan with an interest rate of 3.95%, your monthly payment will drop to about $711 a month &mdash; a savings of about $94 a month, or $1,128 a year.</p> <p>That sounds good, right? But remember, refinancing can be expensive. Say refinancing that $150,000 costs $4,500 in closing fees. It will take you almost four years to save enough from your refinance to pay back these closings costs. Is that worth it? If you stay in your home for eight years or more, it might be. If you end up moving in five years, it might not be.</p> <p>But say you owe $200,000 on a 30-year fixed-rate loan with an interest rate of 5%. Then your monthly payment, again not counting taxes and insurance, would be about $1,073. If you refinance that $200,000 to a new 30-year fixed-rate loan but at an interest rate of 3.95%, your monthly payment would fall to about $949 a month. That's a savings of $124 a month, or $1,488 a year. If your loan closing cost that same $4,500, it would take you just a bit more than three years to generate enough savings to pay for your closing costs. That shorter time frame might make it more worthwhile for homeowners nearing retirement.</p> <p>There is another factor to consider, though. If you'll absolutely need to reduce your monthly living expenses after you retire, then refinancing might make sense, even if it will take you longer to recover the costs of closing.</p> <p>&quot;Many Americans who retire typically see their retirement income fall to nearly half of what they earned while they worked full time,&quot; Sahakian said. &quot;This is one of the considerations borrowers should account for when making a decision about refinancing. Will they be able to afford the monthly payments associated with the mortgage, insurance, and property taxes on their retirement income?&quot;</p> <p><em>Are you considering a home refinance?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows">4 Mortgage Secrets Only Your Broker Knows</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-you-should-consider-an-adjustable-rate-mortgage">Why You Should Consider an Adjustable-Rate Mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quicken-loans-review-competitive-rates-and-good-customer-service">Quicken Loans Review: Competitive Rates and Good Customer Service</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-reduce-mortgage-closing-costs">8 Ways to Reduce Mortgage Closing Costs</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/2-things-you-must-know-about-the-new-mortgage-rules">2 Things You Must Know About the New Mortgage Rules</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Retirement closing costs home loans interest rates mortgages refinancing Mon, 08 Feb 2016 14:00:06 +0000 Dan Rafter 1649872 at http://www.wisebread.com Home Equity Loan or HELOC: Which Is Right for You? http://www.wisebread.com/home-equity-loan-or-heloc-which-is-right-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/home-equity-loan-or-heloc-which-is-right-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_home_loan_000078750729.jpg" alt="Learning if home equity loan or HELOC is right for you" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You'd like to renovate your 1970s-era kitchen. Or maybe it's time to build that master bedroom suite you've long desired. But where to get the money?</p> <p>If you have equity in your home, a home equity loan or home equity line of credit &mdash; better known as a HELOC &mdash; might be the right choice. With both of these loan products, you'll be using the equity in your home to receive an influx of cash that you can then use on anything you want, such as home improvements, your children's college-tuition fund, paying off high interest rate credit card debt, or even taking a cruise around the world.</p> <p>But you do have to pay back the money, of course. And you should also understand the differences between a HELOC and a home equity loan. Despite the similar names, these products are different. And one might be the better choice for you. (See also:&nbsp;<a href="http://www.wisebread.com/real-estate-terms?ref=seealso">21 Real Estate Terms Every Home Buyer Should Understand</a>)</p> <h2>Home Equity Loans</h2> <p>A home equity loan is similar to your primary mortgage loan, only smaller. You can borrow a certain amount as long as it does not exceed the equity in your home. For example, if you owe $150,000 on your mortgage loan and your home is worth $200,000, you have $50,000 of equity in your home.</p> <p>Most lenders won't lend you that full $50,000. But you might be able to take out a loan for, say, $35,000. You'd then receive those dollars in one lump sum that you'd pay back with regular monthly payments, much like you do with your primary mortgage loan.</p> <p>Your home equity loan will come with its own interest rate, which is usually fixed. You will also have a set number of years, perhaps 10, to pay it back, and a monthly payment that remains the same until you do pay off your debt.</p> <h2>HELOCs</h2> <p>A HELOC acts more like a credit card with a maximum spending limit tied to your home's equity. If you have $50,000 of equity, your lender might approve you for a HELOC with a maximum borrowing limit of $40,000. You can then borrow as much or as little as you need to cover home repairs or other expenses.</p> <p>Here's an example: Say you want to spend $20,000 to renovate your home's kitchen. If you have a HELOC with a spending limit of $40,000, you'd be able to borrow that $20,000 and still have $20,000 more to borrow in the future.</p> <p>You can't borrow off a HELOC forever. Most come with what is known as a &quot;draw period&quot; that lasts from five to 10 years. This is the period during which you can borrow off your HELOC. You'll also make monthly payments depending on how much you've borrowed, but you'll only have to pay the interest on the money you borrowed, not the principal.</p> <p>After this period ends, your HELOC will enter its repayment period. During this time, you'll pay back whatever you borrowed in monthly installments. Your monthly installments will be larger or smaller depending upon how much you borrowed, just like with a credit card. If you only borrowed $10,000 during the life of your HELOC, your monthly payments will be smaller than if you borrowed $40,000.</p> <h2>What's Right for You?</h2> <p>So, should you go with a home equity line of credit or a HELOC? That largely depends upon your personality.</p> <p>If you prefer monthly payments that never change along with an interest rate that remains fixed, then a home equity loan is your better choice. These loans are also a smart move if you have a specific project that you want to fund. If you know you need $15,000 to cover the costs of a second-floor addition to your home, you can borrow exactly that amount with a home equity loan and then know exactly how much that loan will cost you each month.</p> <p>A HELOC comes with more uncertainty. The interest rates attached to HELOCs are usually adjustable, meaning that they can rise or fall. This also means that your payments during the repayment period might increase.</p> <p>But HELOCs are a good choice if you want some flexibility with your money. Say you're taking on a long-term home renovation. If you take out a HELOC, you can withdraw money whenever you need to pay your contractors. This gives you access to a pool of funds without having to pay interest on that money until you actually borrow it.</p> <p>&quot;People should simply consider whether they are comfortable with an adjustable rate, because a line of credit will be adjustable,&quot; said Matt Hackett, operations manager with New York City-based direct mortgage lender Equity Now. &quot;If they are, then they should consider whether they are likely to draw the entire portion up front, or whether they want to have access to the funds, but don't need to draw it all at one time. If they do not need it all at once, the line may be a better option as they will only pay interest on the funds they draw.&quot;</p> <p>Lenders also tend to charge lower fees to start a HELOC than to originate a home equity loan, and home equity loans often come with interest rates that are higher than the starting rates for HELOCs. With a home equity loan, you have to pay interest on all the money you borrow all at once, whether you use that money or not. With HELOCs, you only pay interest on the money that you end up borrowing, even if you have access to more funds.</p> <p>Just be careful: Having that big line of credit that comes with a HELOC is tempting. You might spend it recklessly, borrowing, say, $5,000 for a last-minute family vacation instead of saving up the funds in advance to take such a trip. Home equity loans are often better choices for consumers who don't trust themselves to make the smartest money decisions.</p> <p><em>Have you borrowed on the equity in your home? Which form did your loan take?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/home-equity-loan-or-heloc-which-is-right-for-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home">Ask Yourself These 5 Questions Before Buying a Home</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/six-options-if-youre-underwater-on-your-mortgage">6 Options if You&#039;re Underwater on Your Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing borrowing money equity HELOC home equity loans mortgages Wed, 27 Jan 2016 14:00:03 +0000 Dan Rafter 1643289 at http://www.wisebread.com Ask Yourself These 5 Questions Before Buying a Home http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/ask-yourself-these-5-questions-before-buying-a-home" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/family_new_house_000064268645.jpg" alt="Asking yourself 5 questions before buying a home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Buying a home is a major financial decision. The National Association of Realtors reported that in November 2015, the median sales price of existing homes hit $220,300, or 6.3% higher than in the same month one year earlier.</p> <p>As housing prices continue to climb, you need to make sure you're ready to make such a major investment. Here are five questions to ask to make sure that you are financially prepared for owning a home.</p> <h2>1. How Much Money Do You Spend and Earn Each Month?</h2> <p>Real estate professionals say that your total monthly housing expenses, including your estimated new mortgage payment, should never equal more than 28% of your gross monthly income. To know if you can afford your new home's mortgage payment, you'll have to first list what you're already spending each month on such items as car loans, student loans, groceries, and entertainment. (See also:&nbsp;<a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home">4 Easy Ways to Start Saving for a Down Payment on a Home</a>)</p> <p>&quot;Do I really know my current income and all expenses?&quot; asked Glenn Phillips, chief executive officer with Pelham, Alabama's Lake Homes Realty. &quot;If you know this for each month, you'll have a realistic understanding of how much money is available for both the purchase and monthly expenses of owning a home.&quot;</p> <p>Those monthly expenses are important, and can add up. And Phillips reminds homeowners that they'll need to budget money each month for additional expenses such as homeowners insurance, water, sewer, garbage pick-up, and of course, home maintenance.</p> <h2>2. How Handy Are You?</h2> <p>If you're handy enough to handle minor &mdash; or some major &mdash; home repairs and renovations on your own, you might be able to land a home in a desirable neighborhood for a cheaper price. Homes that need updates and renovations usually sell for less, which can be a positive for the handy homebuyer with a limited budget.</p> <p>But be careful: Home renovations might cost more than you think. If you're not able to do at least some of these renovations on your own, you might end up paying far more to update your home than you planned.</p> <p>&quot;Should I buy a home that needs no remodeling and is ready to move in at a higher price, rather than buying the same size home &mdash; but one that needs updating at perhaps a lower price?&quot; asked John Bodrozic, co-founder of digital home management site HomeZada. &quot;If I buy a home that needs some remodeling, how many projects are desired, and what is a realistic budget and time frame to get these projects done?&quot;</p> <h2>3. Can You Afford the Monthly Maintenance?</h2> <p>Having enough money to cover your mortgage, utility bills, property taxes, and homeowners insurance is one thing, but do you have enough dollars to cover the monthly upkeep involved with owning a home?</p> <p>A lot can go wrong with a home &mdash; even a new one. Your water heater might burst. Your roof might start leaking. Even smaller projects like maintaining your yard and landscaping can drain your dollars. It's important that new homeowners have enough financial slush in their accounts to handle the monthly cost of keeping a home running, said Melanie McShane, a real estate broker with Arcadia, California's BrokerInTrust Real Estate.</p> <p>&quot;Buying a home is just the beginning,&quot; McShane said. &quot;Once it is yours, you need to maintain and improve it. Replacing a roof or an AC unit are costly fixes. It is imperative that people have a small savings for the upkeep of the home.&quot;</p> <h2>4. How Strong Is Your Credit?</h2> <p>Your three-digit FICO credit score is an important number. Mortgage lenders will look at it to determine how likely you are to repay your mortgage loan. If your score is low &mdash; say under 640 &mdash; your lender will consider you a risk, and will charge you higher interest rates. If your score is in the excellent range &mdash; usually over 740 &mdash; your lenders will charge you far lower rates, making paying for a home more affordable.</p> <p>Remember that a lower credit score can make the entire process of buying a home more costly.</p> <p>&quot;Your credit is extremely important,&quot; said Michelle Richards, a real estate agent with RE/MAX Gold Coast Realty in Hoboken, New Jersey. &quot;The lower your credit score, the higher the down payment you'll need.&quot;</p> <h2>5. How Long Will You Live in Your Home?</h2> <p>If you don't plan on living in an area for at least five years, buying a home might not be a sound financial decision. Your home's value might not appreciate enough in such a short period of time to allow you to sell it for a high enough cost to cover your selling fees and make a profit, said Bill Golden, a real estate agent with RE/MAX Atlanta Cityside.</p> <p>&quot;Except in rare cases when you'd be buying into a rapidly appreciating market, or you're renovating a total fixer-upper, if you don't plan on staying more than a minimum of two to three years, it probably makes more sense for you to rent,&quot; Golden said. &quot;If you know that your job is going to move you again in two years, buying a home might not be the best solution for you.&quot;</p> <p><em>What questions did you ask before buying your home?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-why-2015-is-the-year-to-buy-a-house">5 Reasons Why 2015 is the Year to Buy a House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-to-finance-a-tiny-house">3 Ways to Finance a Tiny House</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/2-things-you-must-know-about-the-new-mortgage-rules">2 Things You Must Know About the New Mortgage Rules</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing homeownership housing market mortgages new home Thu, 14 Jan 2016 14:00:03 +0000 Dan Rafter 1635471 at http://www.wisebread.com Is an FHA Home Loan Right for You? http://www.wisebread.com/is-an-fha-home-loan-right-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-an-fha-home-loan-right-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/married_couple_house_000023047862.jpg" alt="Couple learning if an FHA home loan is right for them" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're ready to buy a home, and you know that you can afford the monthly payments that come with a mortgage loan. But there's one challenge: You don't have enough money for a large down payment.</p> <p>Don't despair: An FHA loan can help. These mortgages insured by the U.S. Department of Housing and Urban Development's Federal Housing Administration require more affordable down payments, which could make getting the home of your dreams an easier financial task. And borrowers can qualify for FHA loans even with lower credit scores. FHA loans, though, do come with some additional fees, which might impact the overall cost of the mortgage. (See also:&nbsp;<a href="http://www.wisebread.com/heres-why-your-parents-could-buy-a-home-while-you-still-rent">Here's Why Your Parents Could Buy a Home While You Still Rent</a>)</p> <p>Still interested? Read on to learn whether an FHA loan is for you.</p> <h2>When FHA Loans Make Sense</h2> <p>You can technically qualify for an FHA loan even if your FICO credit score is as low as 500. However, that doesn't mean that you won't struggle to find a lender to work with you. The FHA doesn't actually originate loans &mdash; it only insures them &mdash; so, you'll still have to work with a private lender to get an FHA mortgage. And many of these lenders (despite the willingness of the FHA to insure borrowers with such low scores) won't provide mortgage money to borrowers whose scores are too close to 500.</p> <p>Still, FHA loans are a good option for borrowers with credit scores that are below, say, 700. Today's lenders consider FICO scores of 740 or higher to be ideal. They'll reserve their lowest interest rates for borrowers with strong credit. And if your score is below 640, you'll find that only a smaller number of lenders will be willing to work with you. These lenders might recommend that you apply for an FHA loan if your score is too low.</p> <p>FHA loans aren't just a good option for borrowers with weak credit, though. They're also a good choice for borrowers who don't have a lot of money for a down payment. If your FICO credit score is at least 580, you can qualify for an FHA loan that requires a down payment of just 3.5% of your home's purchase price.</p> <p>For a home costing $180,000, that 3.5% down payment comes out to a manageable $6,300.</p> <p>If your FICO credit score is at least 500, you can technically qualify for an FHA loan that requires a down payment of 10% of your home's final purchase price, which is still better than the 20% down payment that some conventional lenders will require.</p> <h2>The Downsides of an FHA Loan</h2> <p>There is a downside to FHA loans: They come with higher fees than conventional loans.</p> <h3>Extra Up Front Costs</h3> <p>If you take out an FHA loan, you'll have to pay two types of mortgage-insurance premiums. The first is an upfront premium of 1.75% of your total mortgage loan. If you take out a loan for $175,000, that comes out to $3,062.75 (you'll have to pay this premium when you take out the mortgage). You can either do this in one lump sum as a closing cost, or you can include it in your loan amount &mdash; turning, say, that $175,000 loan into $178,062.75 &mdash; and pay it off with each of your monthly payments.</p> <h3>Mortgage Insurance</h3> <p>An FHA loan also comes with an annual mortgage insurance premium that you'll have to pay each year. This annual fee depends on the length of your loan and the size of your down payment.</p> <p>If you are taking out a 15-year loan and you put down less than 10% of your home's purchase price, your annual mortgage insurance premium will be 0.7% of your outstanding loan balance. If you put down 10% or more on a 15-year loan, your annual premium will be 0.45% of your loan balance.</p> <p>If you take out a 30-year loan with a down payment of less than 5%, your annual mortgage insurance premium will be 0.85% of your loan's balance. If you put down more than 5% on a 30-year mortgage, that premium will be 0.8% of your balance.</p> <p>So, if you put down 3.5% initially on a 30-year FHA loan and your loan's outstanding balance is $180,000, you'd pay $1,530 that year in mortgage insurance premiums. Again, you would pay that amount off in small amounts with each monthly mortgage payment.</p> <p>Unlike conventional loans, you'll never be able to cancel the mortgage insurance premium. With conventional mortgages, you can cancel your mortgage insurance payments once your loan's balance is 80% or less than your home's market value.</p> <p>So when you're deciding whether an FHA loan is right for you, you'll have to weigh whether the extra yearly fees are worth the convenience of those low down payments and looser credit requirements. For many borrowers who otherwise can't afford the dream of homeownership, the answer may be yes. But if saving a larger down payment for a traditional mortgage <em>is</em> feasible, it's likely to result in lower overall costs.</p> <p><em>Did you buy a home with an FHA loan? What was the process like for you?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/is-an-fha-home-loan-right-for-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit">3 Terrible Things Foreclosure Does to Your Credit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-it-makes-sense-to-apply-for-a-mortgage-loan-without-your-spouse">When It Makes Sense to Apply for a Mortgage Loan Without Your Spouse</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">5 Ways to Qualify for a Mortgage With a Small Downpayment</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-money-moves-to-make-for-tomorrows-mortgage">6 Money Moves to Make for Tomorrow&#039;s Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit scores fha loans fico insurance lenders mortgages Mon, 11 Jan 2016 14:00:03 +0000 Dan Rafter 1634308 at http://www.wisebread.com Here's Why a 30-Year Mortgage Is a Smart Financial Choice http://www.wisebread.com/heres-why-a-30-year-mortgage-is-a-smart-financial-choice <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-why-a-30-year-mortgage-is-a-smart-financial-choice" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_new_house_000051793580.jpg" alt="Couple learning how a 30-year mortgage is a smart choice" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The pros of a 15 versus 30-year mortgage are simple. If you take out a 15-year fixed-rate mortgage loan, you&rsquo;ll pay far less interest over the life of your mortgage. But, if you take out a 30-year <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home">fixed-rate mortgage loan</a>, you&rsquo;ll have a smaller payment each month.</p> <p>Because of this, a 15-year loan would seem to be the smarter financial choice, as long as you can afford the higher monthly payment that comes with it. You&rsquo;ll be savings tens of thousands of dollars in interest by going this route, depending upon how long you hold onto this loan.</p> <p>But there are times when a 30-year loan is the better financial choice, even if the larger monthly payment of a 15-year loan fits within your budget. It all depends upon what you do with the dollars that you save each month thanks to that lower payment.</p> <p>&quot;Choosing a 30-year fixed-rate loan over a 15-year loan gives borrowers a safety net in case they suffer an economic setback,&quot; said Greg Cook, a mortgage consultant with Platinum Home Mortgage in Temecula, California. &quot;While things are good, they can always make the 15-year payment and revert to the 30 when things are tight.&quot;</p> <h2>You Gain Flexibility With a 30-Year Loan</h2> <p>A 30-year mortgage loan provides homeowners with the most flexibility. While this loan requires a lower monthly payment than a 15-year version, homeowners can pay extra each month toward principal if they have extra money available in a given month. This will allow them to pay down their loan at a quicker pace. And if they are having a tougher month, they can pay the lower required payment.</p> <p>&quot;When borrowers are not certain of their job stability, then having a lower minimum monthly payment can be a huge stress-reducer,&quot; said Casey Fleming, author of <a href="http://www.amazon.com/gp/product/0615980708/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0615980708&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=LZERX5HC5JPGLATN">The Loan Guide: How to Get the Best Possible Mortgage</a><em>.</em></p> <p>The 30-year mortgage, because of its lower payment, also makes sense for borrowers who rely heavily on commissions or bonuses as part of their income. If they have a month in which they earn a big bonus, they can pay more on their home loan. If they have a month without a big bonus or commission check, they can instead pay the required lower payment.</p> <h2>But You Spend a Lot More Money Over Time</h2> <p>Going by the raw numbers alone, a 30-year loan rarely makes financial sense if you can afford the payment that comes with a 15-year mortgage.</p> <p>Say you take out a $300,000 30-year fixed-rate mortgage with an interest rate of 4%. If you took the full 30 years to pay off this loan, you'd end up paying a total of $515,608.52 in principal and interest. (This figure doesn't include what you would pay for homeowners insurance and property taxes.) If you took out that same $300,000 as a 15-year fixed-rate loan with an interest rate of 4%, you'd pay a total in principal and interest of $399,431.48 if you took the full 15 years to pay off your loan.</p> <p>You'd save $116,177 by going with the 15-year loan. That's a significant amount of money.</p> <p>But mortgage professionals say that this doesn&rsquo;t automatically make the shorter-term mortgage the right choice. Robert Johnson, president and chief executive officer of The American College of Financial Services in Bryn Mawr, Pennsylvania, said that it makes sense for homeowners to go with a longer loan if they use the money that they'll save each month wisely, such as for boosting their retirement savings.</p> <p>In the above example, homeowners would pay about $786 less each month for a 30-year mortgage. If homeowners use these extra dollars to increase their retirement savings, taking out the longer-term loan might be a good financial decision, Johnson said.</p> <p>&quot;Too often, people stretch their limits and make their mortgage payments but not much else,&quot; Johnson said. &quot;Financial planners know that saving for financial goals is not linear. People need to plan for multiple goals at one time &mdash; making mortgage payments, saving for kids' college expenses, and saving for retirement.&quot;</p> <p>Those homeowners who are disciplined enough to invest their monthly savings are often good candidates for a longer-term mortgage, too.</p> <h2>Invest the Difference, Instead</h2> <p>Robert Greene, regional vice president of Austin, Texas-based The Solomon Group, said that homeowners who have about an extra $425 in savings each month because they are paying off a 30-year mortgage could invest that money in an interest-bearing account. If that account on average generated 8% interest, in 15 years those homeowners would have accumulated about $147,239 in savings. If homeowners continued to invest that same amount of money for 30 years at an average rate of return of 8%, they would have $634,147 in savings.</p> <p>&quot;Would you rather grow equity in a home that is not liquid or equity outside the home that is?&quot; Greene asks.</p> <p>This assumes, however, that you will invest or save that extra money each month &mdash; and that it will earn a higher rate of return than you pay in interest on the mortgage. If you&rsquo;re more apt to spend those extra dollars and you can afford the payment that comes with a shorter-term loan, it might make more sense to go with that 15-year loan and reduce the amount of interest you&rsquo;ll pay.</p> <p><em>Are you taking advantage of the flexibility a 30-year loan offers?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/heres-why-a-30-year-mortgage-is-a-smart-financial-choice">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-tax-deductions-new-homeowners-shouldnt-skip">4 Tax Deductions New Homeowners Shouldn&#039;t Skip</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/first-time-home-buyer-consider-these-5-cities">First-Time Home Buyer? Consider These 5 Cities</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-hidden-housing-costs-new-homeowners-dont-expect">10 Hidden Housing Costs New Homeowners Don&#039;t Expect</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing fixed-rate loans interest mortgages new homeowners Thu, 10 Dec 2015 14:00:35 +0000 Dan Rafter 1618970 at http://www.wisebread.com 2 Things You Must Know About the New Mortgage Rules http://www.wisebread.com/2-things-you-must-know-about-the-new-mortgage-rules <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/2-things-you-must-know-about-the-new-mortgage-rules" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000062153430_1.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The &quot;Know Before You Owe&quot; rules that went into effect October 3rd are supposed to make it easier for consumers to understand exactly how much they are paying for their mortgage loans, and compare offers from different lenders. But could the new rules also slow the mortgage process?</p> <p>Maybe. But any slowdown should only be temporary, said Debbie Hoffman, chief legal officer with mortgage services firm Digital Risk.</p> <p>&quot;In the long-term, no, these new rules shouldn't make it take any longer to close a mortgage loan,&quot; Hoffman says. &quot;It should actually make the whole process more streamlined. It should have a positive impact. But in the short-term, things might take a bit longer.&quot;</p> <p>That's because everyone involved in the mortgage process &mdash; from loan officers, to title insurers, to the underwriters who determine who does and doesn't qualify for mortgage dollars &mdash; has to learn the new lending procedures spelled out in the &quot;Know Before You Owe&quot; rules. But once that happens, Hoffman predicts that the new rules, and the new disclosure forms that they mandate, will make <a href="http://www.wisebread.com/why-you-should-consider-an-adjustable-rate-mortgage">getting a mortgage</a> a less intimidating process for consumers. As for those extra days to close a loan, Hoffman predicts that they will fade away, too, as lenders and underwriters adapt to the new rules.</p> <h2>The Changes</h2> <p>The rules, instituted by the Consumer Financial Protection Bureau, require mortgage lenders to make some changes in the way they hand out mortgage money to borrowers. Consumers don&rsquo;t have to concern themselves with most of these changes. But they should be aware of the introduction of two new forms that list the costs and terms of the mortgage loans for which they are applying, known as the Loan Estimate and the Closing Disclosure. This pair of forms replace four previous disclosures that lenders passed out to borrowers during the mortgage process.</p> <h3>The Loan Estimate</h3> <p>Within three days of submitting a loan application with a lender, consumers should receive the first of the new disclosures, their Loan Estimate disclosure. This disclosure will list how large of a loan you are taking out, the interest rate attached to your loan, your estimated monthly payment, and the estimated amount you'll pay each month in taxes, insurance, and assessments.</p> <p>Just as importantly, the Loan Estimate will list your estimated closing costs and the estimated amount of cash you'll need to bring to the closing table. The second page of the Loan Estimate will break down your closing costs, showing you, for example, how much you'll pay for title insurance, the appraisal of your new home, underwriting services, and a pest inspection.</p> <p>The goal is to make it easier for you to understand how much your mortgage will actually cost you, both at the closing table and over the life of the loan. The Consumer Financial Protection Bureau says that the Loan Estimate also makes it easier for consumers to shop for the best offers from mortgage lenders. That's because consumers will be able to directly compare Loan Estimates from every lender with which they apply.</p> <h3>The Closing Disclosure</h3> <p>The new rules also require lenders to provide you with a second disclosure form, the Closing Disclosure, at least three business days before your scheduled mortgage closing. This disclosure is similar to the Loan Estimate, only it lists your final official closing costs and loan terms. The costs listed on this disclosure are no longer estimates, but are the actual costs you&rsquo;ll pay when you sign the paperwork that makes your loan official.</p> <p>You should take three days to compare your Closing Disclosure with your Loan Estimate to make sure that none of your closing costs have increased greatly. Costs might rise or fall slightly from the time you apply for a loan to the time you receive your Closing Disclosure, but they shouldn't rise by much.</p> <p>If you do notice significant changes, contact your lender to correct the mistakes. If your lender has to send you a new Closing Disclosure with more accurate figures, the three-day review period starts again.</p> <p>&quot;I think the new disclosures add a lot of assets for the consumer,&quot; Hoffman says. &quot;The information is easier to understand. It makes the loan process more transparent. Just the fact that they list exactly how much cash the borrowers need to bring to closing is a nice benefit. The forms should make it easier for borrowers to understand the mortgage process.&quot;</p> <p><em>Have you benefited from the new mortgage disclosure rules?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/2-things-you-must-know-about-the-new-mortgage-rules">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home">Ask Yourself These 5 Questions Before Buying a Home</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-safe-to-re-finance-your-home-close-to-retirement">Is it Safe to Re-Finance Your Home Close to Retirement?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/six-options-if-youre-underwater-on-your-mortgage">6 Options if You&#039;re Underwater on Your Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing closing costs disclosures homeowner know before you owe mortgages new home Mon, 26 Oct 2015 13:15:23 +0000 Dan Rafter 1598468 at http://www.wisebread.com Frayed Relationships, Damaged Credit, and Costly Additions — What a Multi-Generational Home Might Cost You http://www.wisebread.com/frayed-relationships-damaged-credit-and-costly-additions-what-a-multi-generational-home-might-cost-y <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/frayed-relationships-damaged-credit-and-costly-additions-what-a-multi-generational-home-might-cost-y" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/family_home_000043205148.jpg" alt="Family learning what a multi-generational home might cost " title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are your adult children moving back into your home after struggling to find <a href="http://www.wisebread.com/12-gross-jobs-that-pay-pretty-well">well-paying jobs</a> after earning their college degrees? Or maybe you've moved your elderly parents back into your house to help care for them as they age?</p> <p>If so, you're not alone. The Pew Research Center found that a record 57 million U.S. residents in 2012 lived in multi-generational households. That number &mdash; the most recent compiled by the research center &mdash; means that in 2012, 18.1% of the U.S. population lived in a home filled by residents of two or more generations.</p> <p>Living with two or more generations under one roof can prove challenging. It might also become expensive, depending on what modifications have to be done to a home to make sure that everyone &mdash; no matter what generation &mdash; can live in peace. Here's what it might cost you.</p> <h2>Mortgage Matters</h2> <p>Chris Copley, regional sales manager for the Delaware Valley, Pennsylvania, and New Jersey in the Mount Laurel, New Jersey, office of TD Bank, says that he's worked with adult parents and their children who want to buy a multi-generational home together.</p> <p>Such an arrangement can work. But Copley says that buyers need an exit strategy. What happens if after six years, the adult children whose names are on the mortgage note want to move on and buy their own homes?</p> <p>&quot;You need to have that conversation about what happens five to 10 years from now before you all agree to put your names on that mortgage loan,&quot; Copley says. &quot;There has to be an exit strategy.&quot;</p> <p>If there isn't? There could be hard feelings and damaged family relationships. That's because when people on the mortgage decide to leave the arrangement, there aren't many good options available. The owners could sell their home, splitting the mortgage. But that only works well if all parties are happy with selling.</p> <p>The owners could refinance their mortgage loan so that it is only in the name of one of the homeowners. But that assumes that the new sole owners could afford the monthly mortgage payment on their salaries alone. This isn't always the case.</p> <p>Copley's advice: Have a plan in place so that everyone knows what happens if one person wants to ditch the home.</p> <h2>Damaged Credit?</h2> <p>Some multi-generational households only list one generation's names on the mortgage loan. Parents who buy a home with their college-graduate children might only put their own names on the loan and then accept money each month from their children to help cover the costs of the monthly mortgage payment and other housing expenses.</p> <p>Copley says that this arrangement can work if one generation's income is high enough for them to qualify for the mortgage loan on their own. But credit problems can result once one generation moves out of the home.</p> <p>What if your name is on the mortgage and you're only able to make your payment each month because the members of the second generation in your home are covering half of your mortgage? What happens when the members of the generation move out and you can no longer afford the mortgage payment on your own?</p> <p>Copley recommends that multi-generational households not overspend on a mortgage loan. It's best to make sure that the home you buy &mdash; and the mortgage payment that comes with it &mdash; is affordable enough so that the members of just one of the generations can make the payment each month if necessary.</p> <h2>It Might Not Be Cheap</h2> <p>You might decide it is time to move your elderly parents into your home to help care for them. This can be a way to strengthen the bond between you and your parents. But it can also be expensive. You might need to turn main-floor home offices into bedrooms, installing new walls and doorways as you do so.</p> <p>You might also need to install grip-bars in bathrooms and widen hallways to make enough room for wheelchairs. To make sure that everyone is comfortable you might even need to build a new bathroom. You may be living with your elderly parents for 10 years, 20 years or more &mdash; you can't have your parents living like house guests arriving for a three-day stay.</p> <p>Maybe you've decided to buy a new home to make room for yourself and your elderly parents or your adult children. This can prove costly, too. You'll need enough bedrooms to provide enough living space for everyone. And housing prices can jump substantially when you add a greater number of bedrooms to the mix. Zillow found that in 2015, the average price for a three-bedroom home in the United States stood at $173,300. That figure jumped to $291,300 for a four-bedroom home.</p> <p>This doesn't mean that living in a multi-generational home can't work. It just means that families need to discuss financial matters honestly before making a move, and that they need to find a living space that provides enough room and privacy for all of the generations living under one roof.</p> <p><em>How do you make your multi-generational home affordable?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/frayed-relationships-damaged-credit-and-costly-additions-what-a-multi-generational-home-might-cost-y">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-happens-to-a-mortgage-in-a-divorce">Here&#039;s What Happens to a Mortgage in a Divorce</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ask-yourself-these-5-questions-before-buying-a-home">Ask Yourself These 5 Questions Before Buying a Home</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit family living with kids living with parents mortgages multi-generational living Wed, 29 Jul 2015 13:00:14 +0000 Dan Rafter 1501980 at http://www.wisebread.com 5 Ways to Qualify for a Mortgage With a Small Downpayment http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house_of_money_000012291442.jpg" alt="How to qualify for a mortgage loan without 20% down" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're ready to apply for a mortgage loan. Your credit scores are high. Your debt-to-income ratio is low. And you have the employment history that makes you an attractive borrower in the eyes of mortgage lenders.</p> <p>There's just one problem: You don't have enough money to come up with a down payment of 20% of your home's purchase price.</p> <p>The standard rule is that you need a 20% down payment when you are applying for a conventional mortgage, a loan not insured by the federal government. There's a reason for this bit of conventional wisdom: If you don't come up with this 20% down, you'll probably have to pay for private mortgage insurance, which can cost from 0.5% to 1% of your total loan each year. If you borrow $200,000, private mortgage insurance can cost you from $1,000 to $2,000 a year until you build up enough equity to cancel it.</p> <p>Here's some good news, though: You don't really need 20% down to qualify for a <a href="http://www.wisebread.com/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">mortgage loan</a>. There are plenty of government programs that allow you to qualify for a mortgage loan with less. You'll also find that many banks and lenders will loan you mortgage dollars even if you can only come up with a down payment of 5%.</p> <p>Just make sure that you have strong credit and income. The better your financials are, the more likely you are to qualify for a mortgage loan with a lower down payment.</p> <p>If you <em>can</em> afford a down payment of 20%? That's probably your best move. It allows you to avoid private mortgage insurance and it helps you quickly build equity in your home, which could help if your home's value suddenly drops.</p> <p>&quot;While there are mortgage loans that allow less than 20% down, I would discourage it,&quot; says Dan Serra, a certified financial planner from Bethesda, Maryland. &quot;The 20% down to me is a good insurance policy against an unexpected drop in home values in which the homeowner could be trapped with negative equity. I saw this contribute to a lack of mobility for homeowners who had to pass up opportunities to move for a better job or to be closer to family.&quot;</p> <p>If you can't afford a 20% down payment &mdash; and for that $200,000 mortgage a down payment of 20% comes out to a whopping $40,000 &mdash; here are some options for loans that require smaller down payments.</p> <h2>1. Fannie Mae and Freddie Mac's 3% Down Payment Option</h2> <p>Most conventional lenders today offer the 97% loan-to-value program offered by Fannie Mae and Freddie Mac. This program allows borrowers to qualify for a mortgage loan with a down payment as low as 3% of a home's final purchase price.</p> <p>There is a catch, though. At least one of the borrowers applying for this loan must be a first-time home buyer. Your mortgage loan can't be higher than $417,000 for this program.</p> <p>If you're interested in this program, call a mortgage lender licensed to do business in your community. Most lenders offer this option.</p> <h2>2. FHA Loans</h2> <p>Loans insured by the Federal Housing Administration, better known as FHA loans, are another good choice for borrowers seeking a lower down payment. If you have a FICO credit score of at least 580, you can qualify for an FHA loan with a down payment of 3.5% of your home's purchase price.</p> <p>Even if your credit score is lower than 580, you can still qualify for an FHA loan with a lower down payment. If your score is at least 500, you can apply for an FHA loan requiring a down payment of 10% of your home's purchase price.</p> <p>The FHA doesn't originate mortgage loans, so if you want to apply for an FHA loan, you'll need to work with a bank or lender that offers them. Fortunately, the vast majority of lending institutions offer FHA loans.</p> <h2>3. VA Loans</h2> <p>Loans insured by the U.S. Department of Veterans Affairs are an even better option &mdash; if you meet the requirements. VA loans require no down payment at all. To qualify for a VA loan, though, you must be a current or past member of the U.S. Military, National Guard, or Reserves.</p> <h2>4. USDA Rural Home Loans</h2> <p>Another government-insured loan product that requires no down payment is the Section 502 loan insured by the U.S. Department of Agriculture. Better known as a <a href="http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do">USDA Rural Development loan</a>, this loan product is available to homeowners in rural areas and some suburban areas. This program is designed to help borrowers with lower incomes. To qualify for such a loan, your household income can't be higher than the USDA's listed income limits in your county.</p> <h2>5. Call Your Lender</h2> <p>Even if you don't want to take out a government-insured mortgage loan, you might still qualify for a mortgage with a low down payment. Shop around with lenders licensed to do business in your community. You'll find that many will offer loans with down payments of 10%, 5%, or even lower &mdash; if you have the credit scores and income levels to put them at ease.</p> <p><em>Did you buy your home with less than 20% down? what program did you use?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-ways-to-qualify-for-a-mortgage-with-a-small-downpayment">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-it-makes-sense-to-apply-for-a-mortgage-loan-without-your-spouse">When It Makes Sense to Apply for a Mortgage Loan Without Your Spouse</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing down payments lenders loans mortgages pmi Fri, 24 Jul 2015 15:00:12 +0000 Dan Rafter 1494509 at http://www.wisebread.com