home loans http://www.wisebread.com/taxonomy/term/8917/all en-US Surprise! There's a Gender Gap in Mortgages, Too http://www.wisebread.com/surprise-theres-a-gender-gap-in-mortgages-too <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/surprise-theres-a-gender-gap-in-mortgages-too" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_chalk_house_29878474.jpg" alt="Woman facing gender gap in mortgage lending" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The gender gap in earnings is well known. According to a recent report by the Economic Policy Institute, the typical woman can expect to earn 83 cents for every dollar that the typical man earns.</p> <p>But studies show another gender gap that negatively impacts women: Research published by the Urban Institute in September said that women tend to pay more for their mortgages even though they are statistically more likely to pay their loans on time than men.</p> <h2>The Numbers</h2> <p>According to the Urban Institute, about 15.6% of female borrowers have what is known as a &quot;higher-priced mortgage.&quot; Borrowers with such mortgages are charged higher interest rates to borrow their home-loan dollars.</p> <p>How high these rates are at any given time varies. The Urban Institute uses the same definition of higher-priced mortgage used by the Home Mortgage Disclosure Act: a mortgage loan with an annual percentage rate that is higher than the benchmark interest rate known as the Average Prime Offer Rate. That rate stood at 3.58% for a 30-year fixed-rate loan as of June 20 of this year.</p> <p>The Consumer Financial Protection Bureau considers a first mortgage loan to be a higher-priced mortgage if its annual percentage rate is 1.5% or more higher than the Average Prime Offer Rate.</p> <p>The Urban Institute found that while 15.6% of female-only borrowers are paying off higher-priced mortgages, just 15% of male-only borrowers are doing the same. The institute found that male-female borrowers who apply for loans together receive higher-priced mortgages only 7.6% of the time.</p> <h2>Why Are Women Paying More?</h2> <p>Why do single women pay more for their mortgages? It's difficult to tell. It might come down to income. The Urban Institute reported that single female borrowers tend to have lower annual incomes than single males. According to the institute, single female borrowers earned an average of $69,200 a year. Single male borrowers had an average income of $94,700. Male-female borrowers had an even higher annual income of $119,000.</p> <p>Income is one of the financial factors that lenders consider when deciding who qualifies for a mortgage and what interest rates they pay. Lenders often charge higher rates as a form of financial protection when they worry that borrowers' incomes are lower, because they fear that these borrowers will be less likely to pay their loans back on time.</p> <p>Borrowers with lower incomes also have less money for a down payment. When borrowers put down less for a house, they are typically charged a higher interest rate, again to make up for the extra risk that lenders take on when loaning them money. Lenders assume that borrowers who put less money down are more likely to stop paying their mortgage loan if they suffer a financial crisis.</p> <p>But what about FICO credit scores? These three-digit numbers tell lenders whether borrowers have a history of paying their bills on time or if they tend to miss payments and run up credit card debt. Lenders charge higher interest rates to borrowers with low credit scores.</p> <p>But from 2004 to 2014, the Urban Institute found, female-only borrowers had an average FICO credit score of 711, similar to the average 712 score of male-only borrowers. That score is significantly lower, though, than the 725 average score submitted by joint male-female borrowers.</p> <p>Credit bureau Experian reported in March of this year that the average FICO credit score for all women is 675, a bit higher than the average score of 670 for men. Women also had 3.7% less average debt than men, according to Experian.</p> <h2>Better Record</h2> <p>Despite paying more for their mortgages, female-only borrowers tend to do a slightly better job of paying them on time than do male-only borrowers. According to the Urban Institute, female-only borrowers had a default rate on their loans of 9.6% from 2008 through 2010. Male-only borrowers had a slightly higher default rate of 9.7% during this same time.</p> <h2>What to Do?</h2> <p>What does all this mean for women applying for mortgage loans? If they are applying for mortgages on their own and want the lowest interest rates possible, they need to make sure that their finances are strong.</p> <p>This means that their FICO credit score should be at least 740 if they want to qualify for the lowest interest rates. It also means that their monthly debts, including their estimated new mortgage payment, should be 43% or less than their gross monthly income.</p> <p>Single male borrowers need to focus on the same factors, of course. But the research from the Urban Institute indicates that strong FICO scores and debt-to-income ratios are especially important for single females who want to avoid the financial burden of a higher-priced mortgage.</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/surprise-theres-a-gender-gap-in-mortgages-too">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/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-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/should-you-pay-your-mortgage-off-early">Should You Pay Your Mortgage Off Early?</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-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</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/3-hidden-dangers-of-refinancing-your-mortgage">3 Hidden Dangers of Refinancing Your Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing gender home loans interest rates mortgage gap wage gap women Tue, 29 Nov 2016 11:00:09 +0000 Dan Rafter 1834563 at http://www.wisebread.com Everything You Need to Know About Freddie Mac and Fannie Mae http://www.wisebread.com/everything-you-need-to-know-about-freddie-mac-and-fannie-mae <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/everything-you-need-to-know-about-freddie-mac-and-fannie-mae" 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_000085110139.jpg" alt="Couple learning everything about Freddie Mac and Fannie Mae" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you're applying for a mortgage loan, you've undoubtedly heard the names Fannie Mae (<a href="http://www.fanniemae.com/portal/index.html">Federal National Mortgage Association</a> or FNMA) and Freddie Mac (<a href="http://www.freddiemac.com/">Federal Home Loan Mortgage Corporation</a> or FHLMC). But if you're like most consumers, you have little idea of what Fannie and Freddie actually are, and more importantly, what they do.</p> <p>Both Fannie and Freddie have the same purpose: They buy mortgages from banks, mortgage companies, and savings and loans in order to free up more of their capital for mortgages. These lenders use the extra cash gained by selling their loans to Fannie and Freddie to lend more mortgage dollars to future homebuyers. (See also:&nbsp;<a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house?ref=seealso" target="_blank">Everything a First-Time Home Buyer Needs to Buy a House</a>)</p> <p>In other words, the purpose of Fannie Mae and Freddie Mac is to ensure that there is mortgage money in the system when you're ready to take out a mortgage loan.</p> <h2>The History of GSEs</h2> <p>You might think of Freddie Mac and Fannie Mae as lenders. That's incorrect. They are officially known as <em>government-sponsored enterprises</em>, or GSEs. And they are the only two GSEs in the country.</p> <p>As a GSE, both Freddie and Fannie are privately owned. But they do receive financial support from the federal government. In return for that support, Fannie and Freddie have agreed to purchase a specific number of loans made by private lenders to low- or moderate-income borrowers. Lenders face a higher risk that such borrowers will default on these loans, and they might not be willing to make as many of them if the two GSEs didn't agree to purchase a percentage of them.</p> <p>It's impossible to know how many of these loans to low- or moderate-income borrowers lenders would make without the promise of these future purchases by the GSEs. But the federal government believes that without the efforts of Freddie and Fannie, the number of these loans would drop.</p> <p>Freddie and Fannie provide what is known as a secondary market for mortgage lenders. They purchase mortgages from lenders, hold some of them in their own portfolios, and sell some as securities that they guarantee. Freddie Mac and Fannie Mae only purchase conforming mortgages that are not guaranteed by a government agency, such as the Department of Veterans Affairs and the Federal Housing Administration.</p> <p>Because they receive support from the federal government, the securities that Fannie and Freddie sell are considered especially safe investments. In fact, investors consider the securities sold by the two GSEs to be almost as safe as securities issued by the federal government itself.</p> <h2>How Do the GSEs Help You?</h2> <p>You won't deal directly with either Freddie Mae or Freddie Mac when you are applying for a mortgage loan. You'll work instead with a private bank or lender. But the presence of the two GSEs does make a difference for you: Mortgage experts estimate that the mortgage interest rates borrowers pay average about a quarter-percent lower than they would be if Freddie and Fannie didn't exist.</p> <p>That quarter-percent drop in your interest rate means that you'll pay less each month for your mortgage payment, and that you'll pay less in interest if you keep your loan for its entire term.</p> <p>You also have a better chance of qualifying for a mortgage loan today if you are a low- or moderate-income borrower, thanks to the commitment by the GSEs to buy a certain number of loans made to such borrowers.</p> <p>This doesn't mean that everyone loves the GSEs. Far from it. The federal government bailed out Fannie Mae and Freddie Mac in September of 2008 after the housing crisis sent both GSEs into an economic spiral. As part of this bailout, the U.S. Treasury Department was given permission to purchase up to $100 billion in Fannie Mae and Freddie Mac preferred stock and mortgage-backed securities.</p> <p>Because of this, the federal government's Federal Housing Finance Agency put both GSEs into conservatorship. This bailout cost U.S. taxpayers $187 billion. However, in 2012 the U.S. Treasury made a decision to put all profits from Freddie and Fannie back into the general fund. Because of this decision, the bailout has since been repaid, and with interest.</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-you-need-to-know-about-freddie-mac-and-fannie-mae">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/the-only-5-rules-of-home-buying-you-need-to-know">The Only 5 Rules of Home Buying You Need to Know</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-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</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-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-4 views-row-even"> <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-5 views-row-odd views-row-last"> <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> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing fannie mae freddie mac government sponsored enterprises GSE home loans lenders mortgages Wed, 11 May 2016 09:30:26 +0000 Dan Rafter 1705412 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/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</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/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-4 views-row-even"> <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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-theres-a-gender-gap-in-mortgages-too">Surprise! There&#039;s a Gender Gap in Mortgages, Too</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 8 Ways to Reduce Mortgage Closing Costs http://www.wisebread.com/8-ways-to-reduce-mortgage-closing-costs <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-ways-to-reduce-mortgage-closing-costs" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house-2146375-small.jpg" alt="family on porch" title="family on porch" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Mortgage closing costs can be one of the most difficult aspects of buying a home or refinancing a current mortgage. Costs can be high, ranging anywhere from 2%-5%, depending on your locale, lender, and type of mortgage. (See also: <a href="http://www.wisebread.com/choosing-the-right-mortgage-loan-15-or-30-years">How to Choose the Right Mortgage Loan Term</a>)</p> <p>Typical costs include the application fee, origination fee, and fees for home inspection, appraisal, credit report, and an attorney or closing agent. Some, like the application fee, are paid to the lender. Others, like the appraisal and home inspection, are paid to third-parties and have less room for negotiation.</p> <p>Homeowners may feel they have little control over the charges. On top of that, most closing costs are not tax deductible. Nevertheless, it&#39;s possible for home buyers and homeowners to reduce their closing costs.</p> <h2>1. Shop Around</h2> <p>When shopping for a mortgage lender, ask lenders about their closing costs when you ask about their interest rates. Ask about their application fee, loan processing fee (also known as an underwriting fee), and third-party fees paid to others, such as appraisers. Are fees refundable? When are they paid? Most home buyers will just ask about their mortgage rate, but they should also shop for the lowest lender fees, especially the origination fee. Try to nail them down and don&#39;t be satisfied with a general &quot;three percent of the loan amount.&quot;</p> <h2>2. Know the Score on Points</h2> <p>Points, sometimes called <a href="http://homebuying.about.com/od/glossaryp/g/Prepaid-Interest.htm">prepaid interest</a>, are typically the largest single closing cost. One point equals 1% of the mortgage amount. Some lenders charge one point, while others charge two, or even more, points in return for a lower rate.</p> <p>Find out upfront if the points are &quot;bona fide discount points&quot; that lower your interest rate or just another lender&#39;s fee. Generally, one point should reduce the interest rate a quarter of a percentage point. If you expect to stay in the home for a while, say five years, you probably should consider paying extra points for a lower rate.</p> <p>Points for the mortgage used to purchase your home are typically tax deductible in the year you buy the home, while points for refinance loans are tax deductible over the life of the loan. (See also: <a href="http://www.wisebread.com/how-to-refinance-your-mortgage">How to Refinance Your Mortgage</a>)</p> <h2>3. Question Lender Fees</h2> <p>Federal law requires mortgage lenders to provide borrowers a Good Faith Estimate of closing costs within three days of the loan application. It&#39;s just an estimate and can change significantly, up to 10% by law, by the time the loan closes. Examine those fees and ask the lender to explain them.</p> <p>Some lenders charge an origination fee, which is a percentage of the loan amount. They may also charge a loan processing fee, an underwriting fee, a document preparation fee, and an administrative fee. Question those fees. They&#39;re basically the same thing. Although some borrowers, like those with impaired credit, legitimately require more work, some of those fees might be duplicative. (See also: <a href="http://www.wisebread.com/real-estate-terms">21 Real Estate Terms Home Buyers Should Know</a>)</p> <h2>4. Scrutinize Final Costs</h2> <p>At the loan closing, lenders must provide borrowers settlement papers known as the <a href="http://www.investopedia.com/terms/h/hud-1.asp">HUD-1 form</a>. Ask for the paperwork a day before the loan closing, so you have time to go over the documents. Scrutinize closing costs line by line, and question discrepancies between the Good Faith Estimate. Most homeowners glance over the list without asking questions about particular costs, but not all costs are etched in stone.</p> <p>Just asking for a discount could prompt the lender to lower the price. It certainly doesn&#39;t hurt to ask. Some borrowers may feel odd about wrangling over a $200 fee when obtaining a loan of $200,000 or more. But $200 is still $200.</p> <h2>5. Request an Appraisal Waiver</h2> <p>If you&#39;re getting a refinance and had an appraisal recently for a previous refinancing or when you purchased the home, ask your lender if it can waive the new appraisal requirement. You can also request an appraisal waiver if you have plenty of equity in your home and are not getting a cash-out refinance.</p> <h2>6. Get a Title Insurance Discount</h2> <p>When you buy a home, you purchase a new title insurance policy for a one-time fee. When you refinance your mortgage, you can receive a large discount off the cost of a new policy. Although many lenders provide it automatically, ask for it to make sure you get it.</p> <h2>7. Ask the Seller to Pay</h2> <p>Home buyers can ask sellers to pay closing costs in addition to negotiating for a lower sale price. The seller can benefit from paying closing costs by getting the buyer committed to the sale, selling the home sooner. Remember that seller contributions are linked to the home price and could mean a higher sale price. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-before-buying-your-first-home">Buying Your First Home? Here&#39;s What You Need to Know</a>)</p> <h2>8. Consider a No-Closing-Cost Mortgage</h2> <p>Some lenders can waive closing costs in return of charging a slightly higher mortgage rate, or can let borrowers add closing costs to the loan amount. These loans are not truly &quot;no cost.&quot; Obviously, there are trade offs. If you plan to stay in the house over five years, being stuck with a higher rate over five years might not be worth it.</p> <p><em>Did you try to negotiate or otherwise reduce your mortgage closing costs? How did you do it?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/michael-kling">Michael Kling</a> of <a href="http://www.wisebread.com/8-ways-to-reduce-mortgage-closing-costs">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/choosing-the-right-mortgage-loan-15-or-30-years">Choosing the Right Mortgage Loan: 15 or 30 Years?</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-hidden-dangers-of-refinancing-your-mortgage">3 Hidden Dangers of Refinancing Your 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/why-i-didnt-pay-my-mortgage-off-in-full">Why I Didn&#039;t Pay My Mortgage Off In Full</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-times-a-refinance-is-the-wrong-move">3 Times a Refinance Is the Wrong Move</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/7-secrets-to-refinancing-an-underwater-mortgage">7 Secrets to Refinancing an Underwater Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing first time home buyer home buying home loans mortgage mortgage closing costs refinancing Fri, 18 Oct 2013 09:36:03 +0000 Michael Kling 991207 at http://www.wisebread.com Quicken Loans Review: Competitive Rates and Good Customer Service http://www.wisebread.com/quicken-loans-review-competitive-rates-and-good-customer-service <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/quicken-loans-review-competitive-rates-and-good-customer-service" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/handshake-596433-small.jpg" alt="handshake" title="handshake" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Early in 2013, I refinanced my mortgage with <a href="http://www.wisebread.com/redir/9817431" target="_blank" onClick="_gaq.push(['_trackEvent', 'afclick', 'contenttext', 'quickenloans']);">Quicken Loans</a>. I was hesitant at first, since it seems as though a major loan transaction is something you should complete with a loan office you can speak with face-to-face.</p> <p dir="ltr">However, my brick and mortar bank wouldn&rsquo;t give me the best interest rate on a refinance &mdash; despite my good credit rating and my husband&rsquo;s excellent rating. Seventy-five percent of my household&rsquo;s income is the result of my self-employed activities, and the bank decided that constituted a risk.</p> <p dir="ltr">So, when a <a href="http://www.wisebread.com/redir/9817439" target="_blank" onClick="_gaq.push(['_trackEvent', 'afclick', 'contenttext', 'creditsesame']);">Credit Sesame</a> pop-up prompted me to refinance with Quicken Loans, I decided to go for it.</p> <h2>Why Choose Quicken Loans</h2> <p dir="ltr">Quicken Loans is relatively fast and friendly. The entire process is fairly smooth, and you receive help every step of the way. Quicken has a great loan center that provides you with information about your refinance and which documents you need.</p> <p dir="ltr">It&rsquo;s possible to get access to a number of home loan programs with Quicken. You can choose different loan terms, including mortgages with terms of 15 years as well as 30 years. I took advantage of the <a href="http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx" target="_blank">HARP program</a> through Quicken Loans (HARP is slated to end December 31, 2015).</p> <h2>Costs and Fees</h2> <p dir="ltr">As with most loan situations, the costs and fees you pay depend on the type of loan you get. In my case, the fees were fairly reasonable. I had an origination fee of about $1,700. Since I save $300 on my mortgage each month, thanks to the refinance, it took a little less than six months to break even.</p> <p dir="ltr">I also had to pay off the small second mortgage on the home as part of the process, which brought my total out of pocket requirement to a little less than $4,000.</p> <p dir="ltr">Even though I was annoyed that Quicken required me to pay off the second mortgage as part of the refinance deal, I think it was for the best now. It will make my home easier to sell down the road, and I don&rsquo;t have it hanging over my head.</p> <h2>Required Documents and Customer Service</h2> <p dir="ltr">A Quicken representative called my phone number minutes after I filled out the consumer information form on Credit Sesame. Talk about fast lead generation! I didn&rsquo;t answer the phone, though. Instead, I let it go to voicemail. I waited a week (phone calls almost every day), until I was ready, to call back and start the process.</p> <p dir="ltr"><strong>Loan Center</strong></p> <p dir="ltr">When I did talk to my loan officer on the phone, he helped me get set up with Quicken&rsquo;s Loan Center. This serves as a hub for all your paperwork. It&rsquo;s how you upload documentation, such as your Good Faith Estimate. I was able to initiate refinance proceedings immediately, using an electronic signature. My loan officer was on the phone, talking me through it the entire time.</p> <p dir="ltr"><strong>Checklists</strong></p> <p dir="ltr">All of the documents you need appear as a checklist. From copies of your identification to bank statements to tax returns and W-2/1099 forms to additional asset statements, you have an itemized list of exactly what you need. You can scan and upload documents fairly easily. Many banks offer their statements in PDF format that you can easily save to your computer and then upload to the Quicken Loan Center.</p> <p dir="ltr"><strong>Customer Assistance</strong></p> <p dir="ltr">In addition to having a loan officer, Quicken assigns another team member to help you through the process. If there are questions about transfers and assets, you are emailed immediately. If you need additional documentation, and you are slow to submit it, you are reminded. And every few days, someone calls to keep you updated.</p> <p dir="ltr">Any questions you have can be answered quickly via email or over the phone, from the step-by-step process required to cancel your automatic payments to your former lender to the timing involved in canceling those payments and starting payments to Quicken. I was surprised at the level of customer service I received. It was better than what I received when completing my first mortgage at a brick and mortar bank.</p> <h2>Other Features and Services</h2> <p dir="ltr">After everything was cleared, the next step was to sign the paperwork. For the final papers, a notary is required. However, rather than sending us a pile of papers and requiring us to find a notary, Quicken actually sent someone to our home (we could have arranged a meeting elsewhere, if we wanted). He had the paperwork and oversaw the entire process. Then, he took care of mailing the proper copies to the proper places. This was at no extra cost to us (the cost was included in the $1,700 total).</p> <p dir="ltr">Quicken also allows you to the option to make bi-weekly payments, which we decided to do. Your Loan Center remains active, so you can review documents after the fact, and it also includes information on your mortgage statements and payments, so you can stay up-to-date.</p> <h2>How Quicken Loans Compares to Others</h2> <p dir="ltr">In general, Quicken Loans is competitive with other brokerages in terms of fees charged and interest rates offered. I experienced a higher level of customer care with a Quicken Loans refinance than I did with my initial mortgage with a brick and mortar bank. Additionally, Quicken Loans was willing to help me with the HARP program when my primary bank wouldn&rsquo;t. I had to submit more documentation about my income and assets (including PayPal statements), but, in the end, we were able to get the best available interest rate, and get approval without too much trouble, thanks to the HARP program and our credit rating.</p> <h2>How Quicken Loans Could Be Better</h2> <p dir="ltr">Some lenders offer no-cost refinancing. While the fees I paid weren&rsquo;t onerous, I still would have liked the option of a no-cost refinancing. Also, the value of my home was high enough that the small second mortgage could have been rolled into the refinance without too much trouble. That would have been a plus, but in the end it&rsquo;s probably best that I just paid it off.</p> <p dir="ltr">Also, even though the refinance only took slightly more than six weeks to close, it would have been nice to get things through faster, since the timing meant I had to submit additional statements reflecting the most recent situation. But I understand that my self-employment situation probably held up the process a little bit.</p> <h2>Who Is Quicken Loans Good For?</h2> <p dir="ltr">Because of the streamlined HARP program, Quicken Loans is great for the borrower with HARP eligibility trying to refinance a home. Quicken could also be good for a non-HARP refinance. However, the online nature of Quicken Loans means that a non-HARP refinance could come with additional headaches, since there are different appraisal requirements. The easier/non-appraisal situation with HARP means an online refinance is easy.</p> <h2>Bottom Line Recommendation</h2> <p>Overall, my experience refinancing with Quicken Loans was great. It was fast and easy, and my team was helpful and friendly. I&rsquo;ve turned from skeptic to believer.</p> <p><strong><a href="http://www.wisebread.com/redir/9817431" target="_blank" onClick="_gaq.push(['_trackEvent', 'afclick', 'applytext', 'quickenloans']);">Click here to apply now</a></strong></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/miranda-marquit">Miranda Marquit</a> of <a href="http://www.wisebread.com/quicken-loans-review-competitive-rates-and-good-customer-service">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-3"> <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/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-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/my-2016-budget-challenge-how-to-decide-when-to-sell-your-house">My 2016 Budget Challenge: How to Decide When to Sell Your 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/8-ways-to-reduce-mortgage-closing-costs">8 Ways to Reduce Mortgage Closing Costs</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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance">ReFi Shy? How to Determine If Now Is the Time to Refinance</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing home loans mortgage lenders mortgages refinancing Fri, 06 Sep 2013 10:36:29 +0000 Miranda Marquit 981743 at http://www.wisebread.com Why You Should Consider an Adjustable-Rate Mortgage http://www.wisebread.com/why-you-should-consider-an-adjustable-rate-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-you-should-consider-an-adjustable-rate-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house-cash-1222803-small.jpg" alt="house" title="house" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Adjustable-rate mortgages, or ARMs, may <a href="http://www.bloomberg.com/news/2013-07-24/americans-gambling-on-rates-with-most-arms-since-2008.html">be coming back into style</a>.</p> <p>If interest rates rise as they are expected to, ARMs, also sometimes called variable-rate or floating-rate mortgages, may become more popular among both <a href="http://www.wisebread.com/fixed-or-adjustable-choosing-the-right-mortgage-loan">homebuyers and homeowners who missed fixed-rates</a> at their record low. ARMs received a bad rap in recent years, since many home loans that defaulted in the housing crash were ARMs. However, many of those loans were subprime mortgages given to borrowers with poor credit, little home equity, and questionable incomes, while today's lending standards are much stricter. (See also: <a href="http://www.wisebread.com/7-financial-must-haves-for-the-first-time-home-buyer">7 Financial Must Haves for the First-Time Home Buyer</a>)</p> <p>Maybe ARMs deserve a second chance.</p> <h2>&quot;Arm&quot; Yourself With Financial Basics</h2> <p>First, some ARM basics. The interest rates of ARMs change periodically usually based on an index, such as the Prime Rate or a Treasury bond rate. That means your monthly payment may go up or down. Is that risky? Yes. But the trade-off is the introductory low rate that can help you qualify for a home loan and move into the home you want.</p> <p>Most ARMs today are technically &quot;hybrid ARMS.&quot; They entail an introductory period with a low fixed rate, typically between two and seven years. After that initial period, the rate adjusts periodically based on its index.</p> <p>Common hybrid ARMs are the 3/1, 5/1, or 7/1. The first number indicates how long, in years, the initial fixed rate lasts. The second shows how often the interest rate changes. When the loan adjusts &mdash; usually upward &mdash; after the initial period, it is said to be fully indexed.</p> <p>ARMs offer lower interest rates and smaller monthly payments over the near term and the risk of higher rates in the future. Generally speaking, the shorter the initial fixed-rate term, the lower its rate.</p> <h2>Important Terms to Know</h2> <p>Before we look at seven reasons to choose an ARM, let's look at a few key terms.</p> <p><strong>Index</strong></p> <p>The index is a benchmark measure for rates in general. Lenders have used the one-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR).</p> <p><strong>Margin</strong></p> <p>The margin is added to the index to determine your mortgage rate. It depends on the lender, but it usually stays the same. For instance, if the index was 3% and your margin 1%, your rate would be 4%.</p> <p><strong>Cap</strong></p> <p>The cap is how much the rate can increase when it adjusts.</p> <p><strong>Lifetime Cap</strong></p> <p>The lifetime cap is how much the rate can increase over the life of the loan. Look at this to consider the worse-case scenario. A common rate cap for a 5/1 ARM is 2/2/6, which means it could increase up to 2% in the first adjustment, up to 2% in following adjustments, and up to 6% over the life the loan.</p> <p><strong>Payment Shock</strong></p> <p>Payment shock is what happens when your mortgage payment jumps when the rate is adjusted. Before signing the loan documents, run through the numbers by talking to a loan officer or using an online calculator at <a href="http://www.bankrate.com/calculators/mortgages/adjustable-rate-mortgage-arm-calculator.aspx">BankRate</a> or <a href="http://www.zillow.com/mortgage/calculator/Adjustable-rate-mortgage-calculator.htm">Zillow</a> to get an idea of how rate increases will impact your monthly payment.</p> <h2>7 Reasons Homeowners Might Choose an ARM</h2> <p>Despite the negative press, an ARM might be the right choice for many homeowners.&nbsp;Consider these seven reasons why.</p> <p><strong>1. You Expect to Earn More</strong></p> <p>If the loan resets into a higher rate, you'll be able to easily afford the larger monthly payment with your increased earnings.</p> <p><strong>2. You Expect to Sell Before the Rate Increases</strong></p> <p>Perhaps you expect a job relocation or plan to renovate the home and sell it for a higher price. While you're living in the home, you can take advantage of the lower ARM rate without worrying about where rates will head in a few years.</p> <p><strong>3. Your Family is Growing</strong></p> <p>Your family will grow within a few years, so you will <a href="http://www.wisebread.com/how-big-of-a-house-do-you-really-need">move into a larger home</a> anyway.</p> <p><strong>4. You have Poor Credit, but You Are Fixing It</strong></p> <p>If you repair your credit in a year or two, you can refinance into a new mortgage and qualify for a lower rate.</p> <p><strong>5. You Expect Home Prices to Rise Out of Reach</strong></p> <p>You want to grab the home of your dreams before the price is out of reach but can't qualify for a fixed-rate loan.</p> <p><strong>6. You Have a Crystal Ball</strong></p> <p>You've peered into the future and you know that interest rates will drop or remain low when your loan adjusts.</p> <p><strong>7. You Expect a Windfall</strong></p> <p>Your intention is to pay off the loan early because you have an inheritance coming or a plan to <a href="http://www.wisebread.com/if-you-won-the-lottery-you-would">win the lotto</a>.</p> <p>Of course, those last two aren't prudent financial decisions. Nevertheless, if rising rates do make your payment unbearable, and it turns out that you don't win the corner office, and your scheme to win the lotto doesn't work out, you can always refinance into another loan as long as home values don't crash. And that's not likely to happen, is it?</p> <p><em>Have you considered an ARM? Would you ever consider an ARM after the housing bust?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/michael-kling">Michael Kling</a> of <a href="http://www.wisebread.com/why-you-should-consider-an-adjustable-rate-mortgage">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-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</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/surprise-theres-a-gender-gap-in-mortgages-too">Surprise! There&#039;s a Gender Gap in Mortgages, Too</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/should-you-pay-your-mortgage-off-early">Should You Pay Your Mortgage Off Early?</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> Banking Real Estate and Housing adjustable-rate mortgages home loans interest rates mortgages Thu, 15 Aug 2013 10:24:30 +0000 Michael Kling 980813 at http://www.wisebread.com 3 Hidden Dangers of Refinancing Your Mortgage http://www.wisebread.com/3-hidden-dangers-of-refinancing-your-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-hidden-dangers-of-refinancing-your-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/on_front_porch.jpg" alt="Couple on front porch" title="Couple on front porch" class="imagecache imagecache-250w" width="250" height="152" /></a> </div> </div> </div> <p>One of the few pleasant developments from the recent market turmoil is sustained low mortgage rates. With rates at historic lows, many homeowners are able to refinance their mortgages, shaving hundreds off their monthly expenses. But refinancing isn't always a good choice even if it lowers your monthly payment, because there can be hidden traps. Here are a few such dangers to consider before you decide to refinance. (See also: <a href="http://www.wisebread.com/6-great-reasons-for-paying-off-the-mortgage-on-your-home">6 Great Reasons for Paying Off the Mortgage on&nbsp;Your Home</a>)</p> <h3>Refinancing can stretch out your loan terms.</h3> <p>When you refinance, you are essentially getting a completely new loan. If you are 3 years into your 30-year fixed rate loan, for example, you have 27 years of payments left. Even if you refinance to a new 30-year loan, you've essentially stretched out your payments for another 3 years. In some situations, stretching your loan further into the future may be exactly what you are looking for, but just make sure you indeed want to increase the length of your loan before committing to the new terms, as opposed to merely wanting to recast your mortgage.</p> <h3>There are fees when you refinance.</h3> <p>This may not show up in your documents, but every borrower pays a fee to obtain a new loan. Don't listen to any of the mortgage myths that are out there that claim otherwise. After all, the money used to pay the loan officer has to come from somewhere. Sometimes the fees are wrapped into the entire loan, so you end up with a bigger loan amount. Other times, you are paying for it using a higher loan rate. Whatever the case, there is a cost with the new mortgage. When you work out the specifics of whether refinancing your home loan makes sense, make sure you are considering all fees involved.</p> <h3>It's easy to take money out when you refinance.</h3> <p>Perhaps the most dangerous trap of all is the fact that you can easily take out built-up equity every time you refinance. Homeowners need to recognize that money borrowed is money that needs to be paid back eventually. And as we saw in the financial crisis, falling home prices can put a huge stress on homeowners who are maxed out on their mortgages. Even if house prices go up forever, if you serially refinance, there comes a point in time when you have to sell your home to pay off your mortgage just to keep up with the monthly mortgage payments.</p> <p>The surest way to lose your house is to continually refinance with a higher loan amount than what you currently owe. The true meaning of home ownership is to reduce your mortgage debt until you <a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">own it</a> free and clear. If you don't want to keep your home, then keep taking money out by refinancing.</p> <p>Refinancing your mortgage could be the closest thing to getting free money, especially when the current rate is lower than the rate on your loan. But think carefully before you hastily apply for another loan application, or else your home could be in jeopardy.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/david-ning">David Ning</a> of <a href="http://www.wisebread.com/3-hidden-dangers-of-refinancing-your-mortgage">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/8-ways-to-reduce-mortgage-closing-costs">8 Ways to Reduce Mortgage Closing Costs</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-times-a-refinance-is-the-wrong-move">3 Times a Refinance Is the Wrong Move</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/7-secrets-to-refinancing-an-underwater-mortgage">7 Secrets to Refinancing an Underwater Mortgage</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-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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/choosing-the-right-mortgage-loan-15-or-30-years">Choosing the Right Mortgage Loan: 15 or 30 Years?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing home loans mortgage refinancing Wed, 26 Oct 2011 09:48:30 +0000 David Ning 763532 at http://www.wisebread.com Should Conforming Loan Limits Be Increased? http://www.wisebread.com/should-conforming-loan-limits-be-increased-0 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-conforming-loan-limits-be-increased-0" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/bigstock_Hispanic_Family_In_Front_Of_Th_6068664.jpg" alt="Family with house they just bought" title="Family with house they just bought" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>On October 1st, 2011, the conforming loan limit for loans backed by the FHA, Fannie Mae, and Freddie Mac fell back down to the levels they were at before 2008. Less than a month later, the <a href="http://www.businessweek.com/news/2011-10-21/senate-adopts-measure-to-increase-fannie-freddie-loan-limits.html">Senate has passed an extension</a> of the law that raised those limits. Now the bill is going to the House for approval. Here is how it may affect you. (See also: <a href="http://www.wisebread.com/buying-first-home/home-loans">Guide to Home Loans</a>)</p> <p>First of all, let me explain what a conforming loan is. Basically, a loan is &quot;conforming&quot; if it is smaller than the limit that the FHA, Fannie Mae, or Freddie Mac set. Conforming loans can be purchased by these agencies, so these loans are more liquid, and borrowers with conforming loans qualify for the best mortgage rates. If a loan is larger than that limit, then it would be a &quot;jumbo loan,&quot; and the interest rate is generally a percent or more higher than a conforming loan. Right now over 90% of new home loans are backed by FHA, Fannie Mae, or Freddie Mac, so new house purchasers should know that if their loans are larger than the conforming loan amount, they would be more expensive and less likely to be funded.</p> <p>Fannie Mae and Freddie Mac currently have a conforming loan limit of $417,000 in most areas, and a maximum of $625,500 in high-cost areas for a single-unit residence. FHA loans currently have a conforming loan limit of 95% of the median home price in an area or $625,500, whichever is less. In 2008, the Housing and Economic Recovery Act raised these limits significantly. The maximum loan amount for all the agencies was as high as $729,000, and the FHA loan limit was raised from 95% of the median home price to 125% of the median home price. Basically, now the lawmakers want the loan limits to be back to the limits under the 2008 law.</p> <p>This loan limit issue affects FHA borrowers the most, since the difference in the loan limit in many areas changed more than 30%. FHA buyers typically only bring 3.5% of the home cost to their down payment, so basically the loan limit is the maximum price of the house they are purchasing. The good news for today's buyers is that housing prices have already come down more than 30% since 2008 in many areas, so the change in limit might not be a big deal because many houses are just plain more affordable.</p> <p>The loan limit issue also affects upper-middle-class buyers in high-cost areas. Here in the San Francisco Bay area, there are many upper-middle-class families who look for very basic two-to-three bedroom houses that cost more than $800,000. For these families, they may have to lower their price points by $100,000 or pay thousands of dollars more every year.</p> <p>Personally, I believe that the government should not encourage more debt by raising the limit. If you look at a <a href="http://en.wikipedia.org/wiki/Conforming_loan#Conforming_Loan_Limits">history of the conforming loan limit</a>, then you will see that it was raised drastically during the housing bubble. If large government-backed <a href="http://www.wisebread.com/6-great-reasons-for-paying-off-the-mortgage-on-your-home">mortgages</a> were not so easy to come by, then people might have bought cheaper homes, and perhaps we would not be in the situation we are in right now. I actually think that these loan limits should be decreased so that the private markets will have to shoulder more loans and more than 90% of the mortgage market is not backed by American taxpayers.</p> <p><em>What do you think? Do you want the loan limits to go back to the 2008 limits? </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/should-conforming-loan-limits-be-increased-0">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-15"> <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/surprise-theres-a-gender-gap-in-mortgages-too">Surprise! There&#039;s a Gender Gap in Mortgages, Too</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-hidden-dangers-of-refinancing-your-mortgage">3 Hidden Dangers of Refinancing Your 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/8-ways-to-reduce-mortgage-closing-costs">8 Ways to Reduce Mortgage Closing Costs</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/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-5 views-row-odd views-row-last"> <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> </ul> </div> </div> </div> </div><br/></br> Financial News Real Estate and Housing conforming loan limits FHA home loans U.S. Senate Tue, 25 Oct 2011 09:36:14 +0000 Xin Lu 760570 at http://www.wisebread.com VA Home Loan Benefits and Myths http://www.wisebread.com/va-home-loan-benefits-and-myths <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/va-home-loan-benefits-and-myths" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/smiling_military_couple2.jpg" alt="Smiling National Guard Couple" title="Smiling National Guard Couple" class="imagecache imagecache-250w" width="250" height="155" /></a> </div> </div> </div> <p>Veterans Affairs (VA) home loans let military service members finance the purchases of their primary residences without down payments. Qualification for a VA loan is just one of the many perks of military service, but often, eligible applicants aren't aware of the loans or don't fully understand the benefits they offer. According to the government's own research from 2009, nearly 20% of eligible service members weren't aware that they qualified for a VA home loan. What's more, of the 24 million veterans alive in 2009, only 10% of them had ever taken advantage of this benefit.</p> <h2>VA Home Loan Myths</h2> <p>Since our homes are typically our largest purchases and potentially our largest assets, it's important for eligible service members to know all the tools and resources they can leverage. Let's start by dispelling a few myths. (See also: <a title="The 7-Year Mortgage: Take It or Leave It?" href="http://www.wisebread.com/the-7-year-mortgage-take-it-or-leave-it">The 7-Year Mortgage: Take It or Leave It?</a>)</p> <h3>1. A VA loan benefit may only be used once.</h3> <p>On the contrary, the benefit is reusable and service members can qualify for another VA loan once the original is paid off.</p> <h3>2. The home must be purchased in the veteran's name alone.</h3> <p>Not true. A home purchased using a VA loan may be held in both the service member's name and the name of his/her <a title="Married to the Military: Five Freebies for New Spouses to be Aware Of" href="http://www.wisebread.com/married-to-the-military-five-freebies-for-new-spouses-to-be-aware-of">spouse</a>.</p> <h3>3. VA home loans are only available to active service members.</h3> <p>Wrong again. Retired or discharged service members may also qualify based upon length of service and type of discharge received. Whether active or non-active, applicants must obtain a Certificate of Eligibility &mdash; the first step in determining qualification for the loan.</p> <h3>4. Reservists don't qualify for VA home loans.</h3> <p>Not necessarily. Eligibility extends to any service member who has successfully completed a total of six years in the Selected Reserves or the National Guard and received an honorable discharge. Service members with less than six years of service may still be eligible if discharged due to a service-related injury or disability.</p> <h3>5. VA loans can only be used for single-family, detached homes.</h3> <p>Nope. VA loans can be used to buy a condo, town home, or manufactured home.</p> <h2>VA Home Loan Benefits</h2> <p>So now that we've gotten the myths out the way, let's explore some of the benefits that VA loans offer. In our current upside-down real estate market with some homeowners just treading water and a whole new crop of jittery buyers, these benefits just might make all the difference.</p> <ul> <li>A VA home loan typically allows qualified buyers to <a href="http://www.wisebread.com/buying-a-home-without-a-20-down-payment">purchase a home with no down payment</a>.<br /> &nbsp;</li> <li>A VA loan does not require borrowers to pay PMI (Property Mortgage Insurance) premiums.<br /> &nbsp;</li> <li>The loan puts limits on the amount of closing costs that buyers are required to pay.<br /> &nbsp;</li> <li>A VA loan provides a home inspection at no cost to the buyer.<br /> &nbsp;</li> <li>A VA loan provides periodic construction inspections for homes that are being built and requires the builder to provide the buyer a one-year home warranty.<br /> &nbsp;</li> <li>A VA loan allows buyers to pay off their loans early, without pre-payment penalties.<br /> &nbsp;</li> <li>The Veteran's Administration provides personal loan servicing, which includes financial counseling for borrowers experiencing temporary financial hardship.</li> </ul> <p>Whether you're fresh out of the service and looking to leverage your VA home loan benefit for the first time or using it for the fourth time, it's important to separate fact from fiction. While I've covered some of the highlights here, more specific guidelines on eligibility, benefits, and the application process are available. Check out this <a href="http://www.militaryvaloan.com/fact_sheet.htm" title="VA home loan fact sheet">VA home loan fact sheet</a> to learn more about making the most of this benefit.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kentin-waits">Kentin Waits</a> of <a href="http://www.wisebread.com/va-home-loan-benefits-and-myths">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/surprise-theres-a-gender-gap-in-mortgages-too">Surprise! There&#039;s a Gender Gap in Mortgages, Too</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-hidden-dangers-of-refinancing-your-mortgage">3 Hidden Dangers of Refinancing Your 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/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-4 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-5 views-row-odd views-row-last"> <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> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing home loans support resources for military families veterans Fri, 19 Aug 2011 10:24:15 +0000 Kentin Waits 664545 at http://www.wisebread.com Want to Buy a Home With No Money Down? Try a USDA Loan http://www.wisebread.com/want-to-buy-a-home-with-no-money-down-try-a-usda-loan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/want-to-buy-a-home-with-no-money-down-try-a-usda-loan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/farm house for wisebread.jpg" alt="USDA loans" title="USDA loans" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>Given the credit crunch and real estate free-fall of the last two years, a no-down-payment mortgage sounds anachronistic, if not downright unbelievable.</p> <p>But the fact is that thousands of Americans can still purchase a home with no money down, and they don't have to be veterans or military members.</p> <p>The U.S. Department of Agriculture runs a guaranteed loan program that helps consumers secure affordable financing in more rural parts of the country. The USDA loan program has proved a powerful lifeline for borrowers who might otherwise struggle to become homeowners. (See also: <a href="http://www.wisebread.com/the-different-types-of-loans-a-primer">The Different Types of Loans: A Primer</a>)</p> <h3>What is a USDA Home Loan?</h3> <p>A USDA loan is government-backed loan provided to borrowers through the agency's Rural Development program. The loan comes in two varieties &mdash; the Guaranteed Loan and the Direct Loan for lower-income households.</p> <p>The program features flexible credit and income requirements. Borrowers are able to maximize their purchasing power and find competitive rates and loan terms, in part due to the government guarantee that pledges to reimburse lenders in the event of default. Other major benefits of <a href="http://www.usdaloans.com/benefits.html">USDA loans</a> include:</p> <ul> <li>No mortgage insurance required</li> <li>No purchase limit</li> <li>Competitive 30-year fixed interest rates</li> </ul> <h3>Who Is Eligible?</h3> <p>&quot;Rural&quot; can be a misleading term. Borrowers don't have to purchase light years from urban centers. In addition to rural real estate, many qualified USDA homes are within city limits and are usually located in developing areas of the city. This diversity allows potential borrowers a great opportunity to secure a home inside or outside of city limits without high out-of-pocket expenses.</p> <p>USDA home loans are relatively easy to qualify for. In fact, most borrowers who secure a USDA loan would not have been able to secure a conventional loan due to the strict eligibility requirements conventional loans place on lenders. The USDA home loan program even has a loan, the USDA Direct Loan, to help lower-income households secure financing. To initially qualify for a USDA home loan, potential borrowers must have an income no greater than 115% of the median income for the area and be able to afford the monthly mortgage payments including taxes and insurance.</p> <p>Although USDA home loans do have flexible eligibility requirements, most USDA-approved lenders will require a mid-range <a href="http://www.wisebread.com/debt/credit-scores">credit score</a> of at least 620 to secure financing.</p> <p>If potential borrowers doubt their eligibility for a USDA loan, they are still encouraged to apply as those with a history of bankruptcy or foreclosure have qualified in the past.</p> <p>Veterans and active-duty service members can certainly qualify for USDA loans, but they have access to their own powerful, no-down payment program: The <a href="http://www.vabenefitblog.com/saving-with-the-help-of-va-loans/">VA Loan Guaranty program</a>.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/chris-birk">Chris Birk</a> of <a href="http://www.wisebread.com/want-to-buy-a-home-with-no-money-down-try-a-usda-loan">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/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-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/everything-you-need-to-know-about-freddie-mac-and-fannie-mae">Everything You Need to Know About Freddie Mac and Fannie Mae</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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/surprise-theres-a-gender-gap-in-mortgages-too">Surprise! There&#039;s a Gender Gap in Mortgages, Too</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing home loans mortgages usda loans Thu, 17 Feb 2011 14:00:21 +0000 Chris Birk 491469 at http://www.wisebread.com Why I Didn't Pay My Mortgage Off In Full http://www.wisebread.com/why-i-didnt-pay-my-mortgage-off-in-full <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-i-didnt-pay-my-mortgage-off-in-full" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2988469720_3b28068648.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Getting out of credit card debt, paying off all student loans, and paying off their mortgage in full ASAP is the #1 goal of almost every personal finance blogger on the <a href="http://wisebread.com/top-100-most-popular-personal-finance-blogs/">Wise Bread Top Personal Finance Blogs List</a>, but what if they have it all wrong?</p> <p>OK, as the owner of <a href="http://www.creditcardchaser.com/">Credit Card Chaser</a>, I will be the first one to admit that going into credit card debt = bad. Why? As you can tell from the <a href="http://www.creditcardchaser.com/credit-card-calculators/lifetime-credit-card-cost-calculator/">true cost of credit cards calculator</a>, if you buy something with your credit card and don&rsquo;t pay off the balance in full the first month, then that $50 tank of gas can start to balloon to close to $60 (and you&rsquo;ll make payments on your 20% interest credit card for a year and a half). If you fill up your tank every week, before you know it, you are essentially tacking on an &ldquo;I like to carry a balance&rdquo; surcharge onto every tank of gas you buy.</p> <p>If carrying credit card debt is so bad, then why did I pass on the opportunity to pay off the $270,000 that was (and still is) remaining on my <a href="http://www.wisebread.com/redir/mortgagerates">home mortgage</a> last year? Isn&rsquo;t the Holy Grail of all personal finance bloggers to get to the place where they can say that they are &ldquo;100% debt free&rdquo; and then put up all kinds of fancy progress bars and charts and graphs on the sidebar of their blog boasting about their &ldquo;freedom from debt&rdquo; and their ever increasing net worth?</p> <p>For many people, it&rsquo;s a noble and wise goal to pay down their mortgage as quickly as possible. For many others, however, paying off their mortgage in full earlier than they have to could be a huge mistake.</p> <h3>&ldquo;LOAN&rdquo; &mdash; The 4 letter word that shouldn&rsquo;t be a 4 letter word</h3> <p>When you read the word &ldquo;loan&rdquo; on many personal finance blogs, the word is treated as either a necessary evil at best (i.e. &ldquo;I was approved for my home loan, but I am going to make extra payments so I can pay it off as quickly as possibly&rdquo;) or the spawn of &ldquo;you-know-who&rdquo; from &ldquo;you-know-where.&rdquo;</p> <p>I would submit that getting a loan can be a great tool for building wealth, if and only if, the loan is used in the right way and for the right things.</p> <p>What is the right way and what are the right things? I am glad you asked.</p> <h3>Arbitrage, ROI, NPV, WACC, &amp; other fun stuff to bore a date with</h3> <p>Just in case you have never bothered to read the <a href="http://online.wsj.com/">Wall Street Journal</a>, perused <a href="http://finance.yahoo.com/">Yahoo Finance</a>, or spent a quiet relaxing night at home curled up on the couch reading the latest <a href="http://www.sec.gov/edgar.shtml">SEC filings</a> (or if you have never taken a basic business class, for that matter) then you will not know that almost every company whether public or private, large or small, usually uses some sort of debt in order to increase its profit and build long term wealth.</p> <p>For everyone else that has done any of the above things, you will admit that debt can be a powerful tool for many companies to use in accelerating their profit potential. For anyone that has taken a finance course, then you have likely heard more than you care to know about calculating the ROI, NPV, WACC, and other measures commonly used to help make business decisions that often include debt financing.</p> <p>If many financial experts, analysts, and personal finance bloggers alike are quick to applaud the numerous ultra profitable and ultra successful companies that use debt as a means to build wealth, then why on the micro level is debt viewed in an entirely different way?</p> <h3>The Business of &ldquo;YOU&rdquo;</h3> <p>I own 4 different businesses that generate a very healthy ROI, so when one of my businesses was fortunate enough to sell a business asset in the high 6 figure range this past year, I was confronted with the fun situation of deciding how I should best put that large (for me) amount of cash to work.</p> <p>I could take the advice of most personal finance bloggers and pay off the approximately $270,000 that was left on my mortgage and costing me somewhere in the neighborhood of 5% or a little less (after factoring in the tax savings of the home mortgage interest deduction) with one fell swoop and still have almost 2/3 of the lump sum of cash to use for other purposes. OR I could invest that money back into my business that was currently generating an ROI of much higher than the 5% my home mortgage was costing me and make that home loan accelerate the creation of wealth.</p> <p>As you can already guess from the title of this article, I chose not to pay off my mortgage. I used the majority of the money to re-invest back into my business, because yes, I could essentially &ldquo;make&rdquo; 5% by paying off my mortgage in full early but if the ROI of my business was 20% (not the exact number, but just chosen for illustration&rsquo;s sake) then even after factoring in the cost of the debt, I would still roughly net 15%.</p> <p>Yes, there are many different things to consider before making a decision like this because risk tolerance, the certainty of future cash flows, the confidence that one has in their ability or their businesses&rsquo; ability to maintain a certain level of performance, and even the availability of investment/business opportunities yielding a comparatively high ROI are all a factor &mdash; among many others.</p> <h3>The Challenge</h3> <p>My challenge to you is two-fold.</p> <p>First, understand that personal finance is, in fact, very personal. Just because 9 out of 10 of your favorite personal finance bloggers or &ldquo;experts&rdquo; tell you to do something because generally it is the best advice for most people, that does not mean that that is the best thing for you to do.</p> <p>Second, calculate how much your money is worth to you. What is the opportunity cost of &ldquo;doing the safe thing&rdquo; and paying off your mortgage early? What is the ROI of investing into your business or investing into yourself (via education, training, etc.)? Are there arbitrage opportunities or even simply good uses of debt where you can earn a positive ROI by using debt to your advantage?</p> <p><em>What do YOU think?</em></p> <p><strong>BONUS:</strong> If you are one of those people that are just looking for an excuse to think that it&rsquo;s OK to go into debt so that you can buy a big screen TV or a Jet Ski then stop, do not pass go, do not collect $200, and immediately re-read this entire article and then write on the chalk board 100 times: &ldquo;I will only use debt to buy appreciating and/or income producing assets. I will only use debt to buy appr-&rdquo;</p> <p>Well, you get the picture.</p> <div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>This is a guest post by Joel Ohman, a Certified Financial Planner&trade; and the owner of a <a href="http://www.creditcardchaser.com/">credit card</a> website with some really cool (or so he likes to think at least) <a href="http://www.creditcardchaser.com/credit-card-calculators/lifetime-credit-card-cost-calculator/">credit card calculators</a> and other tools for finding the best credit card. Read more articles by Joel:</p> <ul> <li><a href="http://www.creditcardchaser.com/dave-ramsey-credit-cards-i-love-ya-dave-but-you-are-dead-wrong/">Dave Ramsey &amp; Credit Cards (Why Dave Ramsey is Wrong)</a></li> <li><a href="http://www.homeinsurancerates.com/">Finding the Best Home Insurance Rates the Easy Way</a></li> <li><a href="http://www.homeownersinsurancequotes.com/">Tips for Comparing Homeowners Insurance Quotes</a></li> </ul> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/joel-ohman">Joel Ohman</a> of <a href="http://www.wisebread.com/why-i-didnt-pay-my-mortgage-off-in-full">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-3"> <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-ways-to-reduce-mortgage-closing-costs">8 Ways to Reduce Mortgage Closing Costs</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-hidden-dangers-of-refinancing-your-mortgage">3 Hidden Dangers of Refinancing Your 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/things-i-wish-i-knew-before-i-bought-my-second-house">Things I Wish I Knew Before I Bought My Second 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/denied-a-mortgage-heres-how-to-fix-it-fast">Denied a Mortgage? Here&#039;s How to Fix It Fast</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/buying-first-home/home-loans">Home Loans</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing home buying home loans mortgage Fri, 05 Feb 2010 15:00:02 +0000 Joel Ohman 5079 at http://www.wisebread.com Home Loans http://www.wisebread.com/buying-first-home/home-loans <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/buying-first-home/home-loans" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000003627890XSmall.jpg" alt="Mortgage" title="Mortgage" class="imagecache imagecache-250w" width="250" height="165" /></a> </div> </div> </div> <p>Getting a home loan is a necessary part of the process of buying a home for most people. It can take extra work to get a good loan, but if you're familiar with the process and know what to look for, you can improve your prospects.</p> <h2>The Preapproval Process</h2> <p>The entire home-buying process is typically very stressful, but it gets easier if you are preapproved for a mortgage. You know for sure how much house you can afford and a lot of the paperwork is taken care of. Preapproval differs from prequalification; when you are preapproved, your lender has confirmed that they're willing to loan you a specific amount of money. The interest rate can change from the time that you are preapproved to the time you actually closed. However, you can pay to lock your rate in place if you expect that interest rates will rise during that time.</p> <p>In order to get approval for a mortgage from your lender, you'll need to submit documentation of your current capital and your income. The paperwork will typically include one month of paycheck stubs, two years of W-2 forms, and three months of bank account statements, although other paperwork may be necessary depending on your own financial situation.</p> <p>It's also important to have an idea of how much you want to borrow. While a lender can talk to you about how big of a mortgage you can afford, you should have an idea of what kind of house is in your price range, as well as what you want.</p> <p>If you're a first-time home buyer or a veteran, you may qualify for assistance with financing through the Federal Housing Administration or the Department of Veteran Affairs. However, ask if a prospective lender provides FHA loans before starting the application process, because some &mdash; such as credit unions &mdash; do not.</p> <h2>Choosing a Mortgage</h2> <p>Where once there was only a standard 30-year mortgage, there are now a variety of different options. While a 30-year fixed rate is the best option for many homebuyers, you may be offered an ARM, an Option ARM, or an Interest Only mortgage. You can also look at a 15-year fixed rate mortgage.</p> <ul> <li><strong>30-year fixed rate</strong>: While a traditional mortgage typically has a slightly higher interest rate than an ARM to start with, it will not change over the life of the loan.</li> <li><strong>15-year fixed rate</strong>: Identical to a 30-year fixed rate mortgage except for length, a 15-year fixed rate mortgage typically has a higher payment than a 30-year loan &mdash; but you'll pay less interest in the end.</li> <li><strong>ARM</strong>: With an ARM, loans start off at a low interest rate which remains stable for a certain period of time and then is regularly adjusted until the mortgage is paid off. A 5/1 loan, for example, has a fixed interest rate for 5 years and a rate that is adjusted every year from then on out.</li> <li><strong>Option ARM</strong>: Payments on an option ARM can vary by your personal preference. You can pay the full interest and principal due each month, pay just the interest, or pay just a part of the interest. If you opt for the partial payment, the unpaid interest is added to the principal you owe.</li> <li><strong>Interest Only</strong>: For the first five years of an interest only mortgage, you pay only the interest. Payments are low in the first five years and significantly more in the following 25.</li> </ul> <p>Any option other than a fixed rate mortgage should be considered very carefully. Because your monthly payment can increase almost overnight with ARMs, such a loan can endanger your finances. You should only consider a loan other than a fixed rate mortgage if you're certain you can refinance your home before the end of the fixed rate period.</p> <h2>Down Payment</h2> <p>Due to the recent troubles with the housing market, it's virtually impossible to get a home loan without a down payment. In general, a down payment of 20 percent of the cost of your new house is considered the minimum. However, if you qualify for a FHA loan, help from a state housing agency, or a VA loan, you may be able to put down closer to 10 percent of the house's cost.</p> <p>Making less than a 20 percent down payment can lead your lender to request <strong>private mortgage insurance</strong>, known as <strong>PMI</strong>. The insurance offers protection to your lender in the event of foreclosure. On average, PMI can add $55 to your mortgage payment for every $100,000 you borrow.</p> <p>Once you've reduced your loan balance to 78 percent of your home's appraised value, your lender must cancel your PMI unless they have reason to consider you a credit risk. If you have good credit, you can often get your lender to drop your PMI when you've reduced the balance of your loan to 80 percent of your house's value.</p> <p>You can avoid PMI entirely if you put at least 20 percent down. It's also worth considering a larger down payment if you can afford it. The larger the down payment you can make when you purchase your house, the less money you need to borrow and the less interest you'll wind up paying on your mortgage over the years.</p> <h2>Buying Discount Points</h2> <p>Lenders will typically offer you the opportunity to buy discount points, which will decrease your interest rate. However, making the decision to purchase points can be a difficult one. Not only do you have to purchase points upfront, increasing your closing costs, but if you aren't planning to stay in your house for more than a few years, it may not be worthwhile.</p> <p>Before deciding to purchase discount points, it's important to run the numbers and determine whether you'll be able to recoup the cost of the points and more during the time you plan to live in the house.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/thursday-bram">Thursday Bram</a> of <a href="http://www.wisebread.com/buying-first-home/home-loans">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-4"> <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-ways-to-reduce-mortgage-closing-costs">8 Ways to Reduce Mortgage Closing Costs</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-hidden-dangers-of-refinancing-your-mortgage">3 Hidden Dangers of Refinancing Your 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/why-i-didnt-pay-my-mortgage-off-in-full">Why I Didn&#039;t Pay My Mortgage Off In Full</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/surprise-theres-a-gender-gap-in-mortgages-too">Surprise! There&#039;s a Gender Gap in Mortgages, Too</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/heres-what-to-do-if-you-cant-afford-your-mortgage-payment">Here&#039;s What to Do If You Can&#039;t Afford Your Mortgage Payment</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing home loans mortgage Sat, 16 Jan 2010 02:40:01 +0000 Thursday Bram 6322 at http://www.wisebread.com Your equity was always imaginary http://www.wisebread.com/your-equity-was-always-imaginary <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/your-equity-was-always-imaginary" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/land.jpg" alt="Productive land" title="Productive Land" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>You used to hear the term &quot;land rich, cash poor&quot; for people who owned valuable land but didn&#39;t have quite enough money to make ends meet.  It&#39;s an expression that dates back to the days when property was the only kind of real wealth there was.  It&#39;s kind of fallen out of fashion of late.  But as property values keep falling, it&#39;s worth thinking about the ways in which land is wealth.</p> <p>In those days, land was wealth because it produced income--crops, grazing, timber, game, etc.  If the land didn&#39;t produce an income, it wouldn&#39;t be considered especially valuable (so, the owner wouldn&#39;t really be land rich), but it was possible to ruin the income from your land through poor management or bad luck.  That was how you found yourself land rich but cash poor.</p> <p>The only sort of land ownership that most people have any involvement with nowadays is home ownership.  Ordinary urban and suburban plots don&#39;t tend to be particularly productive (although you can grow a garden on one, and actually produce quite a bit), but there&#39;s a second way in which land can be valuable:  You can rent it out.  Or--and this is really the same thing--owning a home makes it unnecessary for you to rent one.</p> <p>Economists use this logic all the time--<strong>not having to spend money</strong> is equivalent to <strong>receiving the same amount</strong>.  This economic logic is correct, although you have to take care not to fool yourself about what expense you&#39;re really avoiding, as in the old joke:  </p> <blockquote><p>This guy gets home from work really late.  When his wife asks why, he explains that he decided save 50 cents by walking home instead of taking the bus.  His wife says, &quot;Idiot!  If you were going to do that, you should have saved $5 by walking home instead of taking a cab!&quot;</p> </blockquote> <p>This, then is another way of valuing a home--it&#39;s worth whatever you&#39;d have to pay to rent an equivalent place to live.  (Of course, you need to adjust for any <a href="/renting-is-cheaper">difference in expenses</a>--taxes, maintenance, insurance, water, sewer, garbage, etc.)</p> <p>We&#39;ve mentioned two ways to value land:  its <strong>productive value</strong> and its <strong>rental value</strong>.  The third way to value land at its <strong>market value</strong>.</p> <p>Market value, of course, is the most common way to value anything.  It doesn&#39;t work very well for land for various reasons:  each piece of land is different, most pieces change hands very rarely, owners will resist selling if the sale price won&#39;t cover the mortgage, etc.  (It&#39;s because of all these problems that we even have such a thing as &quot;appraisers.&quot;)</p> <p>Along with all these problems with valuing land by its market value, the worst thing is that it&#39;s prone to lead you to imagine that the &quot;market value&quot; minus what you owe on your mortgage is your &quot;equity.&quot; </p> <p>In <a href="http://www.paidtwice.com/2008/03/10/it-doesnt-matter-what-my-house-is-worth/">It Doesn&#39;t Matter What My House Is Worth</a>, <a href="http://www.paidtwice.com/">paidtwice</a> talks about the difference between equity that&#39;s produced by paying down the mortgage versus the equity that appears out of nothing if the market values of the house goes up.  She makes a good point, which is that if house prices in general are rising, then you can&#39;t translate that latter equity into an improved standard of living:  If you sell and move, your new house is just as overpriced as your old one was; you don&#39;t come out ahead.</p> <p>The fact is, though, that your equity is imaginary whether it&#39;s produced by soaring property values <strong>or</strong> by paying off the mortgage.  Unless you&#39;re going to sell it, your property&#39;s only real value is what it can produce, plus what you can rent it for (or save by not having to rent someplace else).</p> <p>This has always been true.  Hopefully, it&#39;ll be a little more obvious going forward.  Confusion about real value is what leads to bubbles and crashes.  When only a few people get confused, they&#39;re mostly the people who suffer the consequences.  When you get the sort of mass confusion we&#39;ve had over the past few years, though, popping the bubble leads to bad consequences for lots of other people as well.</p> <p>I think we&#39;ll know we&#39;re clear of these economic troubles when expressions like &quot;land rich but cash poor&quot; make sense again.  It&#39;ll mean that people are valuing land by what it&#39;s really worth.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/your-equity-was-always-imaginary">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/are-you-ready-for-home-ownership">Are You Ready for Home Ownership?</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/low-interest-rates-do-not-make-homes-affordable">Low Interest Rates Do Not Make Homes Affordable</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/surprise-theres-a-gender-gap-in-mortgages-too">Surprise! There&#039;s a Gender Gap in Mortgages, Too</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/real-estate-appraisals-ten-things-most-people-just-dont-understand-about-them">Real Estate Appraisals - Ten things most people just don&#039;t understand about them</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/3-times-a-refinance-is-the-wrong-move">3 Times a Refinance Is the Wrong Move</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing equity home loans home ownership real estate Wed, 12 Mar 2008 13:13:24 +0000 Philip Brewer 1910 at http://www.wisebread.com