Smart Money Management Resources
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Interest Rates
| · | Loans not guaranteed by the federal government (higher interest rates and fees) |
| · | Approval contingent on the borrower’s credit score and history (co-signing if not qualified) |
| · | developing a personalized plan to solve your immediate money and credit problems |
| · | teaching you how to avoid similar problems in the future |
Smart Mortgage Financing
and
Home Refinancing
Stephen Lau
and
Home Refinancing
Stephen Lau
Owning a home is the American dream. Even if you can afford to buy a home, the home-buying process could turn the dream into a nightmare.
Your home may be your greatest asset. Get smart mortgage and home refinancing for smart money management.
Smart Mortgage
Ultimate goals
Your home may be your greatest asset. Get smart mortgage and home refinancing for smart money management.
Smart Mortgage
Ultimate goals
| · | Get a smart mortgage with the lowest possible interest rate and fees. |
| · | Get the amount you need and can afford for a reasonable term. |
Preliminary Smart Actions
| · | Decide if home ownership is right for you. Benefits of buying include:building equity over time; tax deduction. Hassles and problems associated with homeownership include: down payment; property maintenance; possible property devaluation in a downturn housing market; property taxes; potential foreclosure due to non-payment. |
| · | Know your credit score (smart mortgage refinancing requires a credit score of 620 - 700 to obtain prime-rate loans). Repair credit report first! Fix any errors or incorrect information on your report. The composition of a credit report is as follows: - 35 percent: payment history - 30 percent: amount owed - 15 percent: credit history length - 10 percent: new credit - 10 percent: types of credit. |
| · | Start saving. |
| · | Evaluate your current financial situation e.g. balance on credit cards and size of debt. |
| · | Determine affordability. Use the Ginnie Mae Affordability Calculator to determine how much you can afford. |
| · | Calculate the down payment you can afford. |
| · | Estimate your monthly mortgage payment, and develop a payment plan to repay your mortgage loan. Use A-Loan-Calculator. Mortgage monthly payment is determined by the following: - amount of down payment - size of mortgage loan - interest rate - term or duration of loan - type of loan |
| · | Find out all the fees (real estate tax; insurance; homeowners’ association fees, if applicable). Use free software from good-faith estimate to calculate your loan and interest. |
| · | Look for financial assistance with mortgage loan Federal Government Loan Programs include: - The Federal Housing Administration (FHA) - The Department of Housing and Urban Development (HUD) - The Department of Veteran Affairs (VA) State Housing Authorities: Some states have agencies to help with down payment. Contact your local state officials. Local urban universities: Some universities offer incentive programs to purchase property in the neighborhood of urban universities. Get a Home Buyer’s Mortgage Kit: a list of lenders in your state, current fixed and adjustable mortgages, fees, points, and closing costs. Go to Mortgage101 to get more information on smart mortgage. |
| · | Beware of each loan's potential closing costs: - interest rate (from closing date to beginning of first payment) - broker fees - points (one point is one percent iof the mortgage amount) - appraisal fees - application and document preparation fees - credit report fees - home inspection fees - survey fees - title search and title insurance - property taxes - sales commission to real estate agent |
| · | Look for the type of home or property you want to purchase |
Smart Actions to Get A Smart Mortgage
| · | Look for a mortgage broker or lender. A broker (conglomerate of lenders) is preferred to a lender (e.g. a bank) because of better negotiation power, greater flexibility in financing, and more options available. |
| · | Find the right broker to do the following: - helping you choose the most appropriate mortgage product - helping you review different prices and different rates - helping you get pre-approved - helping you complete the mortgage application for approval - helping you prepare for the closing |
The right mortgage broker should offer competitive rates and the best deal without compromising them for commissions and fees.
Above all, the right mortgage broker should be knowledgeable and trustworthy. Always check out with your local Chamber of Commerce and Better Business Bureau and get referrals.
Above all, the right mortgage broker should be knowledgeable and trustworthy. Always check out with your local Chamber of Commerce and Better Business Bureau and get referrals.
| · | Establish a good working relationship with the mortgage broker by providing or demonstrating the following: - your proof of employment, tax returns, pay stubs, bank statements, current rental agreement, investment earnings - your updated credit report - your overall knowledge of mortgage financing. |
| · | Choose the right mortgage product based on the following: - your credit score - your current financial situation (credit cards balance; size of current debt) - your financial stability (e.g. change of jobs, unemployment etc.) - the type of home you have selected and related financing - the length of the mortgage loan. |
| · | Decide on the type of mortgage. |
Mortgage Types
Fixed-interest-rate mortgage comes in 15-year, 20-year, and 30- year term of the loan with fixed interest rate. The special features are:
· longer life term
· lower monthly payment
· more interest paid
Fixed-interest-rate mortgage is ideal if you decide to own the property over a long period of time.
Adjustable-rate mortgage is more affordable due to its initial significantly lower interest rate. The drawback is that the interest rate may go up. This type of loan is good for borrowers with average to below-average credit score.
Fixed-interest-rate mortgage comes in 15-year, 20-year, and 30- year term of the loan with fixed interest rate. The special features are:
· longer life term
· lower monthly payment
· more interest paid
Fixed-interest-rate mortgage is ideal if you decide to own the property over a long period of time.
Adjustable-rate mortgage is more affordable due to its initial significantly lower interest rate. The drawback is that the interest rate may go up. This type of loan is good for borrowers with average to below-average credit score.
| · | Fixed/adjustable mortgage: The interest is fixed for a specified period before it becomes adjustable. The borrower can take advantage of the first few years to fix the credit report, improve the credit rating, and refinance later. |
| · | Hybrid-adjustable-rate mortgage: The interest rate is adjustable for a specified period before it become fixed. The goal is to secure a lower interest rate initially and improve the credit rating. |
Balloon mortgage is a short-term loan option with low interest rate and low monthly payment followed by one final payment, typically at the end of three to ten years.
The borrower typically sells the property to pay off the loan or refinance at the end of the loan period.
Bi-weekly mortgage is a loan making 26 payments in a year, i.e. a total payment of 13 months, instead of the normal 12 months.
The financial benefits include:
· paying off the loan much faster (as much as 8 years)
· paying much less interest
· building up equity faster
Bi-weekly mortgage is a smart way of paying off your loan if affordability is not an issue.
Another option is to make a few extra payments towards your loan on your own. (Some lenders may charge a fee for biweekly mortgage.)
Stated-income/stated-assets mortgage is a type of loan for borrowers with less-than-perfect credit rating. Approval is based on credit score, credit history, or assets. Statement, not proof, of income or assets is required.
No-income-verification loans are another type of loans for borrowers with less-than-perfect credit. Approval is based on credit score and credit history, not the borrower's income.
No-documentation mortgage is a special type of loan for borrowers who would not like to disclose any documentation of assets, income, or employment. The approval is based on qualifying credit history. Such loan is often extended to no more than 65 percent of the value of the property, and the borrower has to pay a much higher interest rate and fees.
The Federal Housing Administration (FHA) loans are no-down-payment loans with loan limits for borrowers who are required to buy a mortgage insurance premium (MIP) to insure against default.
VA loans are no-down-payment loans provided by the Department of Veteran Affairs (VA) to veterans of the U.S. military. The VA loans' characteristics are as follows:
· 15- or 30-year fixed interest rate
· low interest rates and favorable terms
· loans applicable only to single or multi-family homes
Interest-only mortgage is a loan with a five- or ten-year interest-only period, at the end of which the loan is amortized.
The advantages of interest-only mortgage are as follows:
The borrower typically sells the property to pay off the loan or refinance at the end of the loan period.
Bi-weekly mortgage is a loan making 26 payments in a year, i.e. a total payment of 13 months, instead of the normal 12 months.
The financial benefits include:
· paying off the loan much faster (as much as 8 years)
· paying much less interest
· building up equity faster
Bi-weekly mortgage is a smart way of paying off your loan if affordability is not an issue.
Another option is to make a few extra payments towards your loan on your own. (Some lenders may charge a fee for biweekly mortgage.)
Stated-income/stated-assets mortgage is a type of loan for borrowers with less-than-perfect credit rating. Approval is based on credit score, credit history, or assets. Statement, not proof, of income or assets is required.
No-income-verification loans are another type of loans for borrowers with less-than-perfect credit. Approval is based on credit score and credit history, not the borrower's income.
No-documentation mortgage is a special type of loan for borrowers who would not like to disclose any documentation of assets, income, or employment. The approval is based on qualifying credit history. Such loan is often extended to no more than 65 percent of the value of the property, and the borrower has to pay a much higher interest rate and fees.
The Federal Housing Administration (FHA) loans are no-down-payment loans with loan limits for borrowers who are required to buy a mortgage insurance premium (MIP) to insure against default.
VA loans are no-down-payment loans provided by the Department of Veteran Affairs (VA) to veterans of the U.S. military. The VA loans' characteristics are as follows:
· 15- or 30-year fixed interest rate
· low interest rates and favorable terms
· loans applicable only to single or multi-family homes
Interest-only mortgage is a loan with a five- or ten-year interest-only period, at the end of which the loan is amortized.
The advantages of interest-only mortgage are as follows:
| · | increase of equity due to increase in home price (even without paying for the principal balance) |
| · | the option to pay toward the principal of the loan, thereby reducing monthly payment (i.e. flexibility in payment) |
Interest-only mortgage is ideal for borrowers with unsteady or seasonal income.
Assumable loans are loans taken over from the sellers' mortgages. Fixed-rate loans are not assumable, only adjustable-rate-mortgages are.
Home Refinancing
Refinancing is replacing one mortgage with another.
Reasons for refinancing
There are many reasons why a borrower would like to refinance:
Assumable loans are loans taken over from the sellers' mortgages. Fixed-rate loans are not assumable, only adjustable-rate-mortgages are.
Home Refinancing
Refinancing is replacing one mortgage with another.
Reasons for refinancing
There are many reasons why a borrower would like to refinance:
| · | built-up equity: taking equity out of the loan to consolidate debt, pay bills, or to invest |
| · | improved credit rating, and therefore qualified for a much lower-interest-rate loan |
| · | increased income of borrower |
| · | generally lower interest rate in the financial market |
| · | seeking better payment terms. |
Remember, your monthly mortgage payment is always affected by the principal, the interest rate, and the length of your loan.
Refinancing may significantly lower your monthly mortgage payment as well as the interest over the life of your loan. However, certain mortgages may require payment of a fee for pre-payment penalty.
Documentations required for refinancing
When you refinance, you may need the following:
· credit score and credit history
· current value of the property
· interest rate and terms of current mortgage
· money owed on the current mortgage
Smart mortgage tips
Refinancing may significantly lower your monthly mortgage payment as well as the interest over the life of your loan. However, certain mortgages may require payment of a fee for pre-payment penalty.
Documentations required for refinancing
When you refinance, you may need the following:
· credit score and credit history
· current value of the property
· interest rate and terms of current mortgage
· money owed on the current mortgage
Smart mortgage tips
| · | Fix credit report first and remove errors or modify any negative information. |
| · | Negotiate the loan, not the monthly payment for a mortgage. |
| · | Shop around and do not pay extra fees when financing a bi-weekly mortgage. |
| · | Always consult a financial planner before signing a balloon mortgage; it should be the last option. |
| · | Always consult a financial planner before signing a balloon mortgage; it should be the last option. |
| · | A point is one percent of the mortgage amount. Use points to reduce the interest rate. |
| · | Do not spend more than 35 percent of your gross income on mortgage, insurance, real estate taxes, and home-related costs. |
| · | Financing options are many. Do the research. Only YOU can decide which is in your best financial interest. A lender can guide you, but you make the final decision. |
Why some people almost always get the lowest interest rate on their mortgage - for the least Points - and no junk fees! Now
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Mortgage Loan Tips!
get your own
Mortgage Loan Tips!
Learn how YOU can get the Best Mortgage with the lowest rates - even with bad credit!