Go Buy a House

Runners to Your Marks, Get Set, Go Buy a House!

Sometimes being a home buyer can feel a little like being a runner – you have to train (get your finances in order), warm up (get pre-approved for a mortgage), and actually run the race (search for a house or real estate). You cannot expect to run a marathon without any prior training, and the same goes for buying a house. Make sure you do all the necessary work in order to ensure a positive home buying experience.

Runners to Your Marks
Taken from your credit history report, your credit score is based on points you receive for being a good borrower. The most common scoring system used for mortgage approvals was created by the Fair Isaac Corporation® (FICO®), which accesses the three main credit reporting bureaus (Equifax, TransUnion, and Experian). Credit scores can range from as low as 300 points to as high as 850 points. People with average credit usually score around 620, good credit at 660, and excellent credit above 720. Read more

4 Disadvantages of High Loan to Value Loans

4 Disadvantages of High Loan to Value Loans

The loan to value (LTV) ratio is the ratio of the amount of money you borrow through a mortgage or home equity loan to the value of your home. When this ratio exceeds 80%, it is considered to be a high LTV loan. Typically, the maximum loan to value ratio lenders will allow is 80%; however, there are times when they will offer customers a loan with an LTV ratio that not only exceeds 80%, but reaches or even exceeds 100%, meaning that they are allowing the customer to borrow more than the value of their real estate. This could mean no down payment on your mortgage, or all (or more) of your home’s equity to spend on an improvement project. Sounds good, right? Maybe not.

When a borrower applies for a high LTV loan, especially on a first mortgage, it is something of a red flag to lenders, because borrowers who cannot make a substantial down payment are more likely to default on their loan. Then, if they are approved, they might be put in the sub-prime category, or they might be given higher interest rates and tighter qualifications. But when a lender sees that a borrower has a very good credit history, they may be willing to allow them to take out a loan with a high LTV ratio, because they know that they are responsible borrowers who are likely to make their payments on time. If you are given an offer like this, you have to take care to understand all the conditions before accepting the loan. Here are four disadvantages that you should be aware of when considering a high LTV loan: Read more

Know Your Refinancing Options

Know Your Refinancing Options

If you have a home and a mortgage, and you are thinking about refinancing, first you must know both what you want out of your new mortgage and what your different options are, so that you can pick the refinancing plan that best fits your needs.

There are many different situations that will make people consider refinancing their mortgage. Some of the most common ones are:

• They have a fixed-rate mortgage with a high interest rate, and they are looking to get a lower interest rate.

• They have an adjustable rate mortgage (ARM) and are looking to get a fixed rate.

• They have two mortgages and would like to consolidate them into one.

• They have a long-term loan and would like a shorter-term loan so they can pay it off and build equity more quickly.

• They have a short-term loan and would like a longer-term loan so as to reduce their monthly payments.

• They want to move from an interest-only mortgage to a loan that pays down the principal.

• They want some extra cash to make a purchase or to pay off other debt.

There are four main mortgage refinancing options available that can meet the needs listed above: Read more

Get Your Home Equity Loan Into a Relationship

Get Your Home Equity Loan Into a Relationship

Banks will encourage their customers to have multiple accounts and services with them. It is good for them because they are more likely to have long-term customers, and it is good for you because you get special incentives and discounts for having your multiple accounts at one bank. These accounts are said to have a relationship with each other, and this is sometimes called “relationship banking.”

For example, if you have a checking account, savings account, and home equity loan all open with the same bank, then with a relationship banking program, the balances in all three of them may contribute to the combined balance requirement.  Also, some fees on the checking account, such as the maintenance fee and foreign ATM fee, may be waived if your accounts have this relationship.  Thus, with relationship banking, all of your accounts help to maintain the others. Read more

Interested in Interest-Only

Interested in Interest-Only? Here’s What You Should Know

It used to be the case that you had only one choice when it came to paying off your mortgage – the conventional principal and interest plan.  Every month your payment would consist partially of interest (what you owe the lender for using his or her money) and partially of the principal (the actual amount you borrowed), and you would have the loan paid off, little by little, after a certain number of years.

But in 2001, a new type of mortgage was introduced – the interest-only mortgage – in which borrowers are required to make payments only on interest for an introductory period of usually three, five, or ten years.  When this period is over, the principal is then paid down, either in one lump sum or in monthly payments.  This means that, compared to the traditional mortgage, the initial monthly payments are much lower, but the future principal and interest payments will be much higher.

Why It’s Good
An interest-only mortgage is also good for people who either have limited funds now but are expecting to earn more in the near future, or whose income is mostly in the form of infrequent commissions or bonuses.  In both of these cases, the borrowers will not be under pressure to make initial monthly payments that are beyond their means, but once they start earning more or receive those bonuses, they will be able to pay off their principal as well. Therefore, with an interest-only mortgage, you have the ability to buy a house that you normally would not be able to afford. Read more

5 Things Lenders Look At For Home Equity Loan

5 Things Lenders Look At When You Apply for a Home Equity Loan
Before you start the application process for your home equity loan, it is helpful to know what lenders look for in potential borrowers.  With this knowledge you can get your documents in order before you apply. This will ensure that you get the best loan possible.

Here are five things that lenders will examine when considering you as a home equity loan borrower: Read more