As lending standards have tightened as creditors have become more cautious, it has made it more difficult for people looking to buy houses to get approval for a mortgage, and many have found they must turn to homes for rent, at least temporarily, driving up the demand, according to a PricewaterhouseCoopers survey released this month.

Adding to the effect is the fact that many homeowners who had hoped to sell their homes are now holding out and trying to wait for prices to recover, since home prices nationwide are down as much as 10%.

Despite the fact that demand for retail rental space is down, this increased demand for residential rentals can be felt throughout the market. Many who have seen their homes foreclosed upon and been evicted are now turning to rental units as well, as they find it both difficult and heart-wrenching to go through the mortgage process again.

The Mortgage Bankers Association said in a report this week that the number of mortgage applications filed last week had decreased a seasonally adjusted 28.7% compared with the week prior. Thirty year fixed mortgage rates were averaging a 5.75%, up just a tick from the previous week’s 5.74% average.

Though the real estate market has been hit particularly hard in the latest downturn of the economy, Congress is moving toward taking legislative action to help bail out the thousands of Americans in need of help. Leaders in the Senate reached a bi-partisan agreement last week on how they should proceed with the housing bill as legislators rush to get aid to Americans as quickly as they can.

The bill in current form would reduce the principal on mortgages from taking into account the decreased value of homes, which have already fallen 10% across the country. Legislators are anxious to get legislation passed to save the number of Americans who are facing foreclosure.

You might also be able to find more information in these real estate blogs.

The Mortgage Bankers Association said last week that the number of mortgage applications increased 48.1% when seasonally adjusted in the week that ended March 21 from the previous one. Applications for refinancing existing mortgages was up more than 82% from the week prior, while applications for new mortgages to buy homes was up more than 10%. Applications overall have increased more than 40% from last year.

The increasing volume of borrowers trying to get new mortgage or refinance old ones comes as the Federal Reserve has continued to lower its rates, and mortgage  interest rates have been falling along with them. The MBA said an average 30-year fixed-rate mortgage carried a rate of 5.74% the week ending March 21, down from the week prior’s 5.98% rate.

Rates on mortgages for less than 30 years dropped as well, though not as much. The data also showed that fewer borrowers are opting for adjustable rates and instead preferring to take a fixed rate. Many blame the adjustable-rate mortgages, along with careless lending, for getting the U.S. into the housing mess, as borrowers took out mortgages that they could not afford once the rates reset higher.

Many are saying that speculative buyers are the ones who have vanished from the real estate investment market, as those were the ones who some blame for the booming prices in real estate in recent years. Speculative buyers bought homes with the intent to sell them when their value increased to make a profit. But the continual increase in home prices couldn’t continue at its pace forever, and now many buyers of homes who were looking to sell their properties for a profit are finding the homes valued at less than what they paid for them, leaving them upside down.

The NAR report said last year also saw the number of sales of vacation rentals fall 30.6%, compared with 2006 when vacation-home sales were at an all-time high. Though the numbers have fallen and are expected to do the same in 2008, some buyers are finding the market’s current turbulence offers a great opportunity to buy when the prices are down. However, banks are pulling back on lending and some of those wishing to buy homes at these lower prices are finding themselves unable to get financing for the purchases.

1. You weren’t realistic and honest about your financial situation.  You were not completely honest or maybe you stretched the truth about your finances on your home loan application.

Solution:  It is important to view your financial situation honestly to succeed in the world of owning real estate.  Look at your budget and see if you can comfortably accommodate the monthly mortgage payment.  If it looks doubtful, wait a year, save your money, repair your credit history if necessary, and then try again.  Keep in mind that rates and payments can fluctuate depending on your loan type.  If you are already in the home, consider taking advantage of the recent Fed cuts and refinancing your current loan.

2. You signed a loan agreement without understanding it.  You signed where you were told to sign, but you have no idea when your rate will adjust or how your new rate is determined.

Solution:  It is important to read and ask questions when signing any mortgage loan agreement and additional documents.  Make sure you read disclosures and documents that detail any future mortgage rate adjustments and how they will affect your future payments.  You can call your lender and ask questions.  Knowing the details of your loan agreement can also help you make certain decisions concerning refinancing and pre-paying your loan.
 
3. You have been avoiding your lender for weeks or months.  After missing payments, lenders will attempt to contact you to retrieve their payments.  You avoid your lender as a way of avoiding your payments

Solution:  Keep your avenues of communication open.  Avoiding contact with your lender will not alleviate your problem.  Communicate with your lender even if you’ve only missed one payment.  Letting them know what is going on will demonstrate that you are making an active attempt to alleviate the issues.  Many lenders will be open to negotiating payment options and plans to keep you in your home.

Source: Informa Research Services

The data, from the Mortgage Bankers Association’s quarterly report released this month, said that the delinquency rate — the rate of those more than 30 days past due on their latest mortgage payment — also climbed to a record high of 5.82 percent in the fourth quarter, up from 5.59 in the third quarter to reach the highest point since 1985.

The subprime mortgage mess continued to snowball, as the percentage of adjustable-rate mortgages entering foreclosure rose to 5.29 percent in the fourth quarter, and delinquencies rose to record-high 20.02 percent among subprime borrowers, up from 18.81 the previous quarter.

The MBA information includes data on 46 million home loans across the country, and suggests that the U.S., which many say is teetering on the brink of the first recession since 2001, is headed in that direction. The continuing wave of foreclosures will only add to the woes in the real estate market, as banks and lenders overtake the homes that delinquent borrowers are forced from, adding to the already large supply of houses on the market.

As the glut of homes continues to rise and the price values of homes continue to fall, the domino effect takes shape, as builders hold off on constructing new homes, driving down the amount of materials they buy. With the shape the market is in, it’s also difficult for those looking for homes to get approved for the financing to get a new house, as lenders have pulled back and become more choosy about whom they’ll lend to. The Federal Reserve’s chairman, Ben Bernanke, has warned that the country may not have seen the worst of the mess yet, and cautions that the number of foreclosures and late payments could yet rise again.

Experts expect that the rates will continue to fall this year but expect them to rebound in 2009. Lasts year, residential construction fell by a quarter amid the slumping economy and the subprime mortgage mess fallout, as banks and other lenders have found many with credit scores below the prime rate who were granted mortgage loans struggling to repay them and unable to sell or refinance as the prices of homes have fallen drastically.

The number of home foreclosures rose 60% in February, and bank seizures more than doubled from the same time last year, according to RealtyTrac Inc. The real estate market, which has been the biggest victim in the faltering economy, has continued to struggle to regain its strong foothold in the U.S. The Federal Reserve has been trying to combat the falling home prices and rising foreclosures by lowering its interest rate, cutting it again this week by 3/4 a percentage point to 2.25%.

Single-family home starts have fallen 62% since they peaked two years ago. Most experts say it is unclear when the housing debacle will subside and get back on track but some have estimated the bottoming out has to be near.

Get yourself a Lendron T-Shirts so you do not forget the real estate bubble and get burned in the next one.

Today, the U.S. Federal Reserve slashed the discount rate by 75 basis points down to 2.25%.  But how does the Fed rate cut affect you and your search for a new home?  Is the Fed rate cut the miracle elixir to cure the real estate market pain?
 
When the Fed makes a rate cut, it actually doesn’t affect consumers directly since the Fed funds rate is the rate that financial institutions are charged for overnight loans to fulfill reserve funding requirements.  However, this does affect consumers indirectly by allowing financial institutions to offer more financing options, possibly at lower rates.

The Fed cut should not directly affect fixed rate mortgages, but it can have a more immediate impact on short term loans, such as adjustable rate mortgages (ARMs).  Check online rate comparison tables to stay up to date with rates in this volatile market.

This should be good news for responsible borrowers looking to purchase a home.  If home prices either continue to drop or stay put, and more financing options become available, the market may look like a buyers market soon enough.

But if you already own a home, don’t fret!  The Fed rate cut could mean an opportunity to refinance an existing mortgage at a lower rate or use your equity to fund home improvement projects.  However, be aware that some lenders will have set floor rates.  These floor rates may be set slightly higher than how the rate is typically calculated, which is prime rate plus a margin.  To be sure you are getting a good rate, check convenient home loan equity rate tables.

Source: Informa Research Services

He also added that “loan delinquencies and the foreclosure rates have substantially increased over the past year and half. Many neighborhoods may be looking at clusters of foreclosures and many families are facing financial hardships during the months to come.”

“It is the Federal Reserves goal to find ways to prevent unnecessary foreclosures and ways to ensure responsible lending practices” He also noted, “that it extends past sub prime market as well”.

“Far too much of the lending in recent years was neither responsible nor prudent,” he said. “The terms of some sub-prime mortgages permitted home buyers and investors to purchase properties beyond their means, often with little or no equity. In addition, abusive, unfair or deceptive mortgage lending practices led some borrowers into mortgages that they would not have chosen knowingly.”

Some of the states that have been most affected are California, Florida, Ohio, Nevada and Arizona. You can check out new foreclosures daily or get a RSS feed from National Relocation city or states pages.

CALABASAS, CALIFORNIA – Today, the Fed slashed the Fed funds rate by 50 basis points.  Like most things, dropping rates are a game of give and take; the lowering of Fed rates can be beneficial for some parts of your financial life and detrimental for others.  So how exactly can you make the most of the most recent Fed rate cuts?

What does the Fed rate cut mean for my mortgage?
Not all mortgages are directly linked to the Fed rate, but adjustable rate mortgages (ARMs) are one type that is influenced by the Fed rate.  Thus, ARM rates were affected by last week’s drastic Fed rate drop.  In fact, just within the past week since the last Fed cut, the APR on a 5/1 ARM dropped from 5.65% to 5.25% based on Informa’s National Averages (Source: Interest Rate Review®, Informa Research Services). 

What about my other loans?
Because the Prime Rate is the key index used to determine the variable rates, such as credit cards and home equity lines of credit (HELOCs), the rates associated with these types of loans can be affected by the change.

And what is going to happen to my savings efforts?
Since the Fed’s rate cut last Tuesday, average deposit product interest rates have dipped as expected, but there has been no uniform decrease across the board.  For example, the interest rates on 3-, 6-, 12-, 24-, and 36-month certificates of deposit (CDs) (at $25,000) dropped an average of 20-30 basis points according to Informa’s National Averages report.  On the other hand, the rates for checking accounts dropped only 2 basis points (Source: Interest Rate Review®, Informa Research Services).

Despite some drastic rate drops due to the emergency Fed rate cuts last Tuesday, it is very unclear whether or not the most recent reduction will incur the same reaction.  Because today’s Fed rate cut was widely anticipated, some of the slashed rates over the past week may have been anticipated and incorporated into the rates offered today.  However, one thing that may be expected is the volatility of today’s rate environment.

“One thing we’ve noticed is that [financial institutions] are quicker to drop rates than to raise them,” said Ray Montague, Deposit Research Manager at Informa Research Services.  Looking at historical trends, when the Fed drops rates, deposit product rates tend to follow the Fed’s moves very closely and drop rates quickly.  On the other hand, when the Fed raises rates, deposit product rates tend to stray behind and raise their rates slowly.

So what now?  What should I do with my savings and deposits?
Despite falling rates, there is still hope for those looking to save.  Regardless of where Fed rates stand, financial institutions will continue to offer promotional and teaser rates to attract new customers.  If you are finding it difficult to judge what is competitive in the current rate environment, remember to use the sorting feature available on many of the online rate tables.  Additionally, checking rates regularly and staying informed of what rate changes mean for you can help you properly gauge what is best for your situation.

Source: Informa

Loans

• The effects of the Fed funds rate cut should be seen most noticeably in short-term adjustable rate mortgages (ARMs).  While a drop in rates will be more evident over the next few months, those who will benefit most immediately will be those with ARMs whose introductory fixed rate period is ending.  Because the rate adjustment period is beginning on these loans, the rate cut will be reflected in the newly assessed rate.  However, those with ARMs who are in their introductory fixed rate period could potentially see the benefits of the lowered rates over time.

Savings

• Think about locking your money into a CD today before rates have an opportunity to adjust to the Fed rate cut.  Because CDs flaunt fixed rates, this may be a smart move if you suspect rates will drop further.  Due to the volatile stock market, be sure to choosing a savings product with an FDIC-insured institution to ensure that you never lose your initial deposit.  Check online for the most competitive offers.

Pay close attention to promotional and teaser rates from various financial institutions.  Regardless of the rate environment, banks almost always offer impressive rates on CDs, money market accounts, and high-yield savings products to attract new customers.  Even if you have an institution you already enjoy banking with, do your research and check online for current promotions.  Be sure to use the tools available to you to stay up-to-date with the most current rates being offered.

This should also stimulate the real estate market as mortgage rates reach historic all time lows. New home hunters now can afford more home for their money.

Checking rates regularly and staying informed of what rate changes mean for you can help you properly gauge what is best mortgage for your situation.

Source: Informa Research Services

1.  How long do I plan on living in the home?
Depending on how long you intend on living in the house, you may or may not choose to make a substantial down payment.  If you plan on staying in the home for a longer period of time, you may want to look into making a larger down payment if possible.  However, because you don’t get your down payment back, you may want to think about putting less money down if your plans are still up in the air.

Also, figuring out whether you plan on staying in your home for 3 years or 30 years will help you decide what kind of loan you should get.  For instance, if you plan on staying in your home for a shorter period of time, you may consider looking for an adjustable rate or interest only mortgage loan.

2.  How much can I afford to spend on my monthly mortgage payments?
Because your down payment affects the amount you are borrowing, it affects the size of your monthly payments as well.  Typically, when a larger down payment is made (and as a result, a smaller amount is borrowed), monthly payments are smaller.  However, if this is not one of your options, then be sure that your monthly payments fit into your budget.  Think about what kind of loans are available because your monthly payment will be determined by the type of loan you have.  For instance, if you choose a 30-year fixed mortgage over an adjustable rate mortgage (ARM), your payments will stay the same for the life of the loan where as the payments on an ARM may change after the initial term of the loan.

Remember, if you do not put 20% down, you may need to pay private mortgage insurance (PMI), which will be added to your monthly payment.  Unlike the interest paid on most mortgages, PMI is not tax-deductible.  The alternative to paying PMI is to get a “piggy back” loan, or taking out a second loan to help finance the 20% down payment.

3.  What options does my credit score provide me?
It is important to see what options are available to you depending on your credit score.  Good credit can save you money by qualifying you for better interest rates on your mortgage loan.  For instance, let’s take a person with a credit score under 620 versus a person with a credit score of 720 or higher (assuming a standard 30-year fixed, $300,000 mortgage loan).  The person with the lower credit score would qualify for an annual percentage rate (APR) of 9.715% while the person with a higher credit score would qualify for an APR of 6.080%.  In this example, having a better credit score could save you approximately $756 a month, or $9,072 a year (Source: MyFico.com).

Credit Score APR Monthly Payment
Less than 620 9.715% $2,570
700 and higher 6.080% $1,814
Total Savings 3.635% $756/month
(or $9,072/year)

This applies not only to first mortgages, but second ones as well.  For those with impressive credit, getting a “piggy back” loan can be less costly than paying private mortgage insurance.  The rates available depend on your credit score, so be sure to use available resources to research rates.

Source: Informa Research Services

To drive the mortgage scammers out of business, obviously, you need to enforce the current regulations already on the books. Hopefully enforcement from the Fed and others will follow after all this regulatory talk.

National Relocation mortgage section offer a great way to compare mortgage points, interest rates and fees. They want to empower consumers to make informed real estate decisions and help them cut their mortgage transaction costs.

Whether you are refinancing or doing a home purchase. It is very important to do your research ahead of time like school districts and neighborhood information about the areas you are considering. National Relocation can also help you with other great relocation services and providers.

If you are moving locally or across the country you can get moving quotes from multiple moving companies and save big! Always ask for references from any mover you are considering.

If you are in search of a great Realtor you can find one on the site as well. They can help you locate a foreclosure or give you home values of any area they serve. It is important to interview the Realtor you are considering and ask for references of past clients to see how they have performed in the past.

We stumbled across another site that is in Beta - FeeDisclosure.com.  This web site is supposedly helps consumers protect themselves from excessive fees and hidden relationships that can drive up the costs of buying a home. The founders of this Westlake Village, Calif are: Michael A. Kratzer, 42, and Mark Zimmerman, 35. They have spent four years developing the software upon which it is built. Both men have spent many years in the business. This site might be worth researching further.

The truth of the matter is that you DO need life insurance, and tomorrow may not be soon enough if something horrible happens to you and your loved ones are left without a security blanket (to pay off your real estate investments, mortgage and other liabilities). There are two main types of life insurance, whole life and term life. The less expensive of the two is term life insurance.

Term life insurance is meant to provide insurance for a specified period of time, for example, during the time when the children are still dependent on you. Term life insurance generally the least expensive form of life insurance, term life insurance covers an individual for a nominated period of time (term). If the person insured dies while covered, the designated beneficiaries will collect a death benefit. There are no other associated benefits.

Whole life insurance, or Whole of Life Assurance, refers to a policy that pays a lump sum on death or, in some cases, the earlier diagnosis of a critical illness whenever it occurs provided the contract is kept in force through the required payments being made. Life insurance that remains in force during the insured’s entire lifetime, provided premiums are paid as specified in the policy. Whole life insurance also builds a savings elements: called the cash value as a result of the level premium approach to funding the death benefit.

You will have to talk to a financial advisor to see what life insurance policy will be best for yourself and your family. You can also check out Google News for the latest information about what is happening in the insurance industry.

Fiserv Lending Solutions a real estate valuation company says that the picture for many parts of the country is going to be ugly! In 2007, 36 of the one hundred largest markets have seen a big decline in prices. In 2008, that number is going to grow.

Here are the top 10 markets that are projected to see a rise in real estate values: McAllen, Texas is predicted to see a 9.80% rise in 2008, El Paso, Texas is predicted to see a 4.40% rise in 2008, Albuquerque, New Mexico is predicted to see a .60% rise in 2008, Salt Lake City, Utah is predicted to see a 1.90% rise in 2008, Syracuse, New York is predicted to see a 3.60% rise in 2008, San Antonio, Texas is predicted to see a 3.50% rise in 2008, Rochester, New York is predicted to see a 4.20% rise in 2008, Baton Rouge, Louisiana is predicted to see a 2.80% rise in 2008, Fort Worth, Texas is predicted to see a 3.50% rise in 2008 and rounding off the top ten is Birmingham, Alabama with a 3.50% rise in 2008.

The Florida real estate market continues to take a beating along with parts of the California real estate market. The Arizona real estate market is also seeing an adjustment from the major run up from the real estate bubble too.

As a gift to my parents, I helped them refinance their mortgage loan
I found them a low 30-year fixed, so their payments won’t grow.
They’re able to make the monthly payments with ease
And they say it makes owning a home feel like a breeze.

For those who already own their home at this time,
Perhaps the gift of choice should be a home equity loan.
With the Fed cutting the rate again and again,
Rates are the lowest they’ve ever been.
If you want to tap into your equity, now may be the time,
To pay off your credit card debt so it doesn’t continue to climb.

By using rate tables, I filled my wallet with cheer
And ensured that gift-giving will be a little easier next year.
Finding ideal mortgage rates online has become such a cinch
Never again will I need to be a Scrooge or Grinch.
Bring out the holly, garland, and yule log,
Offer everyone some sugar cookies and egg nog.
Use tables to check rates and make your finances soar,
Happy rate shopping to all, from my home to yours!

Source: Informa Research Services

You can research schools and neighborhoods you are considering. You can also find great Realtor, multiple moving quotes from professional movers, home inspectors for many of the services you will need when relocating.

You can also search for a home for rent and apartment rentals if you are not sure whether now is a good time to buy. If you are going to buy you can find real estate information along with a huge inventory of bank foreclosures as well plus you can even get mortgage quotes as well.

When relocating to a new area many times you will have to get new car insurance and may even want to get life insurance as well. You can find many more relocation services.

max-i-mize [verb] : 1. to increase to the greatest possible amount or degree
2. to represent at the highest possible estimate; magnify
3. to make the greatest or fullest use of.

Your home is your greatest asset, and you can maximize that asset by tapping into its equity with a home equity loan. But you already knew that. It is not enough, however, to maximize your home’s (real estate) equity if you do not maximize your home equity loan. Here are three ways that you can get the most out of your home equity loan and make your home work to its greatest potential for you:

1. Find a loan with the fewest fees. When consumers shop for a home equity loan they focus on mortgage rates and monthly payments. These are important, but in the process they tend to overlook the fees that also come with the loan. Common fees associated with home equity loans include application fees, points, closing costs, and pre-payment penalties. So be sure you do your research and compare all the pricing elements for home equity loans .

2. Make sure the interest is tax deductible. In most cases, the interest that you pay on a home equity loan can be tax-deductible. You should always consult your tax advisor and find out if you can take advantage of an offer like this.

3. Use it to finance something that will increase in value. You can use a home equity loan to finance just about anything. You can pay off credit card debt, or you can buy a car. But the way to really get the most out of it is to pay for something that will increase in value, such as home improvements or college tuition. Most home improvements can add more value to your home. When you use your home’s to fund a project like this, you are, in a way, giving the money back to yourself. Similarly, when you put money into a college education, either for your child or yourself, it is the type of investment that will increase in value and be able to pay itself off in the future.

In order to truly maximize your home’s equity, you need to shop wisely, ask the right questions, and make sure you are getting the best home equity loan available. If you follow these three tips, you will be well on your way to getting the most out of, or maximizing, your home equity loan.

Source: Informa Research Services

In looking for another method of payment, you may think that using a home equity line of credit (HELOC) may be a good alternative route to use to pay for your gifts.  But how appropriate is it to use your HELOC to pay for gifts this holiday season?

A HELOC is typically attached to an interest rate which is linked to the prime lending rate.  The interest rates on are usually the prime rate plus a margin that financial institutions determine.  However, if you have excellent credit, sometimes you can qualify to receive the prime rate.  Use the Internet to shop for the most competitive offers on HELOCs.

Because of this variable rate, frequently the overall benefits of HELOCs are dependent, in part, on the rate environment.  For example, if you had a HELOC between July 2003 and March 2004, your rate would have stayed relatively steady because the prime rate hovered at 4%.  On the other hand, if you had a HELOC from March 2004 to July 2006, your rate would have more than doubled from 4% to 8.25% (Source: Federal Reserve Board).

This potential interest rate fluctuation is one reason HELOCs should be meant for short term spending.  By keeping your HELOCuse short term in nature, you can help avoid paying more than necessary for unexpected prime rate increases.

If you want to use your HELOC to pay for your holidays this season, try using it to pay off your credit cards.  Since HELOCs tend to have lower interest rates than credit cards, by using your HELOC to pay off your credit cards, you should save money by lowering the interest paid overall.  Furthermore, the interest paid on HELOCs may be tax-deductible.  Always check with your tax preparer for full details.

Remember that you don’t have to spend a lot this season to show your friends and family that you care.  You can spend thousands of dollars on gifts, but the best things in life are free.  Spending time together should be a higher priority than spending dollars.  This season, be sure the gifts you give are wrapped in love.

Source: Informa Research Services

$1,019 Billion - The volume of home equity loans has reached $1,010 billion according to the 2006 U.S. Census.  This figure is up from $314 billion in 1995 and $500 billion in 2001.  If you are going to join the masses and tap into your home equity, be sure to secure the best rate by using the Internet to research available rates (Source: Harvard Joint Center for Housing).
 
91% - Ninety-one percent of homeowners consider the equity in their primary home “a useful financial asset” according to a 2006 survey by Harris Interactive for Countrywide (Source: Countrywide Home Loans).  Given the competitive interest rates and potential tax benefits of taking out a home equity loan upon a primary residence, it’s no wonder so many people consider their equity an asset.  To enhance these benefits, you should try to find a home equity loan that has the best rate. 
 
55% - Fifty-five percent of those surveyed stated that they used their home equity loan to repair their home, as stated in the Home Equity Lending Monitor 2006, published by Synergistics Research Collaboration.  Other purposes included debt consolidation (32 percent), vehicle purchase (24 percent), appliances or furnishings (15 percent), and travel (8 percent) (Source: Synergistics Research Corporation).
 
1 in 4 - Approximately 1 in 4 households have first mortgages and home equity loans according to the 2006 U.S. Census.  This figure has increased by 4 percent from 2 years ago (Source: U.S. Census).
 
18% - Eighteen percent of those surveyed considered understanding the opposite sex easier than understanding the home buying process according to a study by Harris Interactive for Countrywide in 2005.  Those surveyed also considered programming a DVR or TiVo (55 percent) and taxes (28 percent) easier than understanding the process of purchasing a home (Source: Countrywide Home Loans; ConsumerAffairs.com).
 
7.83% - The current national average for a $50,000 home equity loan with a 15-year term is 7.83 percent.  The national high rate and low rate are 11.75 percent and 5.63 percent, respectively (Source: Informa Research Services).  Shop online for the best rates.

Source: Informa Research Services

• Repair your roof.  In preparation for the rough winter weather ahead, this may be a good time to get any leaks or damage on your roof repaired.  To help cover the costs, consider using your home equity line of credit to help fund this project.

• Forget the pumpkin patch; plant some vegetables.  It’s no wonder autumn is called harvest season; there are numerous plants and vegetables that thrive in the mild weather autumn offers.  Use this opportunity to replenish your garden and repair any damage left by a hot, dry summer.

• Make your backyard warm and toasty.  The temperature may be dropping almost as quickly as the leaves in your backyard, but that doesn’t mean that all your social gatherings must move inside.  Consider using your home equity line to add an outdoor fireplace to keep you and your loved ones warm when the weather begins to get chilly.  On a smaller scale, a fire pit can help serve the same purpose.

Because the interest paid on home equity lines of credit can be tax-deductible, home equity lines are beneficial and flexible ways for you to access funds to help make your tax season a little less scary this year.  Be sure to inquire with your tax preparer for full details concerning tax-deductibility.  Your home equity line of credit can help you have a fabulous fall season without the frightful bill.

Source: Informa Research Services

While most people look primarily for the best mortgage rate, an attractive mortgage is more than just the best rate.  Both lender’s fees and prepayment penalties can put thousands of dollars between you and owning your home.  Here are some pointers to help you acquire a mortgage fully equipped with “all the usual refinements” and save thousands on financing your (real estate) home.

Ask the right questions and go with your intuition.
Mr. Bond never needs to ask a lot of questions, but he always knows the right ones to ask.  Likewise, you should feel free to ask questions until you feel comfortable with the mortgage you have selected.

Similarly, don’t be afraid to ask questions about the lender’s or broker’s fees, which may also include points.  According to the Real Estate Settlement Procedures Act and Regulation Z of the Truth in Lending Act (TILA), the lender is required to fully disclose the cost of borrowing before your mortgage loan is finalized.

Always have an escape route available.
In the world of fictional espionage, there seems to always be a way out of every sticky situation.  In mortgages, this is not always the case.  However, one way to keep an escape route open is by opting out of a prepayment penalty loan.  This will come in handy if life decides to throw any unexpected curves your way.  For instance, you may plan on buying and living in a house for 20 or 30 years.  But what happens if you have an unexpected career change or life event that requires you to sell the house during the first few years of owning it?  Or what if rates drop next year and you would like to refinance?  As long as you don’t have a prepayment penalty, you can either sell or refinance your house as needed without paying a hefty fee.  Prepayment penalties can be effective anywhere from the first six months to three years into the mortgage loan.  Thus, this decision depends on how much flexibility you anticipate needing in the near future.

Furthermore, in addition to the aforementioned full disclosure of fees, Regulation Z of TILA also stipulates that for refinanced mortgages, through the right of rescission (or cancellation), the consumer has three business days to cancel their new loan without penalty.

Never fall for the tricks.
In the classic spy flick, the villain’s antics are typically predictable.  Similarly, the popular “bait-and-switch” move is one of the oldest tricks in the marketing book, so don’t fall for it.  Many financial institutions that offer mortgage loans use their best rates and lowest fees to lure customers into their establishments.  However, there may be stringent requirements to qualify for the advertised offer.  Often times, if the consumer does not meet all the requirements, they will then be offered a higher rate.  To avoid falling victim to this predictable scheme, research mortgage rates before going to the financial institution, and know your credit score.

Use the resources available, such as the Internet, to research and become knowledgeable about mortgages and you’ll see that with a little preparation, it doesn’t take a super spy to find a great mortgage.

Source: Informa Research Services

Choosing the Right Style
When choosing a mortgage, research the different types available and realistically consider which will fit your budget and lifestyle.  Furthermore, gaining a complete understanding of precisely how the various mortgages work should help you make a better decision.  For instance, even though the thought of lower monthly payments is tempting, unless you are anticipating a steady increase in your income over the term of your mortgage, an adjustable rate mortgage may not be the best option for you.

Furthermore, know your credit score and credit history.  Months before you go look at any properties, check your credit history and make sure it is accurate.  By federal law, you are entitled to a free credit report every 12 months from three designated consumer credit reporting agencies.  These free credit reports can be requested by mail, phone, or the Internet through the Annual Credit Report Request Service (Source: annualcreditreport.com).  If your credit history is less-than-perfect, you may consider consulting a credit counselor to help you manage and budget your finances to improve your credit score.  You will find it troublesome to have to clear up inaccuracies on your credit report while trying to get approved for a mortgage for your dream home.

Finding the Right Size
Look for a home that suits both your family and your budget.  Figure out how much you can afford and try to buy a property that is within your budget.  The rule of thumb is that you should aim to spend about a third of your gross annual income on housing.  Another way to figure out an approximate housing budget is to deduct your regular necessary expenses (such as food, utilities, car payments, etc…) from your gross income.  This should help give you a good idea of how much you can afford to spend on monthly mortgage payments.  You need to also remember that the cost of a home includes other costs such as maintenance and utilities which tend to correlate with the size of the home.  Moreover, it might be wise to try to leave room in your budget to include saving for emergencies or other unexpected expenses.

The “Little Black Dress” of Properties
Lastly, despite the popular mantra of “living-in-the-moment,” try to keep a property’s future resale and equity in mind when looking for your new home.  While a vogue home or location may be all the rage at this moment, choosing a classic, timeless real estate will pay off in the long run, especially if you intend on tapping into your home equity at a future date through a home equity loan or line of credit.

Source: Informa Research Services

Choose the size of your adventure: teacups or colossus?
Even at the largest theme park, rides are offered in a variety of sizes from “kiddie” rides for the little tikes to the extreme coasters that push the limits of speed, gravity, and the adrenaline rush.  Likewise, most financial institutions offer a variety of mortgages made to fit homeowner needs.  These usually come in the form of conforming mortgages and jumbo mortgages.  The main difference between these choices is that conforming mortgages are under the threshold (currently, $417,000 for a single-family residence) set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation (more commonly referred to as Fannie Mae and Freddie Mac, respectively), whereas jumbo mortgages are over the $417,000 threshold.

Mortgage term: How long is your favorite ride?
Another factor that coaster buffs consider in deciding which coasters to ride is the length of the ride.  Would you rather have a slow and steady five minute ride or an adrenaline-packed 30 seconds?  Similarly, the term of a mortgage loan, or the amount of time over which you have to pay the mortgage loan back, should influence your decision.  While longer mortgage loan terms allow you to have lower monthly payments, some people might prefer the financial and psychological comfort of paying off their mortgages more quickly despite the larger monthly commitments (i.e. a 30 year fixed vs. a 15 year fixed).

Speaking of monthly payments, consider your spending habits and abilities over the term of the mortgage.  For instance, a balloon mortgage typically requires very low payments in the beginning, but the balance of the mortgage is due in full all at once.  While the low starting payments may be tempting, be realistic about whether you will be able to pay off the loan in its entirety when it is due.
 
Are you ready for that 300-foot rise?
The most obvious and attractive features of coasters are the loops and the drop.  Likewise, many people only notice the interest rates attached to mortgage loans, and with good reason.  Interest only adds to your monthly payments and the overall cost of your home; thus, you should use resources, such as the Internet, to shop for the best mortgage loan interest rates.

Mortgage loans come attached to a fixed or variable rate (also called adjustable or floating rate).  If the rate is variable, look at what interest rate caps are in place (both annual and lifetime).  Interest rate caps can apply not only to the frequency and amount of interest rate changes, but also the total adjustment in the interest rate over the entire span of the loan.

Lastly, in making any financial decision, be sure that you understand the terms and conditions of the mortgage loan you decide to take.  You can save yourself hundreds and thousands of dollars by simply understanding what is expected of you and what you should expect from the lender.  Having this thorough understanding will ensure that you can enjoy the thrilling ride to homeownership.

Source: Informa Research Services

Educate yourself.  According to the White House Press Release, President Bush and his administration plan on enforcing a number of programs to promote consumer mortgage loan education.  The home buying and financing process is not a simple process, and since a home purchase is frequently the largest purchase most people will ever make (real estate), it is something buyers should definitely take the time to understand.

A common complaint among borrowers, particularly those who took out subprime mortgage loans, was that they did not understand the terms of their loan.  Thus, this is why some see education as an effective tool in preventing an inflated level of default mortgages.

Another common complaint among mortgage holders was that the terms of their loan had changed by closing.  Thus, these homebuyers ended up with mortgages and interest scenarios that were not ideal for them or their financial situation.  Had these borrowers been more aware of the different loan options that were available, they may have been able to avoid their current high cost loan.  There are a number of tools, including the Internet, that you can use to research rates and find available loan options.

Don’t be afraid to scrutinize.  While most of us probably sign documents that are placed in front of us in the blink of an eye, it is important to know what terms and conditions to which you are agreeing.  In addition to general knowledge concerning mortgages, being familiar with the mortgage loan vocabulary can help you better recognize bogus terms or interest rates.  The purpose of written documentation is to ensure that both sides understand the terms to which they are agreeing.  If either side neglects to read the fine print, once they sign it, they have agreed to whatever is stated in the document, regardless of whether they meant to or not.

While the government will continue to create more safeguards to protect consumers, doing your part as a responsible borrower can ensure that you don’t run into any surprises down the road.

Source: Informa Research Services

The most obvious feature of any loan is the interest rate and rightly so.  A lower interest rate will, indeed, lower the amount added to the cost of financing your vehicle purchase.  Another factor to consider is that the interest paid on a HEL  may be tax-deductible.  (You should check with your tax preparer for full details.)  Moreover, the monthly payments on a HEL [insert link to home equity rate tables] can be lower than those on an auto loan because of HELs typically have longer terms than auto loans.  Instead of paying back your balance over 5 to 7 years, a HEL allows you 10 to 15 years to pay it back.

However, interest is not everything in choosing a loan to use; there are a number of other factors to consider and one such factor is the additional fees that are added to your loan.  These can come in the form of finance charges or closing costs.  In either case, your main objective should be to keep these as low as possible.  In fact, according to a 2004 report, the Consumer Federation of America found that exorbitant “finance markup charges” that were set arbitrarily added at least $1,000 to the cost of auto loans which cost consumers up to a billion dollars a year (Source: National Consumer Law Center).

Like most questions concerning money and finance, there is no single, definitive answer that works for everyone.  Deciding whether to take out an auto loan or a HEL depends on the interest rates and various promotional offers available.  When you finally decide to treat yourself to that new ride, remember to consider the aforementioned factors to help you appropriately weigh your options.  Doing so will have you sliding into those comfy bucket seats, pressing that pedal to the medal, and leaving any financing doubts or regrets in the dust before you know it.

Source: Informa Research Services

Free press.  Fat-free.  Free gift with purchase.  It seems like anything that’s “free” is harmless and generally, a good thing.  People will jump at the opportunity for something that is sans cost.  But should you be jumping for a no-cost mortgage loan?

So, what exactly is a “no-cost mortgage”?
A no-cost mortgage loan is a mortgage in which the upfront fees are paid by the lender at closing.  These fees include many of the settlement costs, but keep in mind that there are some costs, such as prepaid taxes, or title charges, that cannot always be paid by the lender.  Typically, the only fees that are waived are those that fall into the category of “lender fees.”

How much does a no-cost mortgage cost?
A no-cost mortgage costs nothing out of pocket at closing.  However, a no-cost mortgage may result in having a slightly higher mortgage rate.  Nonetheless, the difference between the interest charged on a no-cost and regular mortgage loan tends to be very small.  You should use the resources available to you, such as the Internet, to shop and find the best rates and fees.

Who would benefit from a no-cost mortgage?
Depending on your situation and personal finances, a no-cost mortgage may or may not be the right option for you.  Some homebuyers may opt to use the cash they save to furnish their home or perhaps upgrade the conditions of their home.  It may be advantageous to use the cash you save by not paying the upfront fees to get the mortgage loan to finance these purchases because it will be affected by a lower interest rate than many other loans, such as credit cards.

No-cost mortgages are not for everyone.  It is really a matter of preference.  You need to weigh the importance of paying closing costs upfront against paying a slightly higher rate over the term of the mortgage loan.

Although there are protective measures in place, such as the Truth in Lending Act, regardless of which loan you choose, you should be sure to read the details contained in the fine print to ensure that you are truly getting (and paying) what you think you are.  Additionally, one can use the Internet to research their available loan options, both traditional and no-cost.

Source: Informa Research Services

Getting a mortgage home loan might seem like a tedious process, but if you do your part to look good on paper, you can increase your eligibility for the best mortgage rates.  Financial institutions primarily consider three main areas in determining who is eligible for a mortgage: employment history, credit history, debt to income ratio (which is the percentage of income that goes to expenses).  As proof of these, most financial institutions will ask for a selection of the following documents in considering your request for a mortgage loan.

Employment

• Last two years’ federal tax returns and/or W-2 statements
Financial institutions typically use your past tax returns as verification of your employment and earnings.

• Pay stubs
Most financial institutions will ask to see your most recent pay stubs, usually covering the past month.  Your pay stub must have your name, your social security number, your employer’s address, and your year-to-date earnings.  These help them to gauge whether you will be able to handle your monthly mortgage payments.

• Employment history
While your pay stubs provide your financial earnings, your employment history gives the financial institution an idea of the nature of your employment.  Generally, a record of steady employment is going to work in your favor.

Credit History

• Credit report, including current creditors and account information
A credit report, including a list of your current creditors and the corresponding account information is useful to a financial institution because it allows them to see how you have dealt with your past loans.  This list should include the details (i.e. minimum monthly payment and balances) of all student loans, auto loans, credit cards, and child support payments.  By establishing a solid credit history, you can avoid having to pay higher interest rates that frequently accompany subprime mortgages.

Expenses and Payments

• Bank statements
In order to verify your banking assets, financial institutions will most likely want to see up to three months of your most recent bank statements.

• Complete record of assets
Additional assets that should be reported upon applying for a mortgage loan should include mutual funds, retirement accounts, real estate titles, and stock certificates.  These not only promotes your qualifications as a worthy risk for the financial institution, but they can also help you secure a lower interest rate.

• Canceled rent checks
If you are currently renting, canceled checks that were used to pay rent can be proof that you are punctual with your payments.  Some financial institutions may ask for the name and address of your landlord instead of the canceled checks.

• Information about desired property or property type
Providing the financial institution with a description of either the property you want to finance or at least a description of the property helps the financial institution decide if any of the loan programs would be right for you.

Having these documents gathered and ready to go when you are in the process of shopping for a new home will help your mortgage application process go smoothly.

Source: Informa Research Services

Just because you’re paying off an unexpected expense by using a home equity loan or line of credit doesn’t necessarily mean that vacation needs be out of mind.  Many financial institutions partner up with airlines to offer customers a way to earn miles while conveniently using the wealth they’ve built through the equity in their homes to pay off emergency medical expenses or fund a remodeling project.

The rewards offered by these companies range from 1,000 to 5,000 miles upon taking out a home equity loan or line of credit.  While these won’t automatically get you flying first class to your destination of choice on your dream vacation, they will get you at least part way there.

However, before enrolling in a mileage program and applying for a home equity loan or line of credit, check out the lending organizations.  A few thousand miles are nice, but if there is a better deal somewhere else (or even better, somewhere else that offers miles as well), you will regret having not done your research first.

Even if you don’t plan on traveling or if you never end up redeeming them for a ticket or upgrade, you can donate your unused miles earned on your home equity loan or line of credit to the charities with which the airlines have partnerships.  Some of the charities that have partnerships with airlines include the Make-A-Wish Foundation, the American Red Cross, and a number of research organizations and children’s hospitals.  These miles might not be tax-deductible, but they are for a good cause.  Besides, it’s not often that you can contribute to a good cause for free.  As long as the miles earned from your home equity loan are used, whether it is by you or by someone else, these programs seem to be a win-win-win situation.

So put your seat backs and tray tables in the upright and locked positions and get ready to take off with your home equity loan!

Source: Informa Research Services

As the popular sports saying goes, “The best offense is a good defense.”  The same can be said for using a broker to get a mortgage.

Navigating the terrain of mortgages—including terminology, conditions, and the process as a whole—can be a challenge, to say the least.  Thus, to help alleviate some of the pain often associated with mortgages, many homebuyers seek the help of mortgage brokers to assist in making the process a little less daunting.

While most mortgage brokers do their work in the best interest of the homebuyer, here are a few tips to make sure you get the most out of your home financing experience.

• Acquire basic knowledge about mortgages and how they work.  Avoid meeting with a mortgage broker or loan officer without any knowledge of your own.  While brokers will take the time to explain the fine (and not-so-fine) print, having basic knowledge under your belt will help you better understand the terms to which you are committing.

• Research available rates online.  Brokers work with a number of lenders to offer you a wide assortment of financing options and competitive prices.  There are a number of resources available online and in print that you can reference for the most current and up-to-date rates.  By becoming familiar with the rates available, you will be able to better evaluate the rates  you are offered by your broker.

• All borrowers have the right to full disclosure of all fees, terms, and penalties associated with their loan, so don’t be afraid to ask your broker questions.  These questions can range from the details of the mortgages you are considering to the nature of their fees.  Asking these questions should help establish a good working relationship with your broker.  Also, this should help clear up any confusion concerning your mortgage.  For example, ask you broker about prepayment penalties.  You may not realize that the offer of a lower rate comes with potential restrictions.

Consider seeking out an Upfront Mortgage Broker® (UMB).  According to the Upfront Mortgage Brokers Association (UMBA) website, “UMBs disclose their fees…in advance and in writing and disclose the wholesale prices passed through from lenders” (Source: upfrontmortgagebrokers.org).  This can help ensure that both you and your broker have a clear understanding of what is being agreed upon.  The UMBA also states that UMBs represent the homebuyer and the homebuyer’s best interest when shopping for potential loans.  Furthermore, instead of increasing their commission from rebates or concessions they receive from third parties, UMBs pass along these credits to their clients.

By taking heed and completing your own pre-mortgage training, you and your broker can be a winning team.

Source: Informa Research Services

We’ve all seen those stickers that proudly boast “University of Southern California Mom” or “Harvard Dad.”  What they should really say is “Pay to the Order of USC” or “Sending the Checks to Harvard University.”  If you’ve ever funded the college education of any loved one, then you know the feeling.  While you may not have much of a say as to where your money goes, you can choose where that money comes from, and one option to help fund a college education is a home equity line of credit.

With a home equity line of credit, you have a certain amount of funds available to you (depending on how much equity you have in your home), but you do not have to receive them all at once, which is the case with a home equity loan.  Instead, you can withdraw money whenever you need it and only pay interest on the amount you borrow.  Also, the interest that you pay on a home equity line of credit is usually tax-deductible.  Check with your tax advisor for more details.

If you are still a little uneasy with the thought of using your home equity to pay those hefty college bills, think of it as an investment.  Using home equity to fund home improvement projects to increase a home’s fair market value is not uncommon.  Similarly, funding your child’s education will theoretically help him or her in the job market, just as home improvements are intended to increase your property’s value in the real estate market.

Lawyer and President of Harvard University Derek Bok once said, “If you think education is expensive, try ignorance.”  To ace the financial test that funding a college education may bring about, do your research and study up on the best mortgage rates so you can be assured that you are getting the best home equity line of credit available.

Source: Informa Research Services

Rest assured, the world is not coming to an end because of a possible Federal Reserve discount rate cut.  On Tuesday, the Federal Open Market Committee will meet to discuss whether or not to lower the discount rate.  But despite the seemingly ambient anticipatory anxiety currently erupting from most business and economic media outlets, the sky is not falling.  Rather, this possible decrease is just a small acorn falling off a tree.  So take a deep breath, sit back, and relax.  Here are some pointers to help you make the most out of next week’s decision.

If you feel that deposit rates may drop after the Fed’s decision, these are just a few of the options to consider in deciding where to place your money:

• Consider locking your money into a CD now to take advantage of the rates that are currently available.  If you are considering a term longer than three years, check onrline for the most competitive offers.

• Money market accounts and high-yield savings accounts are also potential deposit accounts you can use to make the most of a possible rate cut.  The rates offered can be extremely competitive with many CD accounts.  You can also find some of these products offering teaser rates that could be locked in for three to six months.

• Another option to consider is laddering your CDs.  By laddering your CDs, or locking your money into CDs of various terms, you will be given the flexibility to take advantage of the rates and promotions available when your CDs mature.  Furthermore, you can lock your money into a longer term CD that typically offers higher rates, and over time, this should even out the high and low interest rate cycles.

By staying informed of all your options as rates change, you can properly gauge what is best for your situation.  For all these options, you should always keep an eye out for the best rates.  Many financial institutions will continue to offer promotional and teaser rates even if rates fall.  Be sure to use tools on the Internet to stay up to speed with the most current rates being offered.  Even if the Fed decides to cut the discount rate, it is very likely that there will still be great rates out there, both online and at your local bank.  Be sure to take advantage of the promotional products (typically paired up with very good rates) banks will continue to offer to attract new customers.

As for loans, the loans that should be affected by the prime rate cut are the variable rates associated with credit cards and home equity lines of credit. Because the rates tied to these loans are typically calculated by adding a certain percentage to the prime rate, with the Fed cut, these interest rates could drop slightly.  Additionally, this might be a good time to open up that home equity line to help pay for unexpected expenses, such as home repairs or improvements.

In general, if the Fed decides to make any drastic changes, the effects would probably be seen over the span of a few months or years, not a few days, allowing the market time to adjust.  Remembering to keep things in perspective and not be impulsive with any financial decisions will ensure that you and your finances will be relatively safe and secure.

Source: Informa Research Services

A home equity loan can be a great resource to homeowners who need some extra money to do a renovation project, pay for college tuition, or even make a large purchase. However, there are three mistakes that you as a homeowner might make that, if avoided, can make the application process run smoothly and give you a better experience:

1. AVOID being unaware of the differences between a Home Equity Loan and a Home Equity Line of Credit. It is important that you understand the differences between the two types of home equity loans so you will know which one is better for your situation. A home equity loan is paid out in one lump sum and it usually has a fixed interest rate and term. A home equity line of credit, on the other hand, can be drawn on whenever you need money, interest is paid only on the amount you borrow, and it usually has a variable interest rate. Ascertaining how you will use the funds, what type of interest rates you would prefer, and how you can afford to repay the loan will force you to research these loans very carefully and will allow you to make the best decision.

2. AVOID getting hit with unexpected fees. Most fees on home equity loans and lines of credit are unavoidable, but it is still important to know about them, so you are not surprised when you are charged with them. Common fees that are charged on a home equity loan include closing costs, points, appraisal fees, escrow fees, flood certification fees, and recording fees. Some financial institutions will also charge customers a prepayment penalty fee if they close out the account before a certain time period – typically within the first three years. Home equity lines of credit carry most of these fees as well, and they also tend to have annual fees attached to them. Being prepared for these fees will allow you to include them in your estimate of how much you can afford to borrow, so that you do not end up owing more than you had expected.

3. AVOID jumping at the offer of a high LTV ratio. The loan to value (LTV) ratio is the ratio of the amount of money you borrow through a home equity loan (or mortgage) to the value of your home. This ratio is considered high when it exceeds 80%. Sometimes, if you have outstanding credit, certain lenders who want your business will offer you a loan for an amount close to or even exceeding the amount of equity you have in your home. The interest and any fees you might be charged can take a high LTV loan above the value of your home, making the excess amount an unsecured loan, like a credit card. The interest on this amount is not tax-deductible, as the interest on home equity loans and lines of credit usually is.  (Check with your tax advisor for more details.) Only borrow what you can afford – do not take more money just because it is offered to you.

Being aware of these mistakes and knowing how to avoid them will certainly get you on the road to becoming a wise home equity loan shopper.

Source: Informa Research Services

On a test, students want all the points they can get, and even adults will brighten up at the promise of some of those proverbial “brownie points.”  But in the mortgage world it is quite the opposite – people usually aren’t so thrilled about points. Mortgage points, also called discount points, are an up-front fee paid in cash to the lender at the time of closing.  Points can also be rolled into the loan, but this will partially defeat the purpose of paying points in the first place because of the resulting increase in the mortgage rate. However, paying points also means that you are paying extra money upfront to lower your interest rate. Therefore, the question is this: Will it save you more money in the long run to pay a lower interest rate or to pay no points?

What’s the Point?
Points are paid to lower the interest rate—the more points you pay, the lower the interest rate you get, and correspondingly, the less interest you pay overall. One point is equal to 1% of the loan amount, and depending on the individual’s loan scenario, each point lowers the interest rate by approximately .125% to .25%. Borrowers benefit from points because paying points typically results in having lower monthly payments.

Let’s Get to the Point
So, when is it better to pay points in order to get a lower interest rate? The general rule is that if you plan on staying in the same home or mortgage for five or more years, then paying points will work to your advantage.  However, if you plan on moving or refinancing your loan within five years, then your money may be better spent as an increased down payment or used for other purposes (Source: velocityloan.com).

Before you make a decision, analyze your situation and your plans for the future. Knowing what your future plans are will allow you to get the mortgage loan that best fits your needs.

Source: Informa Research Services

One major asset that many homeowners tend to overlook when seeking a way out of a financial hardship is right under their noses… or perhaps more accurately, right over their heads: their home.  Your home is an investment and there’s no reason it can’t yield valuable returns for you. 

A home equity loan (HEL) is a loan that uses the equity built up in your home as collateral and it might be just what you need if your circumstances are right.  However, because home equity options are not created equal, here are a few tips to keep in mind before placing your property on the line:

• Home equity loans are intended for those who have a large, one time expense they need to cover quickly.  Because they are paid out in a single advance, if you have a large project in mind that will take an unspecified amount of time and money, you might consider other options such as a home equity line of credit which allows you continuous access to credit.  However, single expenses, such as paying off credit card debt, could be an effective use of a HEL.

• Speaking of credit card debt, a HEL may be a desirable option for those with less than perfect credit.  Lenders tend to see HELs as rather safe because they hold your home as collateral.  The fact that your property is being used as collateral for a HEL is frequently seen as a huge risk and possible downfall of this type of loan.  To ensure you aren’t forced to face this harsh penalty, be sure to know precisely how you are going to pay the loan back and make all your payments on time.

• HELs are generally offered with lower interest rates, and the interest paid on a HEL may be tax deductible.  Be sure to check with your CPA for complete details.

If a home equity loan sounds like it may be the right fit for you, remember to research potential lenders thoroughly.  Check local credit unions as well as larger banks and finance companies to gain better knowledge of available options before committing to a mortgage company.

Source: Informa Research Services

One part of the American dream is undoubtedly living comfortably in the home of your dreams.  But exactly how attainable is this?  It may be closer than you think.  In fact, it may be only a modest mortgage and a home equity line away.

But before your hopes float too high, be forewarned: unlike the Hollywood version of this story, the real world American Dream does not happen overnight.  And no, you cannot TiVo to the good part of this story.

So, where do you begin?  First, when shopping for your new home, keep your idea of the perfect home close at hand, but keep your realistic idea of your future closer.  Think about what stage of life you want this property to house.  Furthermore, this mentality should apply not only to the aesthetics of properties, but also to the financial side of home shopping.   Remember that while a home that is too small may result in a smaller mortgage, it will also lend itself to lower price appreciation and home equity.  However, trying to buy a home that is too large could potentially end, not in ownership, but rather, in foreclosure.  Finding a happy medium is the key to being a happy homeowner.

Before you start knocking down walls, be sure you know where the funding for your renovations will be coming from.  Home remodeling is an excellent opportunity to use the equity established in your home to fund a project that could potentially increase your home’s value, and therefore, further increase your home equity. However, note that if this is your preferred source of funding, you must wait until you have paid off enough of your mortgage to tap into your equity or until your property has increased in value.

Plan your remodeling not only around improving your daily life, but also around increasing your home’s market value.  There are a number of sources available on the Internet that can help you decide which renovations can get you the most value for your buck.  For instance, updating a kitchen typically adds more to a home’s fair market value than adding something more basic.

Even if you don’t plan on selling your home after completing your home equity-funded remodel, by increasing your property’s market value through various home improvements, you will have access to larger home equity loans and lines of credit which can be used to finance the purchase of a car, in financial emergencies, or additional home remodeling projects.

When you’re ready to begin transforming your modest abode into the home of your dreams, be sure to hire professionals and ensure that experience is on your side.  How many of us have watched countless hours of home improvement shows and convinced ourselves that we could produce improvements of the caliber only to find that there were very obvious reasons why we keep our day jobs?  Honestly, we’ve all been there.  But like opera singing, cosmetic waxing, and brain surgery, remodeling your home to increase your equity may be a task best left to the professionals (or at least, the very experienced).  It’s always a good idea to ask friends or family for referrals and to use state licensed contractors.

With these basic ideas in mind, you can get one step closer to making the cherished American dream your reality.

Source: Informa Research Services

Once you’re on your way to home ownership, there are certain precautions you’ll want to take to further minimize your risks. Here are some tips to make your buying experience a more positive one:

• Know what you’re paying for upfront. Throughout the mortgage lending process, you’ll be faced with a flood of fees, some higher than others. From origination and escrow fees, to title insurance and property taxes, some may seem inflated while others fall in line with your expectations. You should never be afraid to question a fee you feel uncomfortable about or don’t understand.

• Try to avoid an early pre-payment penalty. Everyone wants to have the flexibility of paying off their 30- or 40-year mortgage early. The reward is not only owning your house outright but saving on interest charges. Work with a lender who is willing to waive any pre-payment penalties or can offer you the ability to refinance your mortgage at a better rate.

• Watch out for the classic bait-and-switch. We’ve all fallen victim to this one at some point or another. A lender may try to reel you in with low mortgage rates, no money down, or no closing costs, only to disqualify you with a less than perfect FICO® score. If you feel uncomfortable with the lender, or that they are not being truthful, then move on to someone you can trust.

• Don’t let real estate agents pressure you to buy. Realtors are motivated to sell homes in order to earn a commission. They may force you to buy something that doesn’t quite meet your expectations or pressure you to use their mortgage company. Always comparison shop for the best rates and programs. Remember, the real estate agent works for you and has a fiduciary responsibility to protect your best interests.

• Buy only what you can afford. It’s easy to get caught up in the hype of low-interest or no-interest introductory mortgage rates. Staying within your debt-to-income ratios can help prevent you from over-extending your debt. Use one of the affordability calculators to determine the minimum and maximum amount you can afford before going house hunting, and be sure to stick with your estimate.

• Never buy a home on impulse. At some point during your search for a home you may decide to settle for less or get caught up in a bidding war for a house you don’t necessarily want to buy. Staying within your budget can be a real challenge, especially if a lender approves you for a higher loan amount then you can afford. Give yourself permission to walk away from a questionable deal and see how you feel about it the next day.

Source: Informa Research Services

As a homeowner, you have probably received offers in the mail to apply for a home equity line of credit (HELOC) or a home equity loan (HEL) . If handled properly, these types of loans can provide you with the income you need to handle your financial affairs. To assure that you are getting the best deal, here are some tips you will want to consider to enhance your buying experience:

• Avoid unnecessary fees.  The market for home equity loans can be very competitive. When shopping for the best offer be aware of any application fees, closing costs, or appraisal fees which can drive up your actual costs. Find a home equity loan that does not penalize you if you decide to pay off your loan early, or one that does not charge you a check writing fee each time you access your account.

• Interest rate caps. Like a variable-rate mortgage, a HELOC is subject to change as interest rates fluctuate. This can work to your advantage should interest rates drop. However, be aware of how frequently your rates can adjust upward each year (e.g., quarterly is better than monthly.) Also look at the lifetime cap or maximum amount a rate can adjust upward each year.

• Try to avoid pre-payment penalties. Everyone wants to have the flexibility of paying off their home equity loan early. The reward is not only being debt free but saving on interest charges. Work with a lender who is willing to waive any pre-payment penalties or who gives you the flexibility to make interest-only payments in case you encounter a financial hardship.

• Ability to convert to a fixed rate.  Since most HELOCs have variable rates and can change at different times of the year, what may seem like an attractive rate in the beginning may skyrocket later, should mortgage rates rise. Look for loan features that will allow you to convert to a fixed-rate loan should this happen.

• Shop for the best rates.  Shop and compare for the best HELOC rates online. Be aware of low teaser rates which will escalate after the brief introductory period. Make sure you know the index and margin used to calculate the fully indexed rate. Determine if the rates you are comparing are competitive once all fees have been integrated.

Source: Informa Research Services

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.

It is important that you maintain a good FICO score because it can help you get a mortgage loan with lower interest rates. For example, someone with a credit score of 620 requesting a $215,000 30-year loan may pay an APR of 7.60%. A score of 720 or higher would qualify them for a 6.00% APR (a difference of 1.60%), or a potential savings of $230 per month. Should their credit score fall below 620, they are then in the sub-prime mortgage category, and their mortgage rate could go as high as 8.53%. During the pre-approval process, the financial institution will tell you what range of interest rates [insert link to mortgage rate tables] you are likely to qualify for. Therefore, you should try to get your credit in order before you start shopping for a loan.

Get Set
Before you begin house-hunting, it’s best to find out from your financial institution if you are pre-qualified or pre-approved for a mortgage. But in order to know these things, you first must understand the difference between the two. Do not be caught in an unfavorable home-buying situation due to a confusion of terms.

When a financial institution pre-qualifies you for a mortgage, they are merely giving you an idea of how much you might qualify for. Through the pre-qualification process, you will have to give the financial institution your financial information, including your income, credit score, and debt-to-income ratio. Therefore, when you get pre-qualified, it is based only on what you have told them about your financial situation – the information has not been checked or verified. When you have been pre-qualified, the financial institution will give you a letter which you can present to the seller so they will have an idea of how much you will be able to give them for their house. The next step is to be pre-approved.

Being pre-approved for a mortgage loan not only means that you have told the financial institution your financial information, but also that they have checked all the information and made sure that it is completely accurate. Also, they may have looked deeper into your credit history in order to examine your borrowing habits. A pre-approval will determine the maximum amount you can spend, and it is almost the equivalent of a cash offer because the seller knows that it is secure and trustworthy.

Go!
Now that you have strengthened your credit report and have been pre-approved, you are ready to start looking for the home of your dreams. So, put on your spikes, go to the starting blocks, and when the starting pistol goes off, you can shop for a house with confidence.

Source: Informa Research Services

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:

• High Interest Rate.  A high loan to value mortgage or home equity loan is likely to come with a high interest rate.

• Private Mortgage Insurance (PMI).  You may have to get Private Mortgage Insurance with a high LTV mortgage.

• Fees raise your debt. Even if your principal is not more than the value of your house, do not forget to take into consideration the costs and fees. Common fees on both mortgages and home equity loans include closing costs, points, appraisal fees, and prepayment penalties. These and other fees could raise your debt to more than your house is worth, even if your original intention had been to borrow less than 100% of the value of your home.

• You might lose tax benefits. The interest on mortgages and home equity loans is usually tax-deductible, but if you take out a loan with a loan to value ratio above 100%, the amount by which your loan exceeds the value of your house is unsecured. The interest on that extra amount would consequently no longer be tax-deductible.

The most important thing to do, as is the case when you are shopping for any financial product, is to carefully research your different options. Whether you are buying a house and will need a mortgage, or you already have a house and need to borrow some money against it for a large project or purchase, check the ratesand offers of several different lenders before hastily making a final decision, so you can be assured that you are getting the loan that will save you the most money and that will best fit your needs.

Source: Informa Research Services

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:

1. Cash-out or Cash back Refinancing. This plan allows you to refinance your mortgage for more than you currently owe, and the difference – the equity – is converted into cash for the homeowner.

2. Low Fixed-rate Loan. If you currently have a high fixed-rate mortgage and the rates have dropped due to market conditions, then you may want to refinance to a low fixed-rate loan. Also, if you have an ARM, you might consider this option in order to get the security of a fixed rate. Even if your adjustable rate is low now, it is not guaranteed to remain that way; but if you get a low fixed-rate loan, then you lock that low rate in for the life of the loan. This option is a good choice if you are not planning on moving within the next five years.

3. Shorter-term Loan. If your main goal is to quickly build up equity and to pay off your mortgage sooner, then the shorter-term loan is probably your best choice. A lot of times, if you refinance to this type of loan, your monthly payments will be higher, but you will pay substantially less interest and your mortgage will be paid off sooner. Also, you would benefit from a larger tax deduction on interest if you move from a 30-year fixed to a 15-year fixed loan. There are some cases, however, in which you may be able to refinance to a shorter-term loan without raising your monthly payment – if you’ve had your current mortgage for enough years.

4. Longer-term Loan. If your current monthly payments are higher than is comfortable for your financial situation, then you might want to consider refinancing to a longer-term loan. This will result in a decrease in your monthly payments, since you will have more time to repay the loan.

Examining your current mortgage and knowing how you would like to improve it are the first steps you need to take when starting the refinancing process. Once you know this, you can choose the option that will best help you achieve your goals.

Source: Informa Research Services

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.

What This Means For You
If you are a homeowner and thinking about opening a home equity loan or line of credit, then you should consider relationship banking. If you already have one or more accounts open at a bank, then you should ask your current bank if they offer a relationship banking program, and if so, what benefits you would receive if you were to take advantage of it by opening a home equity loan with them.

Here are some of the possible benefits that would result from having your home equity loan account in a relationship with your other accounts:

• The balance in your home equity loan account may contribute to the combined minimum balance requirement.  When this minimum balance is maintained, the monthly maintenance fee for your checking account is usually waived.

• Other fees, such as check imaging or foreign ATM withdrawal, may be waived.

• You might be offered a lower interest rate on your home equity loan.

But you should also be sure to check other banks and financial institutions for low interest rates on home equity loans. It is possible that a low enough interest rate without relationship banking may save you more money in the long run than a relationship banking product with a higher interest rate. Be sure to do your research by comparing the products and rates of different financial institutions, including your own.

Other Things to Keep In Mind
When you have a home equity loan as part of your banking relationship, it is often required that your monthly payments on the loan be paid automatically from your checking account.  This may or may not be a desired characteristic, depending on your situation.  You may enjoy this feature because it takes the hassle out of making your payments; you may dislike it, however, if you prefer making payments yourself so you know when money is going out.  It really depends on your unique situation and preferences.

Always be sure to shop around for the best interest rates and payment plans. Compare all your options before making a decision so you can get the home equity loan that’s best for you.

Source: Informa Research Services

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.

Borrowers who apply for an interest-only mortgage plan often do it because they are planning on taking the money that they would normally pay for the monthly principal payments and putting it in some type of savings account.  If this is your intention, then make sure you have a strategy for investing the savings and that you will stick to this plan and continue to put your money away wisely.

Why It’s Not So Good
One disadvantage of an interest-only mortgage has to do with the equity in your home.  Since equity is the appraised market value of your home less any outstanding mortgages, then during the period of interest-only payments, you have zero equity to tap into.  This means that if for any reason you need a large amount of money during this time, a home equity loan or line of credit  may not be an option, and you would have to resort to using other alternatives like credit cards or your savings.  Also, if, during this time, your house loses value, then when it comes time to pay down the principal, you will be paying more than the house is actually worth.

Also, it happens that even though borrowers have the intention of saving the difference between their interest-only mortgage and what they would be paying with a traditional mortgage, they are not always able to accomplish it for one reason or the other.  Then, when it comes time to start making payments on the principal, they struggle because they were not able to save the money.  Therefore, you have to be very careful before going into an interest-only mortgage, and make sure that you have a savings strategy in order to come out ahead.

Don’t Rush Into a Decision
Make sure that when you are getting ready to apply for a mortgage that you carefully consider your situation and know how much you can afford each month, both now and in the future.  You should not just hear the words “lower monthly payment” and jump into an interest-only mortgage without examining its details and those of the traditional mortgage.  You have to be sure that you know what you can afford and which type of payments would fit better into your lifestyle, so that you can choose the mortgage that is right for you.  It is also wise to check with a financial advisor so that you make the best decision for your unique situation.

Source: Informa Research Services

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

1. Your credit history. Lenders will look into your credit history, which is a record of your past financial behavior, in order to determine the likelihood that you will responsibly make your loan payments in the future.  Your credit history is contained in a credit report that details such things as your credit card history, the amount of outstanding debt you have, the type of credit in use, the length of your credit history, and the amount of credit you use as compared to the amount that is available to you (referred to as your qualifying ratio).  Your credit history and report also include your credit score, which is a number ranging from 300 to 850 and based on the aforementioned aspects of your borrowing record.  Therefore, the details included in your credit report are represented by one number, in the form of your credit score.  When you apply for a home equity loan, the lender will use your credit score as a guide to determine whether or not you are a credit risk.  Therefore, be sure to maintain a good credit score, so that you will be more likely to receive a loan with a lower down payment and lower mortgage rates.

2. Your source of income. In addition to your credit habits, lenders also like to know about the source and stability of your income.  They know that the details of your situation in this area are a major factor in your ability to keep up with your monthly loan payments.  They want to know such things as whether or not you are self-employed, and how long you have been working in your current field and at your current job.

3. Your debt-to-income ratio. This is a measure of how much of your monthly income goes to paying off debt, such as your mortgage, credit card bills, and car payments.  Most people are expected to have a debt-to-income ratio between 25% and 50%.  The less debt you have, the more likely it is that you will be offered a good home equity loan, because it is more likely that you will be able to pay your bills on time.

4. Loan-to-value (LTV) ratio. When you divide the sum of the amount you owe on your mortgage and the amount of your home’s equity that you want to borrow by the appraised market value of your home, the result is the loan-to-value ratio, or LTV ratio, for a home equity loan (it is calculated differently for a traditional mortgage).

For example, if your house has a market value of $200,000, and your first mortgage has a balance of $50,000, then your equity is $150,000.  Then let’s say you want to borrow $50,000 against that equity.  You add that amount to the $50,000 of your mortgage balance to get $100,000, which is your total debt.  Dividing $100,000 by the $200,000 that your home is worth, you get an LTV ratio of 50 percent.

Typically, the better your credit, the more money a lender will let you borrow, and a higher LTV ratio they will allow.  LTV caps are usually at 80%, but some lenders will give out loans of 100% or more loan-to-value, which means that they are letting you borrow more than what your house is worth.  Be careful though – there are risks involved with high-LTV loans.

5. The purpose for the loan. Even though you are not required to share your intended purpose for getting a home equity loan, it is still a question that lenders will usually ask.

Source: Informa Research Services

It’s almost the fourth of July.  The hot dogs will be sizzling and the watermelon will be juicy.  But will your backyard be in shape so that your family and friends can enjoy them?  If you’ve been thinking about starting a remodeling project - be it landscaping, installing a deck, or fixing up the pool - but have hesitated because of the financial aspect, you should consider tapping into your home’s equity.

There are two ways you can do this: with a home equity loan or a home equity line of credit.  With a home equity loan, you will receive a one-time payout with the stability of a fixed interest rate and monthly payment.  With a home equity line of credit, on the other hand, there is a variable interest rate (sometimes with an option of a fixed rate as well), and you will have the flexibility to use your line of credit at anytime, which is ideal if you have ongoing financing needs.  The interest accrued on both of these home loans areusually tax-deductible.  Your situation and the type of your project will determine which of these loans is better for you.

Getting Started
Here are the steps you need to take toward using your home’s equity to beautify your backyard:

• Decide which loan is sizzling for you. As mentioned above, there are several differences between home equity loans and home equity lines of credit.  If you are ready to pay for your project now, and you therefore want one lump sum and a fixed interest rate, then a home equity loan is right for you.  But if you need to make payments to a contractor, and would rather have ongoing access to your funds and a variable interest rate, then you should look into home equity lines of credit. Consider your situation before committing to one loan or the other.

• Bite off only what you can chew. There are also options having to do with repayment plans, such as principal and interest or interest-only.  Make sure you know all your repayment options so you know you are getting the best plan for your situation and lifestyle.

• Use all the fixins. You can visit your local branch and fill out an application, or you can do it over the Internet.  Most banks today have online applications which you can fill out from the convenience of your own home, and they promise to give you a quick response, sometimes in seconds!  This certainly relieves some of the hassle of visiting the bank, and it definitely saves time. After you apply, they will tell you if you qualify, and if so, how much credit is available to you and what kind of interest rates  you can get.

• Know what’s on the menu. Use the Internet or make phone calls, but be sure to shop around for the best interest rates.  Do not settle on a loan from one bank before you know what other banks can give you.

A home equity loan or home equity line of credit is a great way to finance a home renovation project because although you are borrowing against your home, you are putting the money right back into your home, thus increasing its value, which will serve you well in the future.  So after you fix-up your backyard using your home’s equity, and after you have been showered with compliments from family and friends, all you need to do is throw some hamburgers on the barbecue, pour yourself a nice cold glass of lemonade, sit back, and enjoy the fireworks. You’ll be glad you did!  Happy 4th of July!

Source: Informa Research Services

While both sources of financing – home equity lines of credit and credit cards – are revolving, or open-ended, and therefore can be used for the same types of expenses, it is important to know the differences between them so you can use them as wisely as possible.

Similarities
The similarities between home equity lines of credit and credit cards include:

• They are open-ended. With both, you have ongoing access to your funds.  Therefore, you can use both of them to finance ongoing expenses.  (There are limitations to this, which are explained below.)

• They have special rates. Both can offer low introductory rates.

• They have variable interest rates. On both, the interest that you pay is variable. That means that it is tied to a specific index; in most cases the prime index is used. When the index drops, your interest rate drops, and when it goes up, the rate goes up.

• They have card offers. Obviously, when you have a credit card, it is the medium through which you access your credit.  Similarly, with a home equity line of credit, you have the option of getting a card to access your line of credit.

Differences
Following are some of the differences between home equity lines of credit and credit cards:

• Limitations. Most home equity lines of credit have a specific period in which funds can be accessed, whereas credit cards do not.

• The level of interest rates. The interest rates on home equity lines of credit are typically a lot lower than those on credit cards.

• Tax benefits. The interest on a home equity line of credit is usually tax-deductible, whereas that on a credit card is not.

Do’s
• Many consumers are using their home’s equity to help fund their children’s college education.  This is a great use of it because it is a good investment in their future.

• Another very popular use of a home equity line of credit is to finance a home improvement or renovation project.  The benefit of having access to your funds can be combined with the benefit of putting money into your house and increasing its value and its equity for future use.  So, in a way, you are giving the money back to yourself.

Don’t’s
• Even though you can use your home equity line of credit like a credit card, that does not mean you should. Let your credit card cover everyday expenses, and use your home equity line of credit for large purchases, such as home renovations or college tuition.

• Because of the difference in interest rates, some people advise using a home equity line of credit.

Source: Informa Research Services

Getting ready to buy a home?  Applying for a mortgage? Trying to figure out how you will fund your down payment? You could use the money you so diligently saved with your Savings or Money Market Account to make a higher down payment.  But do you want to make a higher payment, or is it better to spend less money upfront?  Here we show you both sides of the question, whether a larger or smaller down payment is better.

Advantages
Not all mortgage loans require customers to make a 20% down payment.  Some loans require only 5%, while others require no down payment.  As appealing as these two options sound, you must keep in mind that if the lender saves you money in one place, you will most likely have to pay it somewhere else. In this case, in the form of higher interest rates and Private Mortgage Insurance (PMI).  Here are three advantages of making a large down payment:

• Better rates. Generally, the larger the down payment, the better the rates and terms you will receive from the lender.
• Less interest. Making a larger down payment reduces the amount you will have to borrow, so you will pay less interest over the total life of your mortgage loan.
• No extra cost for insurance. By making a down payment of at least 20%, you will not be required to have Private Mortgage Insurance (PMI), the cost of which would be included in your monthly mortgage payment.

Disadvantages
1. One disadvantage of taking money out of your Savings Account to make a higher down payment is that you will no longer receive the interest that your money was earning in the account.  This is only a problem, though, if the average rate of return on your savings is more than the interest rate on your mortgage. 
2. Another disadvantage is that you will have less interest to pay on your mortgage, which translates into less tax-deductible payments.
3. One more disadvantage is the immediate cash access that you lose when you deplete your savings account.  It is important to have an emergency fund, and if you use your savings to make a down payment, you might sacrifice your emergency fund as well.

Consider Your Situation
Now that we have presented the advantages and disadvantages of making a large down payment on your mortgage loan, you need to consider your situation and figure out which is the best option for you.  Can you afford a 20% down payment?  If not, then maybe you need to go with the smaller down payment and higher monthly payments.  What kind of payment schedule would work best for you?  These questions must be answered before you apply for a mortgage loan.  Make sure to compare different loan products and rates online, as well as to consult your financial advisor or tax accountant before making your final decision.

Informa Research Services

The Federal Reserve continued to hold interest rates steady for the seventh straight consecutive time since June of 2006, remaining unchanged at 5.25%. The Fed’s decision means that the prime interest rate that commercial banks charge consumers for credit cards, home equity lines of credit, and other loans will remain steady as well.

While the Fed acknowledged that economic growth has slowed due to an increase in gas prices, a weaker dollar overseas, and a slump in the housing market, it remained bullish on economic expansion for the upcoming quarter. Even though the overall housing sector continued to suffer – primarily due to the sub-prime mortgage fallout – mortgage loan applications were up from the same time a year earlier, according to the Mortgage Bankers Association.

The national average interest rate on a 30-year fixed mortgage was lower from 6.76% a year ago compared to this week’s rate of 6.38% (Source: Informa Research Services). However, new home buyers are still finding it hard to qualify for a loan at today’s market prices. This gradual cooling of the housing market has resulted in a surplus of inventory and a decline in the number of new home sales, according to a recent report issued by the Lusk Center for Real Estate at USC.

Existing homeowners, faced with increasingly higher Adjustable Rate Mortgages are looking to refinance to lower fixed-interest rate loans. Lured by low-introductory teaser rates, nearly 41% of all variable sub-prime loans are scheduled to reset to a higher amount this year (Source: Center for Responsible Lending.) Borrowers who default on their loans could be faced with the threat of foreclosure causing consumer spending to become stagnant.

While slowing economic growth and curbing inflation is one of the main jobs of the Fed, it remains to be seen if the forces driving the real estate market will help or hinder consumer spending. Many economists believe that by not lowering interest rates in the near term may steer the economy towards a recession causing consumer prices to rise even further.

Source: Informa Research Services

While fixed mortgage interest rates have been holding relatively steady for the past year –averaging 6.38% APR, slightly down .38% from a year ago – some homeowners with higher adjustable rates are finding that now is a good time to refinance their mortgages. According to the Mortgage Bankers Association, nearly $1.1 to $1.5 trillion in Adjustable Rate Mortgages will face rate increases this year, with borrowers expected to refinance as much as $700 billion of these adjustable mortgages.

The costs savings to refinance a mortgage loan can be a considerable amount. For example, a monthly payment (excluding taxes and insurance) on a $250,000 mortgage loan at 7.50% would be about $1,748. Reduce this rate to 6.5% and the monthly payment becomes $1,580, or a savings of $168. However, as attractive as this savings might be, refinancing may not be the best option for everyone. Some homeowners with adjustable rate mortgages who would like to refinance into a new loan with lower interest rates are finding it harder to qualify.

With lenders tightening their lending standards, and the possibility of incurring  pre-payment penalty fees for getting out of a mortgage early, not all borrowers can afford the thousands of dollars it would costs them to refinance their existing real estate loans. These challenges are especially greatest for sub-prime borrowers, whose credit scores were below average to begin with and may have even declined further since taking out their initial loan, leaves them with little or no equity to negotiate with on a refinance.

As borrowers get caught up in an ever changing market, where home values are softening and inventory levels increasing, the Federal Reserve’s decision to hold interest rates steady has made fixed mortgage rates an attractive financing option for many borrowers.

Whether or not to refinance depends on each borrower’s unique set of circumstances and if the potential mortgage savings is enough to offset any existing refinancing penalties and fees. In which case, refinancing to a lower fixed rate may make the most sense.

Source: Informa Research Services

Some of the most important decisions that you will make in your life are the ones associated with buying or selling a home.  If you are a buyer, then you have to find the right neighborhood, the right home, and the right mortgage.  If you are a seller, then you have to know the right time and decide on a price.  But the step that is often overlooked is finding the right real estate agent. 

A real estate agent can be extremely helpful to guide you through the home buying or selling experience.  They have the knowledge and experience that you might not have.  They take care of handling the paperwork so that you do not have to worry about it.  When you are buying, they can help by letting you know where schools, shopping centers, and hospitals are located, so you can find the home and the area that best fit your family’s needs.  When you are selling, they set up and oversee open houses, making your life a little easier.  Therefore, you should not underestimate the value of a good real estate agent.

Here are four ways that you can find a real estate agent:
• Referrals. Ask your friends, family, or co-workers to refer you to a real estate agent with whom they had a positive home buying or selling experience.
• Search Online. Do a search for the top real estate companies in your area, then go to those Web sites and look up profiles of individual agents at offices near you. 
• Attend Open Houses. This is a great way to meet real estate agents without the pressure of having to make a decision right then and there.
• Use Print Advertising. Look in your local newspaper for real estate in your area, and then look online for the agents who are advertising those homes.

One more very important factor to take into consideration is that there is a difference between a real estate agent and a REALTOR®.  All REALTORS® are real estate agents, but not all agents are REALTORS®.  Although both a REALTOR® and a real estate agent are licensed to sell real estate, the basic difference between the two is that a REALTOR® belongs to the National Association of REALTORS® (NAR®), while a real estate agent does not.  As a member of the NAR®, a Realtor must subscribe to the REALTOR® Code of Ethics, which contains 17 Articles and Standards of Practice.  Because of the pledge that licensed REALTORS® must make to “put the interests of buyers and sellers ahead of their own and to treat all parties honestly and fairly” (Source: The REALTOR® Code of Ethics), it is most likely that you will have a much better experience if you take the time to find a REALTOR®.

When considering a real estate agent, one important aspect is to know your goals and expectations, that is, what you want out of your real estate agent.  If you have certain expectations, such as daily color ads, ad placement, or frequency of open houses, it is crucial that you find an agent who is on the same page.  So, before you choose a real estate agent, sit down and make a list of the things you know you want to do in order to sell your house.  Then find a real estate agent who will meet those expectations.

If you are buying, do not think that your work is done after you find a good real estate agent.  Be sure to continue to shop around for the best mortgage, so you can afford the home that your real estate agent finds.  Always compare mortgage rates and monthly payments, and find a mortgage that fits into your budget.

Source: Informa Research Services