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Basic Tips on Keeping your Mortgage Payment Current during Short-term Financial Crisis

admin — Tue, 04 Jan 2011 17:09:46 +0000

Basic Tips on Keeping your Mortgage Payment Current during Short-term Financial Crisis

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Home Page > Finance > Mortgage > Basic Tips on Keeping your Mortgage Payment Current during Short-term Financial Crisis

Basic Tips on Keeping your Mortgage Payment Current during Short-term Financial Crisis

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Posted: Oct 14, 2009 |Comments: 0
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Mortgage payment is a basic and vitally important component when it comes to home loan because it determines whether you keep your property or not. The increasing number of home losses due to the inability of home owners to comply with their monthly payment dues is quite prevalent especially in the contemporary economic situation of the world. Higher percentage of unemployment and massive impacts of financial crisis are factors causing a domino effect in the different systems in the society particularly that of real estate. Hence to help you combat chances of losing your home because of financial constraints, you need to know the different ways on how to keep paying your home loans amidst the pressing recession.

What must you do to keep your payments up-to-date?

Financial management is the key to every solution to remedy the continuously occurrence of money-related problems and dilemma. For instance, in dealing with your mortgage programs and payment, you need to properly allocate your resources to balance everything and not miss an important financial obligation.

Here are some of the ways to make sure your payment is current even when experiencing a short-term financial crisis.

Know your Priorities. The first thing you need to do is to determine what the most important entities are that need immediate and prompt payment. Mortgage loans must be on top of your list if you do not want to risk your house from loss or recapture. There are other bills and debts you may have but make sure that you allot the amount needed to finance your home loan before paying other concerns. Remember that your finances must be wisely and fairly divided to all your other financial obligations. Make a list and weigh the pros and cons when you pay your bills accordingly. Live within your Means. This is a common and old-aged cliché but the wisdom behind it is truly dynamic. It is as important before as it is today most especially when everything is crumbling down and finances are really pressing issues to deal with. Spend less and wisely by determining what you need the most and what you can actually do without. Distinguish the difference between needs and wants and get only what you and your family really needs. Overwhelming payments and credits are oftentimes results of binge shopping and impulsive buying. Bear in mind that you need to have a good credit record to continue having a good mortgage rate. Pay your bills and credit cards and other loans to improve your credit record. Communicate with your Mortgage Provider. This is extremely necessary because it may give you more benefit than you ever think. Should you experience difficulties in complying with your monthly dues, you may immediately inform your lender about it so that you may come up with a resilient payment schedule which is more convenient and favorable to you.

Keeping your mortgage payment current is vital especially in the imminent financial crisis that threatens the real estate market and other industries. This will keep you from any hassle and worries of losing your most valuable investment.

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Real Estate in Fountain Hills AZ and Fountain Hills Houses for Sale blog can offer you a whole deal of information about the real estate market. Whether you want to sell your house, buy a property or rent one, getting all the information that you need will give you a great advantage.

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Basic Requirements Needed to Receive a Mortgage

admin — Thu, 29 Jul 2010 07:56:55 +0000

With the housing market in turmoil after the sub-prime mortgage crisis and the Federal bail-out of Freddie Mac and Fannie Mae, the basic requirements to receive a mortgage have tightened up. According to at least one real estate financier, to get a mortgage these days you”practically have to walk on water”. While this is a bit of an exaggeration, it is true that it’s far harder to qualify for a mortgage now than it was just two years ago. It’s not, however, any harder than it was before 2000, when the real estate market went into hyperdrive. According to many professionals in the credit industry, what we’re seeing is a return to the norm.

So exactly what do you need to get a mortgage these days? Says Patricia McClung, of mortgage giant Freddie Mac, creditors are getting back to the basic three C’s of mortgage lending – credit history, capacity and collateral. Here’s what you need to know about each of those three requirements, and how they’ll affect your ability to qualify for a mortgage in the current mortgage market.

Credit History – Do you pay your bills?

The first C in the mortgage triad is credit history – yours. While having a spotty credit history won’t make it impossible to get a mortgage, it will make it more difficult – and more expensive. Lenders are willing to offer far lower mortgage rates to those with the highest credit scores (760-850) than they’ll extend to those with lower credit scores. The difference can be astronomical. According to June 2008 figures, lenders were offering an average of 5.9% mortgage rates to those in the highest credit bracket. Those in the lowest bracket that Fannie Mae will accept (580-619) were being offered rates of 9.4%. On a $250,000 mortgage, that’s a difference in monthly payment of $588.

In order to be considered for a mortgage by most major lenders, you’ll need a credit score of at least 580, though you may still find some lenders willing to take a risk on someone with a lower credit score, particularly if they really shine in one of the other two C’s. The problem, of course, is figuring out exactly what constitutes a credit score of 580. There are many different barometers, and even the major credit reporting bureaus use different reporting criteria. Essentially, in order to qualify for a mortgage, you should have:

5. no missed or late payments on any credit or utility accounts for at least the preceding 12 months

6. a debt to income ratio of .45 or less

7. the legal ability to enter into a contract

8. no outstanding defaults on credit card or other loans

Capacity – Can you pay your mortgage?

In essence,”capacity” simply means ‘do you earn enough to make the payments on the mortgage you are asking for?’ The typical rule of thumb for deciding capacity is that your mortgage payment should be no more than 28% of your monthly gross income. The debt to income ratio referred to above is another way of determining capacity to pay. Follow these steps to calculate your debt to income ratio:

Add up all your sources of income (before taxes) for the month.
Add up your monthly debt. Include all credit card payments and loan payments, including student loans and car loans. Add in your calculated housing costs, including mortgage, insurance, private mortgage insurance and property taxes.
Divide your debt by your income to get a debt to income ratio.

Over the past several years, the acceptable debt to income ratio has crept up as high as .65, but .45 seems to be the new golden number.

Capacity also can include your savings. Most lenders will require that you have the equivalent of six months housing costs in savings in order to approve your mortgage.

Collateral – What have you got?

The final C in the mortgage algorithm is collateral. In banking terms, collateral is something that you own that will be used to ‘secure’ the loan. When you make a secured loan like a mortgage, you are agreeing that if you fail to make payments as agreed upon, the lender can take possession of the collateral and sell it to recover their loan. With a mortgage, the house that you’re buying serves as collateral. If you don’t make the payments as required, the bank or lender may sell the house in order to get their money back.

The amount of the down payment you make is counted as part of the collateral value. While zero down mortgages were not unusual over the past several years, you can expect most lenders to require a down payment of at least five percent of the purchase price of the home. It’s more common for them to require fifteen to twenty percent down on your home. In general, if you put down less than twenty percent on your home, you will have to carry private mortgage insurance (PMI). PMI guarantees repayment of the mortgage if you should default on the mortgage.

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Basic Trends on the American Mortgage Market

admin — Sun, 25 Jul 2010 04:02:49 +0000

Basic Trends On The American Mortgage Market

Most recently, Freddie Mac, second biggest and influential funder of American mortgage loans announced that its current agreement to purchase various mortgages gradually reached its highest level after the specialized USA regulator eased most capital limitations. This significant diminution of the constraining measures is executed as a final attempt to provide further stability to the continuously worsening American real estate markets by increasing total purchasing power of both government sponsored enterprises by extra $200 billion.

A bit later Freddie Mac entered several new contracts to buy loans worth $43,5 billion, suddenly increasing compared with only $14,8 billion for the previous month. Finally total portfolio of this leading financial company as well increased to $712,5 billion. In the similar way, at common annualized rate, total home mortgage investing assets has increased up to remarkable 9,9%. Despite all these unquestionable positives, unfortunately, general delinquency rate as well rose up to 0,74 percent of the loans.

Similarly, current rates on 30-year mortgages climbed up to 6 percent for the first time in 6 weeks, because of the increasing ubiquitous anxiety of the financial markets about quickly rising inflation pressures. In this reason, it will be exceptionally reasonable for you to consider in advance that most popular 30-year fixed mortgage rates currently seem quite steady on ordinary market levels of about 6,03 percent. However, these rates still remain extremely below their common year-ago levels, when 30-year mortgage rates easily averaged 6,16 percent, 15-year mortgages – 5,87 percent and 1 year ARM – 5,43 percent. Other disturbing news on the global market basically include that most frequently searched interest rates for fixed-rate mortgages rise, while actual prices for 1-year adjustable-rate mortgages continuously decrease. As a consequnce from this general decline, the total volume of applications goes down to 3,2%, in comparison with 2007.

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Choosing the Right Mortgage – Basic Mortgage Terms and Features

admin — Thu, 24 Jun 2010 23:11:31 +0000

Choosing the Right Mortgage – Mortgage Basics

There is an astounding range of commercially available mortgage products, which makes choosing the right mortgage increasingly difficult without a firm grasp of mortgage basics. Here we try to give the consumer struggling to understand the basics of what a mortgage is, how it operates, and what features are right for him or her, the basic terms and distinctions that will allow the consumer facing an all-important mortgage decision – perhaps for the first time – to begin to choose the right mortgage from the thousands of mortgage products available on the market. But a word of caution – there is an incredible range of mortgage products commercially available. Before making a final decision on which mortgage is right for you, it would only be prudent to consult with an experienced and knowledgeable mortgage broker.

What Is a Mortgage?

A mortgage is a loan – but a loan that is secured, in this instance, against a home and/or piece of land. The person who borrows the money to buy a house is the mortgagor and the person, company or bank etc. who lends the money is the mortgagee. In most instances, the person buying the house will be required to pay some amount, perhaps as little as 5 per cent, as a down payment on the house or property. A mortgage from a commercial or private lender is secured to pay the balance of the purchase price. The mortgagee/lender provides the balance of the money to buy the house on the ‘closing date’ (i.e., the day the deal for the house is completed and the property ownership changes) and the mortgagor/purchaser pays back the money borrowed to purchase the house over time, usually over a number of years.

Key Mortgage Terms & Concepts

Amortization Period – A mortgage is written based on an understanding that the mortgagor/borrower will pay back the money borrowed over a number of years, rather than months. When purchasing a home that is typically worth several times what the purchaser earns in a year, it is understood that a the number of years will be needed to fully pay off the mortgage. The ‘amortization period” is the number of years that it will take to pay off the mortgage in full under the terms of the mortgage that is agreed to. The usual amortization period is 25 years, although shorter and longer amortization periods are available.

The amortization period sets out how long it will take to pay off the mortgage in monthly payments. Monthly payments consist of two parts – one part goes towards paying the ‘principal’ (the amount of money borrowed) and other part goes towards paying the ‘interest’ (the fee charged for borrowing the money.) The longer it takes to pay back the principal – i.e., the longer the amortization period – the greater the amount of interest that will be paid over the life of the mortgage.

Term – A mortgage agreement will not typically be for the full length of the amortization period. It is too difficult for either party – mortgagor and mortgagee – to foresee all the changes in financial circumstances over such an extended period. Accordingly, the parties – mortgagor/borrower and mortgagee/lender – will agree to a mortgage covering a specific number of years of the mortgage – e.g., 5 years. When the term of the mortgage expires the mortgagee is paid in full for the money that was borrowed to purchase the home. Typically, since it is anticipated that the mortgage will be paid off over the length of the amortization period, at the end of the term the mortgagor will have to negotiate a new mortgage – either with the initial mortgagee/lender or a new mortgagee. This process of ‘refinancing’ is normal, yet is an excellent way for prudent borrowers to re-examine their financial circumstances – for example, to see if their circumstances have changed so that they can shorten the amortization period and pay their mortgage off more quickly, thereby cutting down on the total interest they will pay in purchasing their home.

Fixed-Rate vs. Variable-Rate Mortgages – In a fixed-rate mortgage, the same interest rate is charged throughout the entire mortgage term. In a variable-rate mortgage the interest rate will change based on changes in interest rates that are being charged in the market.

Since interest rates do change based on the financial markets, risk is being assigned and the mortgage rates for both fixed-rate and variable-rate mortgages will reflect who is taking the risks – the mortgagor/borrower or the mortgagee/lender. When mortgage rates are relatively high it is the borrower who takes the risk that interest rates will not fall lower than the rate he or she agrees to for a fixed-rate mortgage. So when mortgage rates are relatively high, mortgagee/lenders will usually be willing to offer fixed-rate mortgages for a lower interest rate than the current interest rate for a variable-rate mortgage. The opposite is, of course, true. When mortgage rates are relatively low – as they are now – the mortgage/lender assumes the risk that interest rates will not go up. Since there is always the risk that rates will go up, a fixed-rate mortgage will have a slightly higher interest rate than a variable-rate mortgage when interest rates are relatively low. (The advantage of a fixed-rate mortgage is, of course, that the mortgagee will always know the cost of his or her mortgage payments over the term of the mortgage.)

Open Mortgages vs. Closed Mortgage – With an open mortgage some or all of the balance of the mortgage can be repaid during the term of the mortgage without a financial penalty. This is particularly advantageous, if the home purchaser has to move for employment or other reasons and if one’s financial circumstances change. Under a closed mortgage, no extra payments or changes in the mortgage can be made before the end of the mortgage term without a penalty being charged. Such penalties can be onerous for the homeowner who is forced by circumstances, such as a change of job, to relocate before the term of the mortgage expires.

Open mortgages can also prove to be very advantageous for the prudent homeowner who is able to make periodic payments directly to the principal owing under the mortgage. Each mortgage payment is split between interest costs and money that goes towards paying off the principal of the loan. If the borrower makes periodic payments over and above the regular mortgage payments that are required (the amounts and timing of which are usually set out in the mortgage itself), these payments directly reduce the amount owing under the mortgage. Doing so effectively reduces the amortization period of the mortgage, since in every subsequent mortgage payment more money will be going to pay off the principal of the mortgage and less money will be going towards the interest costs.

The Importance of Mortgage Advice

While this covers some of the mortgage basics that the consumer will need to choose the right mortgage product, it is important to note that there are quite literally thousands of mortgage products to choose from – each with its own intricacies and detailed terms. Accordingly, the prudent mortgage shopper should consult with someone with advanced expertise in the products and range of choices that are available on the market, given the borrower’s circumstances. An accredited mortgage broker will have the expertise and knowledge to assist the borrower in choosing the right mortgage for his or her situation. Moreover, since an accredited mortgage broker typically receives his or her fee from the lender, a mortgage broker with expertise and knowledge of the thousands of mortgages that are commercially available can assist the borrower in understanding and choosing the right mortgage from the thousands that are available at no cost to the borrower.

For help in choosing the right mortgage or to consult with one of Canada’s most experienced and trusted mortgage brokers, visit www.CandianMortgagesInc.ca or call 1-888-465-1432 to speak with an experienced and knowledgeable broker agent.

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