Random Mortgage Knowledge
There are millions of things to know about the mortgage industry and obtaining a mortgage. Please
view the following random bits of mortgage knowledge
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When buying a home one of the most important pieces of random mortgage
knowledge that is commonly overlooked is preparing a budget and planning for
homeownership. Too often consumers do not plan a budget, overextend
themselves and end up destined for financial ruin. Just because a bank
pre-approves you for a certain amount of a mortgage does not mean that you
need to buy a home for the full amount. Stick with a mortgage that provides
a payment that is comfortable to you and does not "strap you" financially.
A Balloon Loan is a loan that behaves like a normal loan but comes due in full within a predetermined number of years.
ARM is an acronym for Adjustable Rate Mortgages. These mortgages are typically fixed for a predefined number of years and then may adjust.
There are more to mortgages than simply interest rates. Sometimes a great rate may not be the best way to structure your mortgage. Always consult with your mortgage broker to find the best combination of rate, term and fees before moving forward with your purchase or refinance.
Although getting a mortgage is important, understanding your debt and how to better structure it is also very important. Being able to finance your debt in ways that improve your tax situation and your monthly
cash flow bring you to the level of what the rich do on a daily basis.
Your credit score is the biggest factor used in determining the loan programs you qualify for. Getting a mortgage and making timely payments is perhaps the best way to repair a bad credit profile. Even though your initial mortgage terms may not be that attractive, you should be able to refinance into a much better loan program after a year or so of making timely payments.
It is a common misconception that a home is an investment. It is more accurate to consider it a liability. It is a debt that you owe money on. It is only an asset if you generate a positive cash flow from rent, or if you liquidate the equity by selling or refinancing. Even if it were an investment consumers should remember that there are risks with any investment.
When you are looking to buy a home, the most important factor in determining how much of a home you will qualify for is your DTI. DTI stands for Debt to Income ratio. Your DTI will help a lender determine how much of a house and a mortgage payment you can qualify for. Keep in mind that just because a lender states on paper that you can qualify for a home of a certain value, many times they do not take into consideration factors about how you like to spend, save, or invest your money. Some borrowers may like to put 25% of their paychecks away into savings and into other investments. Some borrowers may only like to put away 5% of their paychecks towards savings or retirement, but they like to take expensive vacations each and every year. Everyone is different and buying a home that is too much for you and your lifestyle can have a seriously negative effect on your finances and your family life. Therefore, take everything into consideration when you are looking to buy a home, not just the black and white numbers that are in front of you. Calculate how much you think you would feel comfortable making a mortgage payment of, before you begin looking at homes and this way you and/or your family have a good idea of a price range you are looking for, before falling into love with a home first that may be out of your financial "comfort zone".
There are many different programs available for a first time home buyer. Even with all these different programs, don't allow all the various options get you bogged down. Sometimes the simplest is also the best. Ask David J Zwierecki about the My Community Mortgage. You could potentially get into a home with as little as $500. Though certain criteria will have to be met, the MCM program is a great option for first time home buyers.
Purchasing a home is an investment in your families future. You need a stable environment to thrive in and a home is a long term financial investment that you will reap results from after paying down the mortgage.
If you are thinking about getting a 15 year mortgage then consider the following.
Fully amortizing mortgages have a higher percentage of the monthly payment going towards interest at the beginning of the loan than towards the end. This means that the tax savings of a loan is larger at the beginning of the loan then the end.
A 15 year mortgage has higher payments to get a loan paid off in the 15 years. A 30 year mortgage has lower payments since the loan is paid off over a longer period of time.
If one chooses a 30 year mortgage which makes lower payments and puts the difference between the 30 year and 15 year payments into an investment account that gets 8% a year, one can gather enough in the investment account to payoff their 30 year mortgage in 15 years and have an additional $25,000.
If you'd like to learn more, contact David J Zwierecki.
Paying one extra payment per year on a 30 Year Mortgage can reduce your term to just under 23 years!
Loans that exceed 80% of your properties value will more often than not require you to pay mortgage insurance. Mortgage insurance can be set up as lender paid or borrower paid. With lender paid mortgage insurance you will see a higher interest rate to account for the mortgage insurance as opposed to a buyer paid mortgage insurance which will have you paying monthly in most cases.
Changes in the quoted interest rates of Fixed Rate Mortgages are less dependent on the Federal Reserve's overnight borrowing rate, or "Fed Funds Rate", than commonly believed. In fact, the Fed rate increases and decreases which Mr. Bernanke, and Mr Greenspan before him, announce, are more directly linked to rises and falls in short term interest rates, such as those which determine the rates on Adjustable Rate Mortgages.
Negative amortization loans or pay option loans as they are sometimes called are a great financial tool if used correctly by financially responsible borrowers.
There are even 40 and 50 year mortgages.
This allows the mortgage to be amortized over a longer period, thus resulting in a lower monthly payment.
There are many different loan programs available for you. If you are an investor with great, average or poor credit; a first time home buyer (FTHB) with any type of credit; a person looking to gain more of a tax advantage; folk who are approaching their younger years are able to get reverse mortgages - a program where the bank pays you for the equity you have built up in your home; low and middle income borrowers; folk looking to get a second home or vacation home. If you are not sure, contact this mortgage officer to help assist you in determining the best loan for your unique situation.
A NINA mortgage stands for No Income, No Assets. This is also referred to as a No Doc mortgage because the bank does not verify employment, income or assets and the borrower does not disclose them to the bank.
Interest rates are typically much higher to the increased risk to the bank.
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Information listed above is to be used for educational purposes only and is not guaranteed
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