Where To Get A Bad Credit Loan Mortgage
Posted on June 6, 2009
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If you have gone through a bankruptcy or have a less than stellar credit history, you may be concerned that you are never going to be able to buy the home of your dreams. It may take a little extra looking, and it may even cost a bit more, but there is such a thing as a bad credit loan mortgage that can help you realize your dream of homeownership even if your credit rating is not as high as you wish it were.
Not everyone is in total control of their credit histories all the time; there are numerous reasons for someone to have bad credit reports. Health issues and the medical bills that go with them, divorce, and job losses are all issues that people face in life, and sometimes those issues can adversely affect your credit history.
Your best bet when searching for a bad credit mortgage may be to consider leaving behind conventional financing and try instead to get a USDA, VA, or FHA loan.
USDA loans may be the right solution for your bad credit loan mortgage if you have very little money to put down and if you want to purchase a home that is in a rural area. They may cover 100% of the cost of the home (sometimes even 102%), which is not as common as it has been in times past. It is also possible to get a fixed-rate loan through the USDA Rural Housing program, and it may not be necessary to carry private mortgage insurance (PMI).
VA loans are available to people currently serving in one of the branches of the armed forces and/or veterans. They are backed by the Veterans Administration, which makes lenders more eager to lend even if you have bad credit. The terms tend to be less costly than traditional mortgages, especially for those with bad credit. These loans are not available for investment property or mobile homes; they are only available for a property in which the borrower is going to live.
FHA loans are loans that are backed by mortgage protection insurance from the Federal Housing Authority. Even with bad credit, you may be eligible for an FHA mortgage loan. The FHA’s goal is to allow as many people as possible to reap the emotional and financial rewards that come with home ownership, and they have been assisting with bad credit loan mortgages for many years. Even if you have good credit, and FHA loan is worth looking into, as the protection offered by the FHA allows lenders to loan money to borrowers who have very little money to use as a down payment on their little piece of heaven.
If you have had past credit difficulties, you should know that you are not alone; you should also know that there may be options available for you. Bad credit loan mortgages can be found and help you realize your dream of owning your own home.
What Is A Jumbo Mortgage
Posted on June 6, 2009
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A jumbo mortgage is, as its name implies, a really big mortgage. To be more specific, a jumbo mortgage is one in which the amount being financed is more than the top amount set by the Government Sponsored Enterprises, or GSE. The GSE is a group of financial companies that is charged with maintaining access to housing loans and reducing the cost of those loans so that consumers are able to realize the goal of home ownership.
As part of their duties, the GSE sets a maximum guideline amount for a mortgage, which has traditionally been about $600,000.00. If a mortgage is for more than that amount, it is called a jumbo mortgage.
Of course, we all know that there are lots of houses that cost more than that, so the need for jumbo mortgages has been increasing as the price of housing has increased. Not all lenders offer jumbo mortgages, but there are certainly plenty of lenders who do. Generally speaking, a jumbo mortgage carries more risk for the lender because the payments are very high and even wealthy buyers may at some time in the future have financial difficulties that make it difficult for them to meet their payments. In addition, high-priced homes generally take longer to sell than do moderately priced houses, so if a homeowner does fall into hardship, it may take quite some time to get out from under the mortgage loan, so they may have to default on the loan.
Because of the increased risk, many lenders will require a large down payment on a jumbo mortgage. The interest rate may be a little higher than they would be for a mortgage that falls below the GSE’s guideline maximum amount.
It is possible for some homebuyers to purchase a home with very little or even no money to use as a down payment, but this does not generally apply to a person who wants to get a jumbo mortgage. For these large loans, most lenders insist on some money down, but in most other ways the process for getting a jumbo mortgage is pretty much the same as getting one for a lesser priced home.
If the house of your dreams is a high priced home in an area of the country that has seen dramatic rises in the prices of homes, just realize that there is likely a jumbo mortgage available to you if you have a good credit history and can show your ability to repay the loan. At the same time, you should be prepared for the fact that the loan is probably going to cost you a bit more than a smaller mortgage would, not just in terms of the amount you are borrowing, but also in terms of what it actually costs you for the privilege of borrowing the funds.
Pros And Cons Of Interest Only Mortgage Loans
Posted on June 6, 2009
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Have you been looking into the prospect of buying a home? If you have, you may have heard about interest only mortgage loans and may be wondering if getting an interest only loan is the right option for you. What exactly are interest only mortgage loans? As the name implies, this type of mortgage is set up so that the borrower (you) pays only on the interest of the loan rather than applying part of the payment to interest and part to principal. Of course, this is not done for the entire life of the loan. When the mortgage is set up, the interest only payment is set up for a set number of years only.
Once that set number of years is up, the borrower “trades in” his interest only mortgage loan for a more traditional one in which he begins to pay down the principal balance as well. Typically, interest only mortgage loans are set up with payments being applied to interest only for the first ten years, and then the loan is changed.
The reason that many folks have been interested in interest only mortgage loans is that they allow the borrower to have a much lower payment for those first ten years. Since you are not paying any principal, the resulting payment is lower than it would be with more conventional financing. If you are buying the house as a home and anticipate having an increased income as time goes on, you may be able to qualify for the interest only mortgage loan because of this lower payment that reduces your debt-to-income ratio. If you are an investor, the interest only mortgage loans allow you to keep more cash flow to make home improvements in anticipation of selling or just to keep more of your money in your pocket if you are interested in selling the property relatively quickly.
There are disadvantages to interest only mortgage loans, as well, however. The major disadvantage is that it is more risky to the borrower. With more traditional financing, you are building equity in your house right from the very start, albeit not a lot at first, as even with traditional loans, the majority of your payments go toward interest in the beginning. With interest only mortgage loans, however, you are building absolutely no equity. Equity comes from paying down the principal, and since you are not paying any principal, you are not building any equity.
What is the problem with not building any equity? Well, you are running the risk of not being able to afford the higher payments when the interest only years come to a close, as these payments will likely be higher than they would have been with a different loan. So, if your career does not bring in the kind of money you expected, you may find yourself unable to meet the payment. Also, you may be unable to sell the house when you are ready to sell if that particular period of time is a buyer’s market. Too, you will be unable to get a home equity loan (refinance) because refinancing is based on the equity in your home, and with interest only mortgage loans, you build no equity.
Hot Mortgage Terms You Need To Know
Posted on June 6, 2009
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Are you considering purchasing a new home? If you are, you should know that this may very well be a very good time to buy a house. The housing market is sluggish, which means that prices tend to be lower and so do interest rates. Also, there are more houses from which to choose. This surplus of houses on the market is good for the buyer; basic laws of supply and demand dictate that the more there is of something (in this case houses), the less it tends to cost.
If you are going to purchase soon, however, it is important that you understand the terminology used regularly in the real estate world. Common mortgage terms include interest rates, length or term of loan, closing costs, variable rate loans, origination fees, document taxes, home equity, acceleration, amortization, conventional financing, down payment, FHA loans, fixed rate loans, points, and private mortgage insurance (PMI).
The interest rate is the amount of money the lender is charging you in order to borrow the loan. This is expressed in terms of percent. Of course, the lower the interest rate, the less the cost of the loan.
The term of the loan is also referred to as the length of the loan. This is how long you will be expected to make payments on the mortgage. In years past, most mortgages were twenty years. Now, thirty years is most common.
Closing costs are any fees associated with the actual transaction of buying and selling a home. These include realtor’s fees, title insurance fees, document stamp taxes, the cost of necessary repairs to the home (if the repair company has agreed to be paid at closing), points, and other miscellaneous costs.
Variable rate loans are the “opposite” of fixed rate loans. With a variable rate loan, the percent you pay in interest can go up and down according to the prime interest rate. With fixed rate loans, the interest percent remains the same throughout the life of the loan.
Points, also called loan discount points, are fees that are charged to the buyer from the lender. These fees are prepaid interest and can add quite a bit of cost to your closing. One point is equal to one percent of the loan amount. If you are borrowing $100,000 and are assessed one point by the lender, you will have to pay $1000 of prepaid interest when all the paperwork is done at your closing.
Private mortgage insurance (PMI) is a type of insurance that allows the buyer to put down a smaller down payment on the home. Many lenders will require that you purchase PMI if you are putting less than twenty percent down.
A down payment is the amount of money you are paying out of your own pocket toward the purchase of your new home. The selling price of the home (plus all fees and other costs) minus the amount of the mortgage is equal to your down payment. Most lenders require you to have a down payment of twenty percent or carry PMI.
Different Mortgage Loan Types Can Make Or Break You
Posted on June 6, 2009
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What mortgage loan types are there for people who want to realize the American dream of home ownership? There are several to choose from, and there are advantages to each. The major mortgage loan types are conventional, FHA, and VA. Conventional mortgage loans are the most simple to understand and the most basic. When you get conventional mortgage financing for your home, you simply borrow a certain percentage of the price of the home (the sale price and fees minus any down payment) and agree to pay it back via monthly payments for a certain number of years.
FHA and VA loans are loans that are backed by the Federal Housing Authority and the Veterans Administration, respectively. These two groups both have the goal of helping more Americans realize the dream of home ownership. They work in cooperation with certain lenders and provide those lenders with mortgage insurance in case you have to default on your loan. Generally, these types of loans have a lower down payment, may have lower interest rates, and may be easier to qualify for. Also, with FHA and A mortgage loan types, the FHA and VA themselves set a lot of the parameters of the loan, such as how much of a down payment is needed, how much interest can be charged, inspections of the property in question, and so on. That is why not all lenders prefer to deal with FHA or VA mortgage loan types. The lenders have more control with conventional mortgage loan types.
Another major difference in types of mortgages is whether the loan is a fixed-rate or variable-rate loan. A fixed-rate loan has one interest rate that is set and remains unchanged throughout the life of the loan. Some people prefer to have a fixed-rate loan, especially during times of a “buyer’s market” such as we have now. Rates as well as housing prices tend to be lower right now, so it makes sense to get the lower rate and keep it forever, as interest rates are more likely to climb in the future, rather than decrease in the future. Also, knowing how much your payment is going to be helps you budget your finances more easily.
However, it can sometimes be more difficult to qualify for a fixed-rate loan, so some folks go with the adjustable mortgage loan type. Adjustable mortgages begin with one interest rate, but it is not necessarily going to remain the same throughout the life of the loan. Periodically, the interest rate can be adjusted to suit market conditions. Depending on what is happening in the economy and on what the prime interest rate is, if you have an adjustable mortgage loan type, your interest rate (and payment) can go up or down.
There are also ways of financing that are known as unconventional mortgage loan types. There are a variety of such types of loans, and they are relative newcomers to the home lending industry. You can find interest-only mortgage loans, balloon mortgages, and even reverse mortgage loan types. When you are searching for financing to make your dream a reality, be sure to look into all mortgage loan types to see which is the best fit for you and your family’s circumstances.
Bad Credit Mortgage Loans Making The Dream Of Homeownership Come True
Posted on June 6, 2009
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Bad credit mortgage loans make the American dream of home ownership a possibility even for people with less than perfect credit scores. Subprime loans (also called second chance lending) are usually granted to people with credit scores of less than 680.
Subprime loans are generally required by people who have missed more than two payments in the last 12 months; have a judgment, foreclosure, or eviction against them; declared bankruptcy in the last 5 years; or have a generally defined high risk of default.
Back in the 1930s, the 30 year fixed rate mortgage was introduced as a financial instrument. Since then, the rate of home ownership has doubled and two-thirds of Americans own their own homes today. To expand the reality of homeownership to as many people as possible, sub prime or bad credit mortgage loans came into being.
When you take out bad credit mortgage loans, be prepared to pay higher interest rates and fees. You may also have to take out extra insurance to ensure that the bank gets paid back. Be prepared for bad credit mortgage loans to be more difficult to get in 2009 than they were before the housing bubble burst. This is because there is less liquidity in the markets and the capital will flow first to those with better credit.
But that does not mean that bad credit mortgage loans do not exist. You just have to work a little bit harder to find them.
First off, you should clear up your own credit history to the extent possible. Get a copy of your credit report and dispute any inaccuracies. Pay off any bad debt and get the creditor to mark the bill satisfied in full on your credit report.
Then, start shopping for lenders. You are looking for a bad credit mortgage loans lender who will give you the best loan at the best rate with the fewest fees.
Be prepared to get into a loan for the short term as your chances of refinancing after 24 months are good. There are two reasons for this. The first reason is that after 24 months of regular payments, your credit will improve making regular loans more accessible.
But, the other reason is that by 2012, the credit markets are bound to have improved. You will have built equity in your home so the loan will be a secure investment for the bank. At that point, you can refinance into a more manageable loan.
Bad credit mortgage loans exist to allow people like you the benefits and security of owning your own home. These subprime loans are lifesavers for people who want to work their way back into normal credit. Generally within 2 to 3 years, a responsible borrower will get into a regular loan rather than the bad credit mortgage loans they started with.
A Refinance Mortgage Loan Can Make Sense For You
Posted on June 6, 2009
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Are you looking for a way to finance your kids’ college educations? Do you dream of taking the vacation of a lifetime? Would you like to purchase a new vehicle and perhaps be able to deduct the interest from your federal taxes? Would you like cash for home improvements? Maybe you are interested in having a way to buy your new dream house while your current house is still on the market waiting to be sold? If any of these circumstances apply to you, you are probably thinking about getting a refinance mortgage loan.
What does it mean to refinance your mortgage?
As the name implies, it means that you renegotiate your loan. Usually, refinance mortgage loans are taken out by people who wish to tap into the equity they have built up by paying down the principal on their mortgage. For this reason, refinance mortgage loans are also sometimes referred to as home equity loans.
What exactly does it mean to have equity in your home? That means that your home is worth more than you owe. If the market value of your house is, for example, one hundred thousand dollars, but you only owe eighty-five thousand, you have fifteen thousand dollars worth of equity in your home.
Many lenders are willing to offer a refinance mortgage loan if you have equity in your house, and you may choose to refinance to get cash for something you want or need such as a vacation, home improvements, or a college fund. You may also decide to refinance simply because it makes good financial sense. A lot of times, people have to take less-than-ideal mortgage terms when they are buying their house, either because they have bad credit or little credit when they first take out their home loan.
As time goes on, however, you may have a better credit history or the prime interest rate may be lower than it was when you first bought. If the prime rate is lower, you are likely to be able to refinance your mortgage loan at a lower interest rate and show a significant savings with reduced monthly payments or a lifetime interest savings of thousands of dollars.
Does it make good sense to refinance your mortgage loan? For some people it does; for others, there is no real advantage. If you are considering tapping into your home’s equity, be sure to discuss all your refinance options with a good financial planner and understand what exactly the pros and cons are for your particular situation.
Many people find a refinance a viable alternative to taking out other costly loans that may not have the same tax benefits as a home equity loan. Some refinance mortgage loans even have a lower interest rate than government-backed student loans, so it pays to take a look at all your options and make the best decision for you.
40 Year Mortgage A New Option For A New Era
Posted on June 6, 2009
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The 40 year mortgage makes monthly home payments more affordable, especially in areas where the real estate prices have skyrocketed. It is an attractive tool for homeowners who might otherwise be priced out of the housing market entirely.
In order to understand the 40 year mortgage, we have to look at the history in which the concept came about.
The “standard” 30 year fixed rate mortgage was developed in the 1930s. In 1935, the average home cost $3450 and the average salary was $1600. That means, the average home cost just over two years’ salary.
Fast forward to today. In 2005, the median home price in California was $524,000 while the average salary in that state was $43,000. As you can see, homes now cost ten times annual salary. This makes spreading the payments out over a 40 year mortgage quite attractive.
Another difference was that in the 1930s, people bought homes that they would live in until they died and then pass down to their children. Today, people live in a purchased home for just 8 to 10 years on average.
All of this makes the lower payment 40 year mortgage an attractive option for people whose home purchase is a temporary investment.
A 40 year mortgage may offer you a lower monthly payment. You may also be able to obtain a secure, fixed rate. But these mortgages typically have a balloon payment at the end of thirty years. AT that time, you have to refinance the loan or pay off the remaining balance.
A 40 year mortgage has lower payments than the 30 year fixed mortgage because it stretches out the amortization schedule over a longer period. The loan is actually only for 30 years, but is amortized over 40 years, thus the balloon payment.
An alternative to the 40 year mortgage is the interest only loan as it offers a similar low payment schedule. In some ways, the 40 year mortgage is more attractive though, because it allows you to build at least some equity in the home.
Both the 40 year loan and the interest only loan allow you to purchase a more expensive home than you can afford with the same amount of cash. A $200,000 home would be $100 per month cheaper with a 40 year mortgage than it would be with a 30 year fixed rate mortgage.
The people who will benefit most from 40 year mortgage plans are those who don’t plan on moving from their home during the mortgage period. If you do move, you risk leaving the home during a downturn in the market which puts your entire investment at risk.
It made a lot more sense to take out 40 year loans when it looked like the housing market would continue to rise from year to year. In a depressed market, you need to be sure that you will be in the home for a long time before you take out a 40 year mortgage.
Bad Credit Second Mortgage Lenders Take A Risk On People With Lower Scores
Posted on June 6, 2009
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If you need a bad credit second mortgage, you should know that they exist, though you might need to work a little harder to find them. Lenders who specialize in the bad credit second mortgage market tailor their portfolios so that they can assume the extra risk these loans entail. As a result, you will pay higher interest and fees.
Second mortgages are secured loans that do not have first claim to the house. If you go into foreclosure, the primary mortgage will be paid off from the proceeds of the sale before the second mortgage is. That is why second mortgage interest rates are higher because there is more risk involved.
Because people with bad credit are at higher risk of defaulting on their home payments and going into foreclosure, bad credit second mortgage solutions are harder to find. Here are some of the things banks look for.
First, is there any equity in the home? A bad credit second mortgage ca often be secured when the homeowner owes 80 percent or less than the house is currently valued at.
Second, is there a low debt to income ratio? The more debt you have, the less chance you have of securing a bad credit second mortgage.
Third, do you have a solid employment history? If you do, you are more likely to secure a bad credit second mortgage.
Second mortgages can be used for a number of things. If you do not have the traditional 20 percent down payment, the second can secure the difference. Seconds are also used as home equity lines of credit to allow the homeowner to renovate the home or just spend the money.
It is also possible to secure a second mortgage above and beyond the value of the home. Though this was more common when the credit markets were flush, sometimes you can get loans totaling 125 percent of the value of the property. Lenders usually allow these loans when they perceive that the value of the property will rise in coming years. This could be because the real estate market is on the upswing or it could be because the new owner is investing in improvements.
You should also know that it is possible to take out third and even fourth mortgages on your home, though these are rare. The interest rate on each successive loan becomes steeper as the order of payment in case of a foreclosure is reversed.
Prior to its going belly up, Countrywide was the largest source of bad credit second mortgages. Now that they are no longer in business, it is more difficult to find these loans. If you need a bad credit second mortgage, you may want to simplify the search by turning to online providers. In this way you can fill out one form and have several lenders make offers for your loan. You can compare rates in one easy step.
Bad Credit Mortgage Lenders Homes For People With Less Than Perfect Scores
Posted on June 6, 2009
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Bad credit mortgage lenders offer people with less than perfect scores on their credit reports the hope of owning their own homes. By offering higher interest higher fee sub prime mortgages, bad credit mortgage lenders offer the chance for people with bad credit to own their own home.
Home ownership is part of the American dream. But, the average cost of a home is six to ten times an average person’s salary depending on what part of the country you live in. The only chance of owning a home for an ordinary person is to take out a mortgage. If you have bad credit, it means going to bad credit mortgage lenders.
Many things can happen in people’s lives to put them in a situation where they have bad credit. It may be the result of overextending yourself. It may be that you are bad about paying bills. You may have also had situations outside of your control like a major medical crisis or unexpected layoff. In any case, bad credit mortgage lenders give you a chance to achieve the American dream of homeownership.
Unfortunately, it is not as simple to get yourself out of a bad credit situation as it was to get into it. There are some things you can do immediately to improve your credit score, but other options take years of steady payments to improve the bottom line.
One thing you can do immediately is to obtain a free copy of your credit reports. Then, go through and see if there are any errors. If errors exist, report them immediately. The credit bureau has 30 days to confirm the debt. If they are unable to, then they must remove it from your records. This can help your credit score tremendously.
When you are thinking about buying a home, make sure you make all your payments on all of your bills on time for at least a year. This will improve your chances of getting a good rate on a loan.
But, when it comes to actually buying the home, you may find that you have no choice but to go to bad credit mortgage lenders. This will mean that you have a higher than average rate on your loan and you may also be required to pay extra points. The lender may also require that you take out insurance to secure the loan.
If you agree to these terms, you have a good chance of improving your credit over the next couple of years. That is because when you make payments on a home, it improves your credit score. After 24 months, consider refinancing the home because you should be able to get better rates after you have had the time to rebuild your credit.
Bad credit mortgage lenders offer subprime loans because the risk they take that you won’t pay them back is outweighed by the higher rates and fees you pay. That’s how bad credit mortgage lenders make their money.
