Purchasing a home is often the biggest investment a person will ever make, so it is not a decision that should be taken lightly. Most people do not have enough money saved up to purchase a home outright, so instead must rely upon a mortgage.
A mortgage is a type of loan, which uses the home as collateral. There are actually quite a few different types of mortgages, but the most common mortgages are Fixed-Rate Mortgages and Adjustable-Rate Mortgages.
The Fixed-Rate-Mortgage is sometimes referred to as a traditional mortgage. Fixed-Rate Mortgages are typically offered for durations of 15 or 30 years, although there are also some less standard durations including 10 and 20 years. Over the entire duration of a fixed rate mortgage, the interest rate does not change, so it is very easy to plan your monthly payments using an amortization table.
An Adjustable Rate Mortgage(ARM,) on the other hand, usually offers a low initial interest rate, but the interest rate is adjusted every few years.
Often, you will see Adjustable Rate Mortgages described using the format 5/1 ARM. The first number represents how often the rate of the ARM Increases. So, in the above example, the interest rate would be adjusted every 5 years. The second number represents the percent at which the interest rate can change, so in the above example, every five years, the interest rate would change by up to 1%.
While in most cases, the interest rate of an ARM will not decrease, it is possible. However, when considering going with an ARM, it is important to plan that the interest rate will increase each time. Another important consideration is what the maximum increase of the interest rate is over the course of the loan. Most lenders will provide a maximum of an 8% or 10% increase over the course of the mortgage, although this varies by lender.
Adjustable Rate Mortgages usually offer a lower initial interest rate, making them appear very attractive. However, as the rate increases, the monthly payment of the mortgage can quickly become very unfordable, so it is important to consider not just the initial rate, but how often the rate increases and what the monthly payment will be when the rate increases.
No matter what type of mortgage you go for, having at least 10% of the homes value for a down payment is very important. Traditionally, lenders had required a 20% down payment, but over the last 20 years, many lenders relaxed this requirement, with some even offering mortgages with 0% down.
However, due to our current economic situation, most lenders are returning to more traditional down payment requirements, so in many cases it will no longer be possible to get a mortgage without a down payment.
While having a down payment may now be a requirement for receiving a mortgage, this is not the only reason to save money for a down payment. This is because by having some money set aside, you will be able to get a lower interest rate and more favorable mortgage terms from your lender. With more options, you will be able to choose your lender, instead of having to go with a subprime mortgage lender. Not only will having money for a down payment mean there will be more options and more favorable terms, but it also means that you will have equity in your home as soon as you move in.
In the United States, Bankruptcy is used as a last resort when a borrower is unable to pay back their creditors. There are several different types of bankruptcy, but most people either declare Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. Chapter 7 Bankruptcy, which is most often used, focuses on the liquidation of the debtors assets. Chapter 13 Bankruptcy, on the other hand, deals more with the reorganization of the debt. However, with both of these types of bankruptcy, the debtor can usually retain some of their property.
While in some cases, bankruptcy is the only option, it can have a very negative affect on a persons credit rating. Typically, for the next 7 to 10 years, the individual will have a very low credit score, which makes borrowing money very difficult.
This article discusses how to refinance a home after bankruptcy, although the information provided can also be applied to anyone who wishes to refinance their home. Even though many types of loans, like a new car loan, can be very hard for someone who has declared bankruptcy to get, refinancing a home is often not viewed as a large risk by mortgage lenders. So, even if you have declared bankruptcy, it is usually possible to refinance your mortgage.
Most people decide to refinance their mortgage in an effort to get a lower interest rate and a lower monthly payment. In the case of someone who has filed bankruptcy, it is not uncommon to have a subprime mortgage, which can have excessive rate increases, higher interest rates, and unfavorable terms. As a result, refinancing your home can often be the best way to save money and stay in your home.
It is important to note, however, that when you refinance your home, you are basically starting from scratch with your new lender. Over the course of the first few years of a mortgage, you are primarily paying the interest of the loan. Over time, the amount of interest you are paying will decrease, while the amount that you are paying towards the principal will increase.
As an example, lets consider a home that costs $200,000. In the first three years of your mortgage, you might pay $50,000 to your lender, but only $3,000 goes towards the cost of the home. So, after 3 years, you would still owe $197,000 towards the home. Over the next three years, you may pay $9,000 towards the principal and as time goes on, the amount that goes towards principal increases. If you were to refinance your home after only 3 years, you would be refinancing it for basically the full amount, even though you have paid your lender $50,000.
This is important to remember, because a big part of refinancing your home involves determining whether it is in your best interests to do it in the first place.
The first step when preparing to refinance your home should be to begin setting aside some money every month. When you refinance a mortgage, you will usually have to pay a number of different fees, including an application fee and a loan origination fee.
These fees are often called junk fees, because they do not actually go towards the mortgage itself or the value of the home. In many cases, junk fees can cost several thousand dollars, so it is a good idea begin saving money as early as possible.
It is also important to determine if your current mortgage has a penalty for paying the mortgage off early. Some mortgages, especially subprime mortgages, have a pre-payment penalty, which goes into affect if you pay your home off early. If this is the case, you will need to take this into account.
Before you begin shopping around for a new mortgage, it is also very important to analyze your monthly expenses and compare these with your monthly income. This is important because you need to get an idea of what type of monthly mortgage payment you can afford.
It is important to take into account all of your monthly expenses, including utilities, phone bills, car payments, food, and any other living expenses you may have. Also, make sure that you include any outstanding debt, such as credit card bills, as well as emergency bills that may occur.
Getting an idea of the current mortgage rates is essential, even if you have poor credit or have filed bankruptcy. You can use these figures to help decide whether a particular lender is offering you a fair interest rate or if they are offering a subprime mortgage.
Begin by calling around to several of your local banks to find out what the current mortgage rates are. At this time, don’t mention the details of your situation, but simply inquire as to what the current mortgage rate is. It is also a good idea to consult some online lenders as well, who usually have their basic interest rates posted on their website.
Once you have an idea of the current mortgage rates, you can start to get estimates for refinancing your home, as a number of lenders to provide a pre-qualification letter with their rates. The lender will ask you for your financial information, but they should not actually run your credit or charge you any fees for the written estimate.
At this point, it is imperative that you are upfront and honest with the lender. Lying about your bankruptcy or your credit score, might get a higher estimate, but when they actually run your credit, they will find out you were lying and will not offer you the same rate. In the end, you are only wasting your own time, as well as that of your lender, which can often disqualify you from receiving the loan anyway. Instead, honestly answer their questions about your income and bring up the fact that you have filed for bankruptcy.
Make sure that you also ask about the cost of refinancing your mortgage, such as attorney fees, application fees, and any other charges that the lender might have.
It is a good idea to check the rates of a multiple lenders, so you can explore all of your options.
Once you have a number of estimates, you can begin comparing the different loans to find the one that best fits your needs. Start by comparing the interest rates offered to the standard interest rates that you found in step 3. This will give you an idea of whether the interest rate is normal or if it is subprime.
Next, compare the cost of refinancing your home against the cost of keeping your existing mortgage. It is essential not just consider the difference between the monthly payments, but also the cost of the junk fees and any pre-payment penalties associated with your current mortgage. For instance, if your monthly payment is $100 less on the new mortgage, but you have to pay $3,000 in junk fees, then it would take you almost 3 years before you break even on the mortgage. Remember, that the junk fees are due at the time of signing.
It is also important to look at the big picture. An amortization table can be very handy, which will break down every payment over the course of the loan to show you how much of it is going towards interest and how much towards principal. It is important to compare where you are with your current loan and where you would be if you refinanced your mortgage.
After you have carefully considered all of your options and decided upon a lender, it is a good idea to try to get your lender to reduce the junk fees. These fees can often be reduced with a little negotiation and are often padded just for this reason.
While refinancing your home can be a great way to reduce monthly payments or get out of a subprime loan, it is not a decision that should be taken lightly, especially for those who have filed bankruptcy. Instead, it is important to make sure that refinancing your home is really in your best interest and not just think about the difference in monthly payments.
Obama’s First Time Home Buyers Tax Credit can be a great way to help make a new home affordable, while taking advantage of historically low home prices and interest rates.
The First Time Home Buyers Tax Credit is available for up to 10% of the homes purchase price or $8,000, whichever is greater. This tax credit is different from previous tax breaks for new home buyers in that it does not need to be repaid. Other tax credits for new home buyers, like the 2008 tax credit were simply no interest loans offered by the federal government. This tax credit, on the other hand, is provided to the homeowner and does not need to be repaid as long as the homeowner lives in the new home for at least three years.
This tax credit, which is part of the American Recovery and Reinvestment Act of 2009, is a powerful tool that can be used to fix up the home, pay down the mortgage, or help out with bills. Since it does not need to be repaid, it can be a great way to increase equity in a home.
It is also not necessary to owe anything in taxes to receive the tax credit. This is because this is a tax credit and not a tax deduction, the latter of which would only count towards the taxes.
This first time buyers tax credit is a great tool for those who wish to purchase a new home. It can be used on almost any type of home, including manufactured homes, mobile homes, condominiums, town homes, traditional single family homes, and even houseboats.
While the home buyers tax credit can be a great tool, there are several restrictions. In order to receive the tax credit, the homeowner must:
Receiving the home owners tax credit is also relatively simple and it can be claimed on either the 2008 taxes or 2009 taxes. People who have already filed their 2008 taxes can choose to file an amended tax return, which allows the homeowner to typically receive the tax credit within eight weeks of the IRS receiving the amended return. Otherwise, the homeowner can wait until April 2010 and claim it on their 2009 taxes.
It is important to note that this tax credit will go towards any outstanding tax debts first, and the remainder will be refunded to the tax payer. For those that do not owe anything in taxes, the entire $8,000 credit is offered.
To take advantage of Obama’s First Time Home Buyers Tax Credit, the homeowner will have to complete the IRS’s Form 5045. For those who wish to receive their tax credit early and decide to amend their 2008 tax return, it will be necessary to complete a 1040X Form, as well as the 5045.
n an effort to help stabilize the housing market and our economy, President Obama and the United States Congress recently passed the American Recovery and Reinvestment Act of 2009. The American Recovery and Reinvestment Act has many provisions, including a tax credit for new home buyers.
With this tax credit, qualifying homeowners can receive 10% of the purchase price of the home or $8,000, whichever is greater. Unlike previous tax breaks for homeowners, the First Time Home Buyer Tax Credit does not need to be repaid.
Since the early twentieth century, the demographics of the home mortgage industry have greatly changed.
According to the National Association of Realtors, in 2006 1 in 5 home buyers were single women, with single women purchasing new homes in much greater numbers than single men.
This change in the demographics of homeowners might be attributed to a psychological urge of women to begin nesting at an earlier age than men and an increase in money earning potential. Today, women are also much more likely to have received a college education and in the workplace, women are slowly closing the gender pay gap.
While single women, and to a lesser extent single men, do make up a significant chunk of new home buyers, married couples still make up the majority of new home purchases. Currently the National Association of Realtors reports that about 60% of new home purchases are by married couples, but this percent has decreased slightly over the last 40 years. However, there has still been a significant increase of single females purchasing a home.
With the increase in women home buyers, there has also been an increase in less than reputable lending practices. In fact in a survey conducted by the Consumer Federation of America in 2006, it was found that women, who make up about a third of all borrowers, have received about 40% of all subprime mortgages. A subprime mortgage is a mortgage that is typically offered to those with poor credit who are deemed as a risk to the lender. The rate will typically be well above the typical market value and this is intended to help contract the risk presented by the borrower. This finding helps to highlight the importance of shopping around for your new mortgage and having a good understanding of the typical mortgage rates.
While women have been purchasing homes in much greater numbers, new home purchases by African Americans have actually significantly declined over the last twenty years.
For many people, owning a home can be a great investment that has many benefits. Most people do not have enough money to purchase the home up front, so they get a special type of loan called a mortgage.
A mortgage uses the actual home or the land as collateral for the value of the loan. Purchasing a home is a big decision and before jumping in and getting a mortgage, there are several things the borrower should do.
Before applying for a mortgage, one of the most important things to do is try to minimize your level of debt. This is because one of the things a lender looks at is how much debt you have and your payment history. If you already have a great deal of debt or have a poor payment history, they might not be willing to offer you a loan or you may not be able to receive the best rates.
If at all possible you should begin by paying down your credit card balances as much as possible. If you have any problems on your credit report, such as an unpaid bill, you should also pay these off before applying for a mortgage. This will increase your chance of qualifying for the loan and receiving the lowest interest rate possible.
It can also be a good idea to save some money aside from the money you are saving for a down payment, this can be used in the event that there is some sort of emergency. Usually most financial advisors recommend that you have enough money to live for 4 to 6 months, paying your utilities, groceries, and mortgage, without working.
Once you have taken care to lower your risk factors, such as outstanding payments or credit card debt, it is a good idea to get an idea of how much you can afford for a monthly payment, because this will help you determine what type of home you will be able to afford.
It is not uncommon for both lenders and real estate agents to try to push as much debt as possible onto the borrower, because this is in their best interest, but it is not typically in the best interest of the borrower. So, ensure that you have an idea of what you can afford before you begin shopping for a mortgage.
Commonly, it is recommended that your monthly mortgage payment does not exceed 28% of your gross income, including that of your spouse. There are a number of other costs associated with owning a home, such as repair and maintenance, and the 28% figure typically allows for these expenses, as well as those of daily living.
Since the more you borrow, the more the lender makes, they might try to convince you that you can afford more than this. Leading up to the current financial meltdown, many lenders were telling people that 30% or even 40% was acceptable, arguing that the home would always increase in value, so this was no problem.
Now, however with the current slump in homes values, this is no longer the case, so remember to have an idea of what you can afford and look at any effort on the part of the lender or real estate agent to increase this with skepticism.
Once you have your current credit load as minimized as possible and have an idea of what you can afford in terms of a monthly payment, you can begin shopping around for loans and try to find the best possible deal.