What Is Annual Percentage Rate (APR) For Home Mortgages
February 13, 2010 by · Leave a Comment
The annual percentage rate (APR) is the cost of a loan and is calculated by using a standard formula. This yields an interest rate that includes all fees related to the loan, including the mortgage insurance, points, interests, etc.
It is important to know that the amount of money you pay monthly is not affected by the APR. Monthly payments are determined by the term of your loan and the interest rate.
However you must take the APR into consideration when you are contemplating any given home loan. A loan that boasts a low interest rate but has a high APR is not a good bet. Always talk with a qualified mortgage specialist at your financial institution for sage advice.
The APR will be different for loans that are of different durations. For example, a 20 year fixed rate loan will have a different annual percentage rate than will a 30 year loan that also has a fixed rate.
In order to compare the costs from one loan to another it is wise to consult the Good Faith Estimate (GFE). The APR is important but it is only one of many important aspects of a home loan.
When you compare the APR from one financial institution to another, make sure that they are on a level playing field. In other words compare loan programs that are the same, as opposed to completely different. Remember though that the APR will be different depending on the amount of money you wish to borrow. A loan for $250,000 will have a lower APR than will a loan for $100,000 even thought it has the same interest rate. Keep in mind as well that an adjustable rate mortgage loan has an APR that is aware that the loan is indexed and as such that it does not change from its beginning value.
Other Important Aspects of the APR
What else is the APR? It is also the “cost of credit to the borrower in relation to the amount borrowed.” This is always calculated as an annual rate. This is a necessity as stipulated by the Federal Truth in Lending Act, Regulation Z.
A number of items are used to effectively calculate the APR. These include private mortgage insurance (PMI), origination and discount points and prepaid interest. This also takes into consideration any lending fees such as processing, credit reports and underwriting. As well, application fees, administrative fees and tax service fees are a part of this.
Be aware that not all mortgage lenders use the same fees which which to calculate the true cost of a mortgage. APR is a useful tool but be forewarned about the different ways it may be used.
The Federal Truth in Lending Act is a disclosure form that by law must be given to all individuals looking to apply for a mortgage loan. When rates are advertised, the APR MUST be disclosed. All of the bank fees that a lender could charge are here which is why it works well for the purposes of comparison. The true cost of a mortgage loan when you get down to the nitty gritty is what the APR constitutes. The APR helps to keep lenders honest because upfront costs and fees cannot be disguised behind interest rates that are advertised as low.
To use an example from the real world- if you visit one lender and are offered a loan with an interest rate of 6.25 percent with one discount point and another lender offers you a loan with an interest rate of 6.5 percent and zero points then how do you decide which one is the better deal of the two?
Whichever loan has the lowest APR would be the most suitable choice. Bear in mind however that this does not take into account other aspects of the prospective borrower’s financial situation such as his job stability, how much money he has in reserves and how longs he plans to reside in the home he wishes to purchase.
Be aware that the APR is not the same as a note rate. When you have a credit card the APR is often the exact same as the interest rate. However when you take out a mortgage, the APR will be higher than the interest rates you pay due to closing costs.
Compare Mortgage Rates , The Basics
January 24, 2010 by · Leave a Comment
You do your homework when it comes to buying a car or taking a trip so it makes sense that you would do the same when you are looking to buy a home. It is essential that you compare rates from one financial institution to another to ensure that you are getting the best mortgage package that you can.
When you compare loan rates make sure that you compare interest rates for the same day. Do not compare loan rates for two companies on Monday and two other ones on Wednesday. The reason for this is because interest rates go up and down and are subject to change from one day to the next. Interest rates sometimes change as often as different times throughout a given day.
Compare Loan Rates of the Same Kind
When you compare loan rates compare those that are the same as opposed to different. Do not look at a fixed mortgage rate at one bank and an adjustable rate at another. This defeats your purpose and will do nothing but confuse you. Compare loan rates of products that are the same, such as the rate for a 30 year fixed mortgage or the rate for a 20 year adjustable rate mortgage.
As you compare loan rates, make sure that you compare a selection of lenders at the same interest rate and with the same lock-in period (which is generally 30, 45 or 60 days). The interest rates and points you can be offered will vary from lender to lender. Most lenders will also allow you to choose the lock-in period that is best for you. This is why it is essential to compare loan rates from one lender to another.
Lending Fees
Take the total that you are quoted for lending fees and add it to the points and all of the other fees connected to the home loan. Not all lenders use the same names for all of the applicable fees. For that reason, when you compare loan rates it is essential that you carefully review the total sum of every fee.
What are the fees that are attached to every mortgage? Before you attempt to compare loan rates you have to understand what you are comparing. The fees can include:
· Appraisal fee
· Processing and underwriting fee
· Mortgage insurance premium
· Application fee
· Fee for a credit report
· Tax service fee
· Commitment
· Wire transfer fee
· Any other applicable fee unique to the transaction
Any number of fees can be a part of a mortgage package so it makes sense to compare loan rates in every way that you can. This will help you secure the best deal and save you money in the process!
Debt Consolidation Loans For Homeowners
January 24, 2010 by · Leave a Comment
If you have your share of debt and it is causing you sleepless nights then you might want to consider debt consolidation for homeowners. Debt consolidation is a way to blend all of your debts together into one. For example if you have three or four credit cards, debt consolidation for homeowners can pay off your cards and then you only have one payment to make monthly- that of the loan.
Advantages of Debt Consolidation for Homeowners
There are many advantages of debt consolidation for homeowners (which are sometimes also referred to as refinance loans):
· A debt consolidation loan often has a lower interest rate than most credit cards and other types of personal loans. This means that you will save yourself money in the long run.
· Debt consolidation for homeowners can equal both a lower interest rate as well as an extended term for the loan. This means that your total payments on a monthly basis will be reduced.
· Budgeting will become much simpler thanks to the convenience of one monthly payment for your debt consolidation for homeowners’ loan.
· A debt consolidation for homeowners should free up a little bit of money that can be put towards other necessities of life.
· If eliminating credit card debt completely is your goal, then debt consolidation for homeowners can put you on the road to doing just that.
Qualifications for Debt Consolidation for Homeowners
In order to qualify for a debt consolidation loan for homeowners you must be employed and therefore have a way to repay the loan. Your income has a big impact on whether you will be granted a debt consolidation for homeowners so make sure you take your most current pay stubs with you when you go to speak with a professional at the bank. You also must take a copy of the previous year’s tax return with you.
Bring your monthly budget with you as well. The bank needs to carefully scrutinize your budget and your income to determine if you would make a good candidate for a debt consolidation for homeowners.
If your income is not high enough or if you do seasonal work or work part time jobs as opposed to a full time job, you may require someone else to co-sign the loan for you or you may need to use something as collateral (such as your house or car).
Perfect Credit And Home Mortgages
January 24, 2010 by · Leave a Comment
In a perfect world you would have perfect credit and applying for a mortgage would be well, perfect. Approval would take seconds and interest rates would be negligible. That is in a perfect world. Most everyone we talk to is not perfect and has not been for some time so where do we go from here?
Do you need perfect credit to get a mortgage? – No. Imagine if perfect credit was required. Few loans would be made and every lender in town would be bankrupt.
Perfect credit is not needed to get a mortgage. Home ownership today is higher than ever before because loans are being extended to more borrowers. Contact your mortgage broker to find the loan that is right for you.
You do not need perfect credit. However if you want the “perfect” loan then perfect credit definitely helps. Discuss your needs with a broker you trust.
You can obtain a mortgage loan with almost any type of credit. However, the worse the credit the more you will be required to put down as a down payment for a purchase transaction and the higher the interest rate you are more likely to pay. Sometimes compensating factors such as a lot of documented liquid assets, great job time, and a very low DTI (Debt to Income Ratio ) may help to slightly compensate for a lower credit score.
Perfect credit is not needed to get a mortgage because most lenders do not judge borrowers on credit alone. Although, credit is a big factor when applying for a mortgage each lender has different criteria to be approved for a mortgage. Lenders also take into account a borrower’s mortgage/rental history, employment history, and other factors. There are many lenders that target borrowers with less than perfect credit which is called sub-prime lending.
Many lenders specialize in people with less than perfect credit. With the loan programs available in todays market most people can purchase a home.
There are many different types of mortgages that you will be able to get without perfect credit. Some programs use the credit score only, only the mortgage history, and some will even disregard collections and judgments allowing them to exist without having to pay them off.
If you are thinking about buying a home but you are not quite sure if you can qualify then it might make sense for you to contact a mortgage broker. A good mortgage professional will not only look at your credit but will also look at your complete financial picture to see what makes sense for your current situation. They will also make recommendations on what programs will be available for your situation. If you are unable to obtain a mortgage now a mortgage professional will help guide you through what needs to be accomplished so you can qualify real soon.
There are some lenders that do not even look at FICO scores. This is because sometimes people have not established any credit , but yet will still make rental payments and utility payments on time. These various payment histories will appear on an individuals credit report.
There is no such thing as ‘perfect credit’ . All consumers who have a credit rating fall into either ‘conforming’ or ’sub prime’ financing category. There are even programs for first time borrowers who have no credit history.
However, some consumers who have had difficulty meeting their commitments may have credit so damaged that they could be asked to raise their credit score to qualify .
If you have poor credit ou should strive to improve your credit rating after securing a mortgage. This will allow you to refinance at a conforming rate and save you money every month.
When banks underwrite a mortgage application, there are four major factors they consider. Credit history is only one of four. Lenders also examine the loan applicant’s ability to repay the loan, the homeowner’s asset reserves, and the loan amount in relation to the property value, in other words, how much is the homeowner putting up in the property. With one or more of the other three factors being above average, even a home buyer with below average credit profile can easily obtain a mortgage.
Even if you have filed for bankruptcy or are currently in foreclosure, contact us about refinancing your property. You do not need perfect credit, even bad credit is OK with us because we have thousands of loan programs for borrowers of all credit types.
Many mortgage loans programs are available to borrowers with less than perfect credit. One thing to consider when obtaining a loan with less than perfect credit: The borrower can usually get a better interest rate by getting a 2 or 3 year fixed product rather than the traditional 30 year fixed. This makes good sense because once the credit is repaired 2 or 3 years down the road the borrower will most likely want to refinance into a lower interest “A” paper type loan.
Some other factors that lenders will look at is the borrower’s payment history on an existing mortgage as well as rental history. The better the payment history, meaning no late payments greater than 30 days, you will qualify for a lower interest rate and higher loan amount.
Is A Foreclosure Bailout Loan Right For You
January 24, 2010 by · Leave a Comment
A foreclosure bailout loan is synonymous with a refinance loan. If you are in jeopardy of having your home foreclosed on by the bank, you can obtain a mortgage that will allow you to pay off the loan you presently have in order for the foreclosure fear to go away.
If you are in dire financial circumstances and you believe that a foreclosure bailout loan is your only option then it is in your best interests to contact a mortgage specialist at your bank as soon as possible. Time is of the essence. At the first sign of danger seek out financial advice. Your situation can worsen quickly so do not delay.
What do you need to know in order to qualify for a foreclosure bailout loan? The majority of loans of this kind are such that they require a minimum of 25 percent equity in your home and a credit score that is over 500. For this reason not everyone will qualify for this type of loan. Take the time to find out if you do as this can be a viable option to losing your home.
If you qualify for a foreclosure bailout loan then it is wise if you pay the points in order to get rid of the prepayment penalty that accompanies the loan. If you do this then you can repair your credit faster and put yourself in an improved financial state.
Most mortgages are considered to be in default after 120 days. While a foreclosure bailout loan does come with a higher interest rate than other types of loans, it is better than the risk of losing your home and all that you have worked for. The reason for the high interest rate is because as a homeowner facing foreclosure, you have fallen into a high risk category as far as the bank is concerned. Bear in mind that a bailout loan will make it possible for you to continue to own your home. You are refinancing your home as opposed to leasing it.
If a foreclosure bailout loan seems to be your best option for holding onto your home then make sure that you find an experienced and qualified mortgage specialist to work with who has your best interests at heart. This is not the time for mistakes to be made so you need to work with the best to guarantee that everything goes smoothly. Living in the shadow of foreclosure is a time sensitive matter and you cannot afford any mishaps to take place.
Be wary of companies who make empty promises. In the mortgage business there are scam artists who will try to take advantage of hapless victims who are terrified of losing their homes. The old adage, “if it is too good to be true it probably is” is very fitting in this instance. Don’t fall victim!
Seek out an equity lender for a foreclosure bailout loan. This is an individual whose lending requirements are contingent upon the equity you have built; more so than on your credit history or present credit score. In this way the equity lender is protected because the equity in your home stands for more.
A bailout loan in most cases is a short term loan as opposed to a long term loan. The purpose of this loan is to ensure that foreclosure is kept at bay. As a homeowner once you have obtained the bailout loan you can then do one of two things- you can improve upon your financial situation and refinance your home or you can put your home up for sale. Those with considerable equity in their home might be able to take some of the money from the bailout loan and use it to pay off other debts. This might be the incentive you need to get your finances working for you as opposed to against you.
