Julian Lim asked:


Closing costs have a significant impact on the home loan rate that is paid when obtaining a new mortgage loan. Here are a few of the major closing costs and how they affect the home mortgage rates.

Closing Costs Affecting Home Mortgage Rates

First time home buyers or borrowers are often rather unpleasantly surprised at the time of closing or just prior when the good faith estimate of closing costs is received. These closing costs can sometime add a significant cost to the dollar amount that the borrower is expected to provide to clear the escrow account at the time of closing or shortly thereafter. The home loan rate is not directly tied to each of the closing costs, but indirectly, you will pay the closing costs. You should make sure you realize and understand each of these costs and how they impact your total cost of the loan.

Definitions

‘Closing costs’ is just one of the definitions that you should understand when considering obtaining a home loan. The ‘home loan rate’ is another. Closing costs are expenses related to the obtaining of the loan, such as document preparation, title search, appraisals, and various other expenses. These costs are typically listed as part of the closing process on the loan. The closing of the mortgage at the title company or with the loan officer will spell out each of these costs and who is responsible for payment of the cost at closing.

Title search

One of the responsibilities that must be met is a search by a title company of court records to insure that the ownership or title to the home in question is clear. They will be looking at sales and deed records to determine that the sellers actually have the legal authority to sell the property. There is a fee charged by the title company to conduct this search. The clear title means that the title company can guarantee the title is correct and that you will have a clear title to the property in question after closing. The title company actually provides a type of insurance, known as title insurance. The cost of the title insurance is one of the closing costs built into the home mortgage rates.

Origination fees

Another factor in the home loan rate is that of origination fees. These are costs associated with the work the lender or broker does in opening an application file and working to collect and pass on all the necessary documentation required to complete the loan according to the contract. These fees can be sizable or modest, depending upon the broker, but in most cases are negotiable also that fact is not commonly known.

Points

The borrower may be required to pay ‘points’ as part of the loan fees. There are two types of points that you may be asked to cover. Origination points are the fees you pay your broker or lender to secure the loan while discount points are essentially interest that you prepay in order to manage the best interest rates on your loan. Both types of points are usually paid at the home of closing. Payment of the discount points can significantly lower your home mortgage rates meaning thousands of dollars less in cost over the life of the loan.



ELISEO

Mark J asked:


A mortgage consultant is an independent agent, an intermediary between you the consumer and the mortgage lender. The mortgage consultant will shop the available lenders to find the mortgage product that offers the best combination of features, options and rates to suit your individual circumstances. The best part - depending on your credit picture - there is no charge to the consumer for the service. The mortgage consultant’s fee is normally paid by the lender.

A Mortgage Consultant put together transactions between lenders and borrowers. They have Access to many different lenders, but don’t work for them as they work for the customers. New York Mortgage Home Loan independently advises and constructs the best mortgage plan, which usually costs the customer less than if they directly go to the lender themselves.

With the New York Mortgage Home Loan the customer can get the best of both worlds - access to big bank cost of money with lower overhead and better service.

The New York Mortgage Home Loan works hard, honestly, and intelligently. They are loyal to the customer as they share the conviction that the customer should be treated as a person, not a loan number. The customer should have the same contact person, from start to finish during the entire transaction. This one-person contact is available 24 hours a day/7 days a week.

New York Mortgage Home Loan believe in being very accurate with quotes regarding interest rates and estimated closing costs - and, we take this belief one step further - we attend settlement with every one of our customers to make sure what we quoted in the beginning is what shows up at the end from the lender.

New York Mortgage Home Loan also believes it is important for the customers to understand the issues which impact the decisions that only they can make. New York Mortgage Home Loan takes the time to provide the necessary information because only a well-informed customer can make the best decisions.

New York Mortgage Home Loan understands those concepts that often aren’t understood by most mortgage originators - property tax & hazard insurance escrow accounts, investor reporting, collection activities, foreclosure law, and most importantly, the understanding of the legal instruments which all borrowers must sign at closing.

New York Mortgage Home Loan believes in honesty, hard work, and attention to every detail related to the customer and mortgage. They provide accurate Rate Quotes. The Mortgage-related closing costs at settlement are exactly same as initially quoted. New York Mortgage Home Loan ensures professional & confidential interaction with clients.

A Mortgage Consultant is useful for any of the customers as with the fluctuation in interest rates of land; homeowners have become more aggressive in seeking out the best possible terms from a lender. The appeal of a mortgage consultant lies in the opportunity for you to effectively search a large segment of the mortgage industry for the optimum terms, rather than negotiate personally with only one or a few lenders.

A mortgage consultant can also be an independent source of information and an unbiased help in wading through the myriad of options available in the mortgage industry today.



JOSEF

Mark J asked:


New York Mortgage Home Loan believe in being very accurate with quotes regarding interest rates and estimated closing costs - and, we take this belief one step further - we attend settlement with every one of our customers to make sure what we quoted in the beginning is what shows up at the end from the lender.

A mortgage consultant is an independent agent, an intermediary between you the consumer and the mortgage lender. The mortgage consultant will shop the available lenders to find the mortgage product that offers the best combination of features, options and rates to suit your individual circumstances. The best part - depending on your credit picture - there is no charge to the consumer for the service. The mortgage consultant’s fee is normally paid by the lender.

A Mortgage Consultant put together transactions between lenders and borrowers. They have Access to many different lenders, but don’t work for them as they work for the customers. New York Mortgage Home Loan independently advises and constructs the best mortgage plan, which usually costs the customer less than if they directly go to the lender themselves.

With the New York Mortgage Home Loan the customer can get the best of both worlds - access to big bank cost of money with lower overhead and better service.

The New York Mortgage Home Loan works hard, honestly, and intelligently. They are loyal to the customer as they share the conviction that the customer should be treated as a person, not a loan number. The customer should have the same contact person, from start to finish during the entire transaction. This one-person contact is available 24 hours a day/7 days a week.

New York Mortgage Home Loan also believes it is important for the customers to understand the issues which impact the decisions that only they can make. New York Mortgage Home Loan takes the time to provide the necessary information because only a well-informed customer can make the best decisions.

New York Mortgage Home Loan understands those concepts that often aren’t understood by most mortgage originators - property tax & hazard insurance escrow accounts, investor reporting, collection activities, foreclosure law, and most importantly, the understanding of the legal instruments which all borrowers must sign at closing.

New York Mortgage Home Loan believes in honesty, hard work, and attention to every detail related to the customer and mortgage. They provide accurate Rate Quotes. The Mortgage-related closing costs at settlement are exactly same as initially quoted. New York Mortgage Home Loan ensures professional & confidential interaction with clients.

A Mortgage Consultant is useful for any of the customers as with the fluctuation in interest rates of land; homeowners have become more aggressive in seeking out the best possible terms from a lender. The appeal of a mortgage consultant lies in the opportunity for you to effectively search a large segment of the mortgage industry for the optimum terms, rather than negotiate personally with only one or a few lenders.

A mortgage consultant can also be an independent source of information and an unbiased help in wading through the myriad of options available in the mortgage industry today.



JULIUS

Red Rock Mortgages asked:


Don’t lose sleep over your bad credit home loan

Having a bad credit home loan is not a comfortable situation to be in but you don’t need to lose sleep over it. Tackling a bad credit home loan requires patience, determination and a helpful agency to support you in this financial problem. Redrockmortgages.com offers credit loans to help you emerge from your financial troubles.

You have bad credit, now what?

When you have bad credit, you need to take a loan to pay for all other financial requirements that need to be fulfilled. Before applying for a bad credit home loan or any other bad credit loan you must make sure that you have surveyed all your options because the bad credit home loan that you choose to opt for will decide whether or not you can emerge from the vicious circle of taking loans again and again to pay off the credit you accumulated earlier.

Remember, that the right credit loan can remove you from this sticky financial crunch but a hastily taken bad credit home loan can make the situation worse by saddling you with escalating interest rates and payments that you cannot afford to make. Be sure that you consider all your options before you opt for any loan.

What are my options?

At redrockmortgages.com, we understand the less-than-savoury circumstances you find yourself in and this is why we offer bad credit home loans and bad credit loans that seek to pull you out of your bad credit situation as soon as possible. We are not averse to offer bad credit home loans and other bad credit loans to people who have defaulted on their credit card payments or mortgage payments at competitive rates because we understand that anyone can be a victim of bad credit.

Our bad credit loans are designed keeping in mind borrowers who have a host of bad credit issues that also include defaults and judgments. Our interest rates are very competitive, unlike other lenders who claim to offer help for bad credit but escalate their interest rates so that their customers move from one bad credit trap to another.

What type of loans can I avail?

At redrockmortages.com, we offer bad credit home loans and other bad credit loans to customers who need loans that are particularly suited to paid or unpaid defaults and judgments, mortgage arrears and discharged bankrupts, casually employed or employed for the short term such as in spurts of 3 months or less, construction loans as well as loans for small apartments.

You can opt to pay both the principle and interest when repaying the loan or repaying only the interest for the first five years. The loan term is for 30 years and you can choose the payback frequency that suits you best. It could be weekly, fortnightly or monthly. The mode of paying back your bad credit home loan can be through cheques, salary crediting, electronic funds transfer or direct debit. We only accept a residential security.



CASEY

Loan Modification Help Center asked:


Everyday we read about the worldwide financial crisis and, specifically, about the U.S. banking and housing crisis.  To understand the challenges facing borrowers during the Housing crisis, it is critical to understand adjustable rate mortgages - how they work and how they can impact you. 

ARMs offer both advantages and disadvantages. Unlike a fixed-rate mortgage, an ARM provides interest rates that change periodically - and payments that go up or down accordingly.  At first, lenders generally charge lower interest rates for ARMs and this makes an ARM easier to afford initially.  If interest rates remain steady or move lower, this can work to your long term advantage. It is important, however, to weigh the risk that if interest rates increase in the future, so will your monthly payments. 

The initial rate and payment on an ARM will remain in effect for a limited period–ranging from several months to 5 years or more. After this initial period, the interest rate and monthly payment may change at regular intervals - every month, every year, every 3 years.   This period between rate changes is called the adjustment period.

The interest rate on an ARM is determined by two things: the index and the margin. The index is usually a standard measure of interest rates and the margin is an extra amount that the lender adds. If the index rate goes up, so does your interest rate and monthly payment.  On the other hand, if the index rate goes down, your monthly payment may go down. Not all ARMs adjust downward, however so be sure to read the details about any loan you are considering. 

Lenders base ARM rates on a variety of indexes. You should ask what index will be used for your ARM, how it has fluctuated in the past, and where it is published.  

The margin may differ from one lender to another, but it is usually constant over the life of the loan. The fully indexed rate is equal to the margin plus the index. For example, if the lender uses an index that is currently 4% and adds a 3% margin, the fully indexed rate would be 7%.

Some lenders base the amount of the margin on your credit record - the better your credit, the lower the margin. In comparing ARMs, look at both the index and margin for each program.

An interest-rate cap places a limit on the amount your interest rate can increase. Interest caps come in two forms: A periodic adjustment cap, which limits the amount the interest rate can be adjusted up or down from one adjustment period to the next, and a lifetime cap, which limits the interest-rate increase over the life of the loan.  By law, virtually all ARMs must have a lifetime cap.

In addition to interest-rate caps, many ARMs limit, or cap, the amount your monthly payment may increase at each adjustment.  A payment cap can limit the increase to your monthly payments but also can add to the amount you owe on the loan. This is called negative amortization.

If you are considering an ARM, ask yourself: 

- Is my income enough–or likely to rise enough–to cover higher mortgage payments if interest rates go up? - Will I be taking on other sizable debts, such as a loan for a car or school tuition, in the near future? - How long do I plan to own this home? If you plan to sell soon, rising interest rates may not pose the problem they do if you plan to own the house for a long time. - Do I plan to make any additional payments or pay the loan off early?

 

Golden Rule:  Before you consider any loan, ask questions and read the details. For information and news please visit Loan Modification Help Center



CORNELL

Ray Torres asked:


When my dad bought his home, he went for a 30 year home loan. As a matter of fact, most of the homeowners I know have acquired their home via that home finance offering. But why it has being so popular over the years?

A 30 year home mortgage used to be the first choice of most borrowers, because since the total payments are spread over a longer period of time with the interest rate set for the entire time of the mortgage’s life. 30 year home loan rates are an industry standard but is it the right choice for you?

As we mentioned, the plus side for a 30 year home loan is lower monthly payments. This attraction is somewhat dimmed by the fact that you pay thousands of extra dollars in interest. But, on the other hand, your interest is 100% tax deductible which does lower your after tax cost at the end of the equation. It also offers you some flexibility so that if your financial situation changes and you have more money you can pay it off in less than 30 years, this while keeping the low monthly payments. The fact that your payments might be smaller gives you the option to purchase a larger roomier home.

To show an example of the interest difference between 30 year home loan rates and one of the other rates. On a 30 year, 100,000 dollar loan using 7% interest rate your monthly payment of interest and principle would be $665.30 dollars. Over the next 30 years you will have paid $139,511.04 in interest alone. Now with a 15 year home loan rate on the same amount you will pay $871.11 per month and over the next 15 years, you would pay $56,799 in interest. This would save you $82,712 dollars.

If you have the will power to invest the savings from the monthly payments, it still could be a good choice to go with the 30 year mortgage. Especially if you can find an investment that the long term payoff matches or exceeds what you would save in a 15 year mortgage. Another factor to consider is how fast you want to accrue equity in your home or to own it out right. 30 year home loan rates take much longer to build equity.

30 year home loan rates are certainly attractive and the vast majority of home buyers get 30-year loans because that is the longest home loan available today. Experts agree if they could get a 35- or 40-year loan, they probably would. There are many other options to consider. Probably the biggest question you have to ask yourself when considering a loan is what are your financial goals? What loan plan will help you the most to reach that goal? It is clearly to your advantage to look into other loan options for the best loan available for you and your financial goals. It may surprise you that because of your personal situation there may be other plans more suitable for you, such as a 15 year mortgage, for example.

Before committing to a long term loan, have a clear idea of your financial goals, chop around for alternatives from different lenders and if possible, seek professional financial advice on what best for you. It will be time and resources well spend.



CARLTON

Dean Shainin asked:


The first thing which home buyers will need to know is how much they can afford. There are various rules of thumb which are used to determine the size of a home loan you can afford. However, it is noteworthy that these formulas and guidelines will need to be taken within the context of every home buyer’s particular situation.

Home lenders now offer all sorts of loan packages with various options for the borrowers. It is therefore even more important for you to be fully informed on the short and long term implications of the home loan packages you are offered.

What Are The Important Considerations For The Mortgage Home Loan Procedure?

An income or mortgage ratio can give you an estimate of the price you can afford when you are to purchase your home. This formula is 25% of your gross income per paycheck to be used toward a house payment. Based on this formula and the indicative amount of what you can afford, you can then begin to look for a home and stay within a price range suitable for you. Although there are many variances, this formula gives you the basic guideline to help you keep within your budget. Another formula that is also used is 2 ½ to 3 ½ times your annual gross income calculated for the amount of the home loan.

It is important to note that these formulas do not consider interest rate or the type of loan you might obtain. In addition, they also do not consider living expenses or other debt.

These ratios are used by lenders as guidelines against monthly income and debt in order to determine the home loan payment a person is qualified to make and still have money left over at the end of a month for other living expenses and/or other financial obligations.

For some home buyers, a few issues are however not clear with the rule of thumb formulas and ratios. If one does not have a good understanding of how they may or may not be used, then it is possible that one may make some mistakes on the amount they can borrow. Sometimes it is not clear for some people the exact meaning of the rule of thumb that they can use up to 30% of their income for a loan payment for a home. Does the 30% include principal and interest? Is it the principle and interest? Does it include anything else? Is the 30% based on gross or net income? All these specific details about the rule of thumb formulas are not clear for some people.

Before a home buyer start to look for a house or discuss the house selling price, he/she will need to know the specific details of the rule of thumb ratios so that they know the amount of a mortgage they can take up. All rule of thumb formulas and ratios should only be used as a guideline until a person has full understanding of how to use them effectively, and know they include or exclude.

Home buyers search for their financial options when they are close to decide on their home selection. However, knowing your financial options beforehand will save you a lot of time and will make home selection hassle free.

In most cases, the real estate agencies you will be dealing with will refer you to the mortgage agents they normally deal with. It is recommended that you assess if these agents meet your needs and expectations. If they do not, it is a good idea that you talk to other lenders.

A mortgage is a long term financial commitment. It is very important that you get a home loan with monthly repayments you are comfortable with, and which suits your financial situation.



ANTON

Lender411 asked:


If you thought finding just the right home was an important decision, you are thinking of only half the transaction! As a matter of fact, while the right home is a crucial aspect of any real estate transaction, finding the right home loan with which to finance it is just as essential. Pick the wrong loan, and you may find that in a few short years your dream home will no longer be affordable; pick the right loan, and the payments will be easier to keep up with!

In the most basic terms, a home loan is little more than the amounts of money you need to borrow from a lender in order to buy the home you have picked out. It is typically the difference between what the house costs minus the down payment funds you have sitting in your bank account. Usually the loan amount is a pretty hefty chunk of money, and borrowers need to think through the terms they foresee being able to afford not just in the short term, but also in the long run. Since loan terms are generally measured by decades, it is of the utmost importance that you think very carefully before shopping around for a loan product.

The first question that more often than not needs to be answered is whether you want to apply for a fixed rate mortgage or instead opt for an adjustable rate loan (commonly abbreviated as ARM). Fixed rate loans are conservative in their risk; the interest rate never changes and the payment will remain consistent throughout the life of the loan. Adjustable rate loans start off with a much lower interest rate, but over the term of the loan the interest rate gradually creeps up and before long it might surpass the interest rates charged on fixed rate loans.

Fixed rate loans are perfect for borrowers who want payment predictability they can bank on. The interest will never adjust upward – even if the economy changes drastically – and the payment is the same over the life of the loan. This makes budgeting a lot more realistic. Since banks are the ones who are taking the risk for issuing loans at interest rates that may be surpassed any time soon by the economy, they usually charge slightly higher rates than they would for adjustable rate mortgages. Future homeowners who are looking for a long term home and do not foresee moving any time soon will do well to give these loans a good look.

Adjustable rate mortgages are for the homeowner who is somewhat of a gambler at heart or who is not thinking long term when purchasing a home. For those anticipating to only keep their home for three, five or seven years, an adjustable rate mortgage that offers a lower interest rate during that period of time might be a great way to accomplish homeownership and save money on the loan product. It becomes problematic if you change your mind midstream and decide to keep the home but the loan continues to adjust upward with respect to the interest rate. The uncertainty about the changing interest rates and payments makes it harder to budget.

An amazing but risky third option that seems to combine aspects from both a fixed loan and an adjustable rate mortgage is the balloon loan. These loans are dicey but could save you a lot of money. Initially the balloon loan will have a very low interest rate – much like an adjustable rate mortgage – but it will remain steady and unchanged, like a fixed rate mortgage. After a predetermined period of time, commonly seven to 10 years, you are required to pay off the entire outstanding balance which is a huge sum. Although you could refinance your home at that time, it is essential to remember that you need to qualify for the refinance loan in the first place! Since economic climates are subject to change, there is no guarantee that this process will be as easy in seven to 10 years as it is today. You can find out about these and mortgage and refinance rates on our site www.lender411.com.



DOMINGO