Steven Cancel asked:


It has never been a better time to consider getting a home loan with rates at historic lows and home prices softening. Purchasing a home is often the biggest investment one will make within their lifetime. Prior to purchasing a home there are many things to consider. You will want to have goals in place that support your decision and loan type. Different loan types can cater to your current and future financial needs. Always understand that mortgage companies understand that your needs and future expectations change. At any point you’re within your loan you can refinance and adjust your loan type and length but this often includes fees and charges that can be avoided by not changing the terms of your loan.

The first step one should take in consult with a seasoned loan professional. This would include a mortgage broker or loan officer that has been originating mortgages for a long period of time. It is not wise to make such a large investment with someone who is not familiar with each aspect of the industry. Create a list of questions that you have prior to contacting the professional so they will get a good feel of what your goals and expectations are. Be prepared for a credit check and be able to provide up to 2 years of income documentation. Your loan specialist will then provide you with an amount you will be able to get approved for along with what the expected monthly payment will be should you decide to take a loan out for the given amount.

If your goal is to purchase a home to live in it for at least 30 years it is best to get a 30 year fixed mortgage. This will allow your new home to be fully paid off over a 30 year period. After 30 years you will only have the loan paid off but you will also have equity that was obtained. Over the history of the real estate industry, housing pricing has shown incredible returns for their owners. Many other options are also available such as lower fixed periods, ARM, and jumbo loans. Your mortgage professional will best fit you with your loan type.

As a consumer it is also important that you trust your loan professional. Should you decide purchasing a home is the right path for your future you should make sure that the origination process is completed in a reasonable manner? Loan professionals are paid on what is known on the industry as points. Each point is a percentage on the actual amount being provided from the lender. These points can be clearly stated on the loan forms but also can be included in the actual rate you are being provided. Ensure you are aware of all the charges you acquiring to prevent from being over charged by a loan professional.



ALLAN

Kristin Abouelata – Home Loans asked:


It’s not very often that a borrower takes into heavy consideration what his loan to value is when shopping for a loan.  In fact, if the subject is brought up by the customer, it’s mostly in relation to avoiding paying monthly mortgage insurance.  But sometimes, a loan to value can affect even more aspects of your loan – like pricing and approval!

What is loan to value?  Well, it’s exactly what it says.  The loan amount compared to the value of the home you are buying or refinancing.  For example, if you are buying a $100,000 home, and your loan amount is only $50,000, your loan to value or “LTV” is 50%.  It’s also very common to refinance a home to obtain a lower LTV and drop mortgage insurance that was before required.

Different types of loans have different minimum requirements for LTV’s.   With primary residence purchases, for instance, an FHA loan can have as high as a 97.75% LTV (soon to change to 96.5% in 2009).  A conventional loan can have as high as a 97% LTV (but more common is 95% LTV).  VA and Rural Housing loans can have 100% LTV’s.  People who have cash to put down on the property they are buying and financing with a conventional loan oftentimes try to amass 20% of the purchase price in order to avoid mortgage insurance.  Mortgage insurance is required when your LTV for a primary residence is above 80% and is issued by independent mortgage insuring companies like Genworth Financial or PMI.  Fannie and Freddie, the big purchasers of conventional loans, will require one of these or other approved companies issue mortgage insurance unless the loan has an 80% LTV.  And if you’re refinancing the home you live in?  The whole grid of acceptable LTV’s changes for the most part, with a few exceptions.  And furthermore, if you’re talking about investment properties, it’s another can of worms.

But when else does LTV mean something?  Consider when a loan specialist prices your loan.  Oftentimes there are pricing differentials based upon the loan to value.  For instance, if you carry mortgage insurance and your LTV is 85.01% or higher, you might actually get a better interest rate than if you had an 85% LTV (but don’t get too excited because your monthly mortgage insurance will be higher).  Or if your LTV is 60% or lower, you might also get a better interest rate.  If you are close to tipping the scales on one of these ratios, it may be to your benefit to ask your loan specialist how close you are to a pricing break one way or another.  You’d be surprised to find out it might change your mind as to how much money you decide to put down on your loan. 

And guess what else?  A low loan to value may be the difference between loan approval and loan denial.  Why is that?  Because if you are investing enough of your own money into the equity of a property, chances are you won’t default on the loan.  And if you do, it’s probably a last recourse.  Not to mention, the lender who holds the note won’t lose money because there is enough equity in the property to cover foreclosure costs, re-sale costs and any value loss from an upside down market.  The lender is covered.  So, the lender will consider the loan less risky and a higher debt to income ratio is tolerated when reviewed with a high credit score. 



BART