Posted by Elizabeth Dennis on June 4, 2011 | No Comments
In the days before the real estate bubble bursting, no down payment home loans had grown more and more common. However, they were also partially responsible for the housing market collapse as people qualified for loans they couldn’t afford. Since the collapse, home buyers can still find no down payment loans, but they need to keep in mind that there are some catches.
Twenty years ago, it was common for most home buyers to put down at least 20% on a home. Today, it’s common to put down as little as 4% and some try to put down nothing at all and have the entire price of the home financed. However, these loans are now much harder to come by unless you are a veteran and eligible for the Quicken Loans VA loan. There can be many reasons why someone would want to try and qualify for a no money down home loan. Many times, first time home buyers don’t have 20% saved. Potential home owners could also want to save that money for other things such as improvements to the house or new furniture.
Risks of No Money Down Home Loans
Whether or not you decide to try and qualify for a no money down home loan, there are plusses and minuses that you need to consider. For one, it is much harder after the mortgage lending crisis to qualify for a no money down loan because most lenders see this as a red flag that you will not be able to keep up with the payments. If you don’t have the money upfront, most will assume that you are either bad at saving or don’t bring home enough money making you a lending risk. In fact, a recent study showed that half of the foreclosed homes in Denver came from nothing down loans.
Secondly, keep in mind that the less you put down in the beginning, the more you are going to have to pay in monthly payments. While you might be saving money initially, you will have to have enough to write that check each month.
Next, the less you put down, the smaller your house is likely to be. If you don’t put any money down, banks won’t be as willing to lend as much. This means that you will only be able to afford less of a house. With any size down payment, however, you can typically get a larger house and one you probably want a little more.
In addition, the less you put down, you’ll have to carry Private Mortgage Insurance. This PMI is there to protect the lender against the buyer defaulting on the payments. The lower your down payment, the higher your PMI is going to be. You will also have to continue paying this additional expense until you gain at least 20-22% equity in your home. At this point, it can be canceled and you can put that extra money to other things.
No money down home loans are still available, but you must make sure you can afford the higher monthly payments and the PMI. If you can, and you have near perfect credit in order to qualify, you can save that down payment money and put it toward something else.
Posted by Elizabeth Dennis on May 17, 2011 | No Comments
Finding the best online mortgage is very similar to finding a traditional mortgage. One thing to be aware of, however, is to stay with reputable companies and those that also have a large presence. These will be much more trustworthy and financially stable than others.
In order to get the best online rates, first obtain a copy of your credit report from all three major reporting companies. Check to make sure that there are no mistakes and that all three have virtually the same information. Everyone is entitled to one free report a year and if you find any mistakes, make sure they are fixed immediately.
Be sure to evaluate mortgage points as well as fees. These normally are charged for underwriting a mortgage loan. Don’t be fooled by a great online mortgage quote as the fees and points may make the rate seem too good to be true.
Next, compare the online quotes that you have received once you fill out all the appropriate information online. Compare fixed interest rates against adjustable rates as well as mortgage payments, points, fees, and overall rate. Be sure to get at least three quotes from reputable mortgage brokers.
If you find a mortgage that you believe you would like, be sure and ask for a Good Faith Estimate. This is not a binding document, but it is a written estimate of all the costs associated with originating a loan. This estimate will keep lenders from changing or charging extra fees at a later date.
When looking for an online mortgage, you can go to a traditional lender that also offers loans on its website or you can look for one that specialize in online mortgages such as E-loan or Quicken. Of course, do some research into the company to make sure that they are trustworthy and not a predatory lender and stay clear from any site that seems to promise too much.
Posted by Elizabeth Dennis on May 8, 2011 | 1 Comment
If you are planning on buying a home, chances are you will need a mortgage lender. And today, there are more options than ever when trying to find someone to qualify you for a loan. One of the more popular options now a days is to use mortgage broker. There are several important differences between using a mortgage broker and a traditional loan officer from a bank. In addition, there are also pros and cons associated with each one.
Today, most mortgages issued actually come from mortgage brokers. These people are there in order to marry a buyer with specific loan. There are many different services that brokers will undertake including assessing borrower’s credit worthiness, finding a product that matches the client’s needs, gathering the required documentation, completing the lending forms, submitting materials and explaining any legal issues. For their services, many brokers will charge a fee of one to three percent of the loan amount.
As of 2004, there were approximately 53,000 mortgage brokerage companies in the United States. These companies employed almost a half million people and accounted for 68% of all residential loans. In order to keep the mortgage brokerage industry on the up and up, there are more than ten federal laws, five federal agencies and forty-nine state laws or licensing boards keeping an eye on the business.
The most important service provided by a mortgage broker is to act as a go between for the lender and the buyer. As a result, they will work with dozens, if not hundreds, of lenders as a freelance agent. When a buyer comes to a mortgage broker the broker will analyze the client’s credit to see which lender best fits the buyer’s needs. The loan application is then submitted to several lenders and the one that offers the best terms is then chosen. The most talented mortgage brokers can generally find a loan for just about any type of credit or credit history. Once a buyer is presented with the choices for lenders, be sure to shop around and make sure that the terms are reasonable.
As with most things, there are some disadvantages to working with a mortgage broker. At times, a buyer can get overcharged for the broker’s fees and the broker can make false promises of being able to find anyone a reasonable loan. In addition, they may not have access to certain bank programs that a traditional lender would have. Finally, when dealing with out of town lenders, they might not understand local heating or septic systems, thereby slowing down closing until all of their questions have been answered. At these times, using a local bank may be the way to go.
But there are still many advantages as well. A mortgage broker will do all the heavy lifting for you and can look at wholesale rates which will typically be lower. They can also finance tricky deals and may be the best option when trying to finance unique or commercial properties. Mortgage brokers can also be easier to get in touch with and have less levels of bureaucracy.
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