Posts Tagged ‘Mortgage Loans’

Refinancing ‘Effectively’

Monday, May 10th, 2010

Home refinancing is when you already have a mortgage on your home and apply for a second loan to pay off the first one. There are a lot of deals out there but one must be wise to select a deal that works best. While taking such decisions, it is important to first determine whether the amount you save on interest balances the amount of fees payable during refinancing.

First step: Find out your credit score. Get a copy of your credit report at least once a year; it will help you analyze your errors or inconsistencies. Credit information is one of the main influencers of interest rates when you’re hunting for a loan, it sets the loan conditions and mortgage terms that you are qualified to have.

After getting your credit ratings, go to the next step: start looking for a lender that is reputed and gives you the best deal  - in terms of interest rates, associated fees and principal lending amount. Get opinions from friends, relatives or Google around for a good lender. It is advisable to consult an individual who holds an experience with certain lenders, it is best to approach a mortgage broker. They’ll assist you in getting the best deal taking in consideration all your needs and requirements. Most importantly, before going into a refinance loan, sit back and look to see if the total costs and the savings of the transaction will add value to your life and your living standard.

Coming to the conclusion – Refinancing bundles up large benefits such as tax deductions, low monthly payments and increase in home equity and handy cash. But on the other hand, getting a refinance has its cons too; there is a fee to obtain the loan and you may have a longer term of payment with the loan, and your mortgage will be higher.

Keeping in mind all the pros and cons of getting refinancing, in what circumstances would you to go for a refinance? What would you be doing in order to find a suitable deal: would you search for a lender by yourself or will you let the broker handle it on your behalf? Which option is more convenient and effective?  Feel free to share your view and ideas.

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Posted in Mortgage Industry, Mortgage Refinance, housing market | 98 Comments »

FHA Loans – ‘to the Rescue’ or ‘to be Rescued’

Monday, April 26th, 2010

FHA-insured Loans, originated during the great depression by the Federal Housing Administration and are meant to secure lenders against defaulting borrowers. Whereas, they are also an answer to borrowers who have a less than perfect (below 720) credit score or are unable to handle a 10% – 20% down payment. All these traits of FHA loans quickly made them popular especially in the 2008-2009 financial climate.

In the year 2008, FHA loans have accounted for about 46 percent of all mortgage applications – almost half of all mortgages. In addition, Federal Housing Administration guaranteed 186,000 mortgages in June, 2009, a record number in its 75-year history.

In these days, individuals highly prefer them over conventional loans, since it only requires a 3%-3.5% down payment, while conventional loans entail a 10%-20%. However, interest rates on FHA loans are a little bit higher than conventional loans.

Some analysts pointed out that borrowers with FHA-secured loans now have an average credit score of 690, compared to 630 two years ago. In spite of this, a large number of borrowers are turning up late in their payments or even defaulting. Delinquent FHA loans, those 90 days or more late, jumped 62.1% in the past year to 558,944, or 9.4% of FHA loans, as of the end of January, according to agency statistics.  The FHA, however, insists its finances are sound. Its loan portfolio actually performed better than most mortgage products, according to David Stevens, the agency’s commissioner.

FHA loans are still a better option for lower income individuals to purchase a home that they would not otherwise be able to afford. However, if the number of delinquencies increases with such a pace, it is possible that taxpayers will eventually have to bail out the agency. My question here is: How can the Federal Housing Administration work out a suitable strategy to reduce defaults and late payments, and maintain healthy equity/collateral ratios against lent money at the same time?

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Posted in FHA Loans, Mortgage Industry, housing market | 8 Comments »

Bankruptcies High Tide

Monday, April 12th, 2010

Small businesses make up a large share of the whole economy, not only in the US but in all parts of the world. However, these businesses are the most affected by the recent global recession. People who were getting good returns from their businesses are now turning towards courts with bankruptcy petitions. There were 158,141 U.S. bankruptcy petitions filed last month — a 35% increase over February’s figure, according to data compiled by Automated Access to Court Records (AACER). This was a 19% increase over the number in October 2009, the last record-high month.

A large number of individuals are turning towards the complete bankruptcy filing (chapter 7 filings), allowing courts to foreclose all their possessions along with their homes. However, chapter 13 filings are also available, which requires individuals to repay a substantial part of their debts and prevents banks from foreclosing their houses. This behavior clearly indicates that home-owners are just walking away from their mortgages, rather than attempting to cope up with their payments, especially in times where large number of individuals are unemployed and don’t foresee themselves having good earnings in the near future.

The statistics show that personal borrowings in the US have increased 10 times more than they were in 1960, allowing individuals to borrow relatively more than their returning capabilities. That is why people are ending up bankrupt.  My question here is: If people are not able to pay back, why lend them money in the first place? Why can’t financial institutions counsel their borrowers on borrowing patterns and best practices, keeping In view the conditions of the economy?

Reference Link: http://www.time.com/time/business/article/0,8599,1977728,00.html

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Posted in Mortgage Industry | 36 Comments »