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Posts Tagged ‘home loan’

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Should You Tap Your Home’s Equity?

January 22nd, 2010 by Matthew C. Keegan | 2 Comments | Filed in Home Financing

Among the many inaccuracies being doled out by the media these days is news about the housing market.

home financingCertainly, there are many homeowners who are in trouble, likely to lose their homes to foreclosure or suffer significant loss to the value of their homes. But there are many millions of homeowners who are riding out stormy seas with some already coming out on the other side in improved shape. Those people are likely to help lead the recovery effort provided that Congress and the Obama administration back away from trillions of dollars in promised new spending.

But this article is not about politics. What it is about is tapping your home equity, money you have built up in your home after many years of ownership and market value increases.

Responsible Consumer Borrowing

Responsible consumers know that home equity should be used to finance important things in their lives including a home renovation project, fund college tuition, pay off medical bills, even debt consolidation. Of course, putting money out for anything beyond what would benefit the home directly has some analysts unnerved, but when used wisely it can be a smart decision.

There are essentially four options for most homeowners when it comes to taking out equity. Three are generally available to all homeowners while a fourth depends a lot on your age.

1. Home equity loans (HEL) – Sometimes maligned and occasionally abused, a home equity loan allows you to tap the equity in your home, receiving a loan with your home secured as collateral. In most cases a HEL is tax deductible and, if you sell your home, you will be required to pay off your loan along with your first mortgage.

2. Home equity line of credit (HELOC) – With your home secured as collateral, a credit line can sometimes be advantageous for the homeowner who wants a ready supply of cash available, but who plans to tap the line only when needed. A HELOC can be accessed for a number of years, and you are responsible for paying back only what you have borrowed. Your HELOC should be tax deductible.

3. Cash-out financing – This kind of loan describes when a homeowner decides to refinance his mortgage to obtain a new loan. That new loan exceeds the amount owed on the current loan with those extra monies available for whatever purposes. The advantage here is that there is only one loan involved and it is tax deductible.

4. Reverse mortgage. For senior citizens who want to stay in their homes, a reverse mortgage can allow them to do so especially if they have build up significant equity over the years. No payments are due until the borrower moves, dies, or if the property is sold. The final payment can not exceed the proceeds from the sale of the home, freeing heirs from further obligation. Work with an accountant to discuss your options as well as tax implications.

What type of loan is right for you? Ask your financial advisor who can discuss tax advantages as well as help you map out a repayment plan.


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Self Employed? Home Loans For You!

November 2nd, 2009 by Matthew C. Keegan | 1 Comment | Filed in Home Financing

For the self employed, you know one important way to hold down your tax obligations is to find as many deductibles as possible. After all, you work hard — why allow Uncle Sam to take more money from you then “he” should? One way to limit your pay out is to buy a home.

Loan Documentation

fall leavesUnfortunately, one of the more difficult things for you to do is to document your income, something that most lenders required in today’s economic environment. A few years back, lenders would have issued no-documentation mortgages, but those practices died with the mortgage collapse of 2008.

Home loan brokers will want you to substantiate your income in a number of different ways. If you pay yourself, then you can show your last two or three pay stubs as well as W2 forms for the past two years. However, that may not be possible for some self employed people particularly if you take money out of your business as a disbursement, not salary.

Financial Information

If that’s your situation, then you understand that you’ll need to work with a mortgage broker who understands the unique needs of the self employed. Some lenders are fine with less documentation, however they are likely to want you to provide some financial details about yourself including the following:

  • Your checking and savings account statements for at least the last three months.
  • Copies of your federal and state income tax returns for the past two or three years.
  • A copy of your business’s articles of incorporation in addition to business checking account statements.

Don’t worry about being rejected, especially if you have very good credit. Lenders are in the business of lending people money and they can only make money off of you if you borrow from them. Consequently, every loan applicant is treated as a possible client and lenders will bend over backwards to try to find a way for you.

Credit Reports

Keep in mind that your mortgage lender will obtain all three copies of your credit reports and credit scores from Experian, Equifax and Trans Union to help them make their determination. You may be asked to come up with a larger down payment, particularly if your income fluctuates. That doesn’t mean you won’t be approved for a home loan, rather that the lender wants you to assume a greater portion of the risk.

Finally, if you are not getting the satisfaction you expect, try a different mortgage broker. Some brokers are very tight with their lending requirements while others are cautious, but still willing to take a risk on you if you have a track record of very good credit.

Adv. – Mortgage interest rates remain near historic lows.  Whether buying new and refinancing your current home, you’ll want to take advantage of low rates before inflation kicks in. Please stop by PickMyMortgage.com or SayLending.com to find the best home financing options available.


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ARMs Crack Four Percent Threshold

September 30th, 2009 by Matthew C. Keegan | 1 Comment | Filed in Home Financing

Mortgage rates continue to drop, nearing historic lows. This is good news for first time home buyers who may also be eligible for an $8000 federal tax credit which expires on November 30, 2009. Zillow.com reports that 30-year fixed-rate mortgages are now about 5% while adjustable rate mortgages (ARMs) have dropped below 4% in some cases.

Dropping mortgage rates are helping home shoppers become homeowners.
Dropping mortgage rates are helping home shoppers become homeowners.

Zillow reports that the national average for a 5/1 ARM is now 3.94%, one of the lowest rates of all time. A 5/1 ARM – also known as a variable rate mortgage – offers a fixed rate for the first five years of the mortgage. Beginning with the sixth year the rate adjusts as it is tied in with either the LIBOR (London Interbank Offered Rate) or the one-year U.S. Treasury index. If the typical payment schedule is followed, this type of mortgage is usually paid off after thirty years.

The ARMs Advantages, Disadvantages

ARMs are advantageous for many homeowners because they allow them to enjoy lower monthly payments for the first few years of the mortgage. However, ARMs have also caused millions of homeowners grief over the past few years as low-rate ARMs eventually reset to the higher rate, adding hundreds of dollars to many people’s monthly mortgage payments. Quite a few ARMs were sub-prime mortgages, one of the catalysts contributing to the current housing crunch.

Clearly, if you choose an ARM you need to take into consideration a later reset. The problem some consumers faced is that in advance of their reset, they didn’t qualify for a new mortgage as their economic position changed for the worse or they were simply deemed no longer creditworthy to refinance their homes. An ARM can be useful for the person who expects that they will sell their home before the initial low rate financing period comes to an end.

Get A Larger Loan

ARMs also let buyers take out a larger loan, which is helpful if you don’t have as much money to put down or if you need a larger house. However, given the current economic squeeze, many lenders are no longer willing to risk extending loans beyond certain tighter restrictions. This means that although you may be able to swing larger payments, the bank isn’t willing to offer expanded financing.

Finally, it does pay to shop around for a mortgage. Though credit is still relatively tight, if you have very good or excellent credit, you should be able to obtain the best rates available.

Adv. — Visit LetsRenovate.com to find pre-screened home contractors too. Check out our free online planning sheets, helpful tools which will enable you to get the job done.


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They Are Out There: Mortgage Modification Scams

September 9th, 2009 by Matthew C. Keegan | 1 Comment | Filed in Consumer Tips

One of the unfortunate fall outs of the collapsing sub-prime mortgage market is that some homeowners are getting scammed when they seek out so-called mortgage modification schemes.

Be careful about turning your home over to a third party when modifying your current home loan.

Be careful about turning your home over to a third party when modifying your current home loan.

According to a recent article which appeared in the Baltimore Sun, some people are being taken in by companies and individuals who are marketing mortgages with the word “hope” in their title. It seems that these scammers are trying to confuse homeowners into thinking that they are part of the “Hope Now” partnership between HUD (Housing and Urban Development) and community and business groups when they are not. Instead of getting a federal government approved loan, they’re getting hooked by a company who isn’t looking out for their best interests.

Promises made by these companies includes telling homeowners that their mortgage modification terms will be modified which would lower monthly payments. Instead, rates aren’t always lowered or stiff fees are assessed, both of which can cause people to lose their homes.

Scammers And Their Deeds

Many states do not allow up front fees for modifying home loans which can equal the cost of a monthly mortgage payment. Scammers purport to have an unusually high success rate (as high as 95% according to the newspaper) which entices desperate homeowners to sign on. Where states prohibit up front fees, illegitimate operators will often assess a monthly installment payment for services rendered (or not).

If you’re having financial difficulties and are trying to keep your home from being foreclosed, you need to keep your head on your shoulder by carefully exploring your options before deciding what course of action that you should take. Specifically, you may want to:

Read up on local laws – Some states prohibit up front fees while other states limit who can take on the role of mortgage counselor or modifier. Call your county courthouse or state government to learn who oversees lenders in your area; report any strange schemes to them.

Vet mortgage modification companies – Not all modification companies are running scams, but some will pressure you into signing a legitimate contract by telling you not to talk with your current mortgage lender. That’s a big mistake – you ALWAYS want to keep your mortgage company in the loop as they’ll have final say as to whether your house will go to foreclosure or not.

Use an attorney – Never sign a contract that hasn’t been checked by an attorney first. Scammers will sometimes have homeowners sign blank pieces of paper and then fill in the details later. You just may end up signing over ownership to your home to a third party!

Think things through – Working on your tattered emotions, avoid those companies who guarantee you that your home won’t be repossessed. Your mortgage agreement and local laws are the best indicator as to where you stand if you don’t make payments.

Unfortunately, scammers are still working to con people, but they need not be successful in their efforts. If you suspect a scam in progress, call the police. Once you’ve signed the contract, you may find it difficult if not impossible to cancel a binding legal agreement, even an ill gotten one at that.

Adv. – If you are a first time homeowner, don’t forget that the federal government is giving to you an $8000 buying credit good through November 30, 2009. For more information about buying a home, finding a mortgage or refinancing, please visit SayLending.com.


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