Knowledge You Need To Get Mortgage Loans

By: Serg Harros

Hunting for the house of your dreams can be exhilarating. Unfortunately, hunting for the home loan of your dream is not nearly as exciting. The following advice can help you avoid problems.

1. To minimize the stress of the real estate transaction, it is always best to get pre-approved for a loan. When you get pre-approved for a loan, the lender guarantees they will give you the pre-approved amount for a set number of days, often 30 to 60.

2. In the old days, it took weeks to get approved for a mortgage. Many lenders now use a software program to determine if they will give you a loan. If your credit is in good shape, it can take as little as three days for approval.

3. Some adjustable rate mortgages tie their interest rates to the COFI index. COFI stands for 11th District Cost of Funds Index. It is a monetary correlation of money transactions for banks in California, Arizona and Nevada.

4. When evaluating your mortgage application, the lender will get a FICO score for you. This is a cumulative report drawn from three credit agencies. They are TransUnion, Experian and Equifax.

5. Interest only loans are very popular these days since the let you get into a home with minimum monthly payments. Be aware, however, that these loans often automatically convert to an ARM at some point.

6. Should you go with a fixed or adjustable rate mortgage? In general, go with fixed when rates are low and an adjustable when rates are high.

7. Deducting the interest on a mortgage is a great tax benefit. Most people do not understand there is a limit to the deduction. You can only deduct the interest on the first million dollars of a mortgage.

8. The tax code in the United States makes little sense, but it is helpful with refinancing. If you refinance your home, you do not have to pay any capital gains tax. This is true even if you refinance for more than the home is worth.

9. When applying for a mortgage, you will be surprised at how many fees lenders hit you with. To check your credit, you will often be charged a credit report fee. It should be no more than $50.

10. To get an accurate account of your closing costs, make sure to ask for a HUD-1 form. It has to set out all closing costs.

Applying for a mortgage can be a bit intimidating. You financial soul is stripped bare. That being said, don’t get to stressed. Millions of borrowers are approved and you probably are more qualified than many of them.

Loan Refinancing: Debt-Freedom or Debt-Slavery?

By: Kate Ross

Many loan agents promote home loan refinancing as the path to debt freedom. Refinancing can be either a way to reduce your debt, a way to reduce the amount of your monthly payments or a cheap source of finance. However, depending on your home loan terms and the new loan conditions, refinancing can contribute to reducing or augmenting your debt.

You need to be extremely careful when considering refinancing since it’s a very complex financial operation and there are many variables involved that if not considered carefully, they can affect the results turning the financial transaction into an extremely onerous decision that may increase your debt against your will.

Daily Finance Eased

Refinancing your home loan can alleviate your daily finances. By refinancing your home mortgage with a longer repayment program and / or a lower interest rate, you can lower your monthly payments and thus, the amount of money you destine towards debt payments will be considerably reduced.

However, this doesn’t always come at no-cost. If you get a lower rate and a longer repayment program, you may be saving money but you’ll have to be indebted for a longer period of time. If you get a higher rate and a longer repayment program, you may get lower or higher monthly payments depending on the intensity of the increments and you may also get some ease for your finances but you’ll also be attached to the loan for a longer period of time. Only an equal loan term and a lower interest rate can save you thousands and not oblige you to a loan for longer periods.

Long Term Commitment to Mortgage Payments

The opposite of the above is also true. If you want to hasten the date where you’ll finally be debt free, you’ll have to compromise your income to debt ratio. Shortening repayment programs will raise your monthly payments as a higher rate would do. This can be compensated by a reduction on the interest rate but this cannot always be achieved.

By refinancing for shorter repayment programs you will be affecting your income since you’ll have to destine higher amounts towards debt payments. So, when it comes to refinancing, you’ll need to ponder all and reach equilibrium between all these variables so you don’t extend your debt-slavery too long and you don’t affect your income to debt ratio either.

The Right Path Towards Debt-Freedom

What you need to do is reduce your overall debt and since home loans are the cheapest sources of finance, it is wise to extend the repayment programs (even if the rate goes up) because by lowering the installments you’ll be able to use the surplus to repay other debt. Of course, this requires discipline on your behalf since a chaotic credit behavior will worsen your situation.

If you can get approved for a cash-out refinance home loan, you’ll be able to use the extra money to cancel outstanding and more expensive debt which will contribute to achieving debt freedom sooner. Remember, exchanging your expensive debt for cheaper financial sources is the smartest and most intelligent thing to do.