After foreclosure: How long until you can buy again?
Walking away from a mortgage you can still afford to pay has consequences; everyone knows that. Your credit score is shot and it can be impossible to get credit.
Some homeowners, no doubt, believe that the credit score hit is worth getting out from a deeply underwater mortgage. They may owe, say, $500,000 when their house value is only valued at $350,000. And, they figure, there's no way it will ever be worth what they owe so it's better to get out from underneath the burden.
After default, they reason, they can raise their FICO scores by paying all their bills on time and eventually finance another home purchase.
Don't count on it.
While homeowners who default due to economic hardship, such as a job loss or divorce, normally must wait two to five years before buying a home again, walkaways may face double that time.
"It could be well over seven or eight years before [walkaways] are able to obtain a mortgage to buy a home again," said Jay Brinkmann, chief economist for the Mortgage Bankers Association.
"Credit scores are only one component of a complete credit decision," Brinkmann said. "[In these cases] credit scores are not a good indicator of their willingness to continue to pay their mortgage."
But future underwriters will scrutinize their records very closely, and if they find no precipitating factors leading to the defaults -- no job loss, no health issues --the repaired credit score won't overshadow the black mark of a walkaway.
"If you made a strategic decision to default on paying your mortgage, it will work against you," said Bill Merrell of the National Association of Review Appraisers and Mortgage Underwriters.
Merrell, who teaches underwriting, said banks are looking at several factors in determining whether to grant mortgages: the amount of money borrowers have in the bank; employment histories; payment history.
However, banks may be far more lenient if the default resulted from factors somewhat beyond the borrower's control, such as from local economic problems. "They'll give you more consideration if it's job related," he said. But, he added, banks look at strategic defaults "very negatively."
That said, it's not impossible to get a loan. Banks still want to make interest payments, so they might be willing to gamble with a walkaway.
"It might be a little more difficult for them to borrow, but [banks'] drive for market share -- to profit from making loans -- will trump that caution," said Keith Gumbinger, of the mortgage information publisher HSH Associates. "I don't think we'll see a full denial."
It's hard to foresee the state of mortgage lending six or seven months from now, let alone seven or eight years into the future. So lenders may look at applications from one-time strategic defaulters and say, "Yes, they walked away but it's a whole different market now," according to Gumbinger.
Even so, lenders may require more from borrowers who walked away than those who didn't.
"To the extent they could get a mortgage," said Brinkmann, "they can count on needing a heavy down payment."
The lenders may ask for 30% down or more. That would provide enough collateral cushion that the bank could get all or most of its money back in a foreclosure.
Strategic defaulters might also be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive.
Friday, May 28, 2010
Thursday, May 27, 2010
:::Mortgage rates are back near record low::::
Mortgage rates are back near record low
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Unexpected benefit of turmoil in Europe and markets: Mortgage rates near record low...
A home sits for sale with a reduced price sign, in Bedford Hts., Ohio, Thursday, May 27, 2010. Mortgage rates have fallen to the lowest level of the year as European turmoil caused investors to pour money into the safe haven of U.S. government securities.
WASHINGTON (AP) -- Turmoil in the stock market and the European debt crisis are making life easier for American homebuyers and families looking to refinance: Mortgage rates are inching closer to a record low.
The window of opportunity may close soon. Home loan rates will rise if investors grow more confident and shift money out of the safety of government bonds, which influence mortgage rates.
For now, though, rates are tantalizingly low. The average 30-year fixed-rate loan sank to 4.78 percent this week, the lowest this year and barely above the record of 4.71 percent set in December. And 15-year loans are at their lowest rates in two decades.
"Strike now," suggested Greg McBride, senior financial analyst at Bankrate.com.
Some homeowners are doing just that. Applications to refinance surged this week to the highest level in seven months, the Mortgage Bankers Association said.
Anxiety over the European crisis has caused global investors to snap up Treasury bonds, which they view as much safer than other investments. Treasury yields have fallen as a result, taking mortgage rates down, too.
When the crisis eases, and especially if the American economy recovery stays on track, expect investors to move out of bonds and back into stocks. That would make mortgages more expensive.
"If the economy finally really shows sustained improvement, rates are definitely going to go up," said Fred Chamberlin, a consultant with Alpine Mortgage Planning in Eugene, Ore.
He suggests that homeowners looking to refinance move fast and not hold out for even lower rates. "If you want the bottom, the only way you're going to know it is when you've missed it," Chamberlin said.
Refinancing isn't right for everyone who qualifies. It typically costs several thousand dollars in fees. Experts suggest calculating how long it will take to recover those fees with the lower loan rate.
As cheap as mortgages are these days, the number of loans being taken out to buy homes remains at its lowest point in more than 13 years. One reason is that a special tax credit for homebuyers expired last month. Many people had rushed to sign contracts by then.
Another obstacle: trouble qualifying for a mortgage. Borrowers need solid credit and a down payment of at least 3.5 percent. Banks tightened lending standards after millions of borrowers fell into default and foreclosure during the housing bust.
"They're really looking with a magnifying glass," said Steve Mevorah, a loan officer with Icon Mortgage Inc. in Las Vegas. "They're trying to make sure that they are flawless loans."
Analysts had expected mortgage rates to rise when the government ended a program designed to bolster the housing market. Instead, they fell because of fears that Greece would default on its debt.
Also keeping rates low is the government's decision last year to provide unlimited support through 2012 for Freddie Mac and Fannie Mae, which buy mortgages and package them into securities and help keep rates low.
Investors "are very comfortable with the guarantee that is in place," notes Credit Suisse mortgage strategist Mahesh Swaminathan. "That, for all practical purposes, is very strong government support."
Since the financial crisis ended, mortgages of all types have become more affordable -- from the 30-year fixed to adjustable varieties.
The premium that borrowers pay to take out "jumbo" loans for more expensive homes has dropped by a full percentage point since late 2008, to just 0.8 percent, for instance.
:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
Unexpected benefit of turmoil in Europe and markets: Mortgage rates near record low...
A home sits for sale with a reduced price sign, in Bedford Hts., Ohio, Thursday, May 27, 2010. Mortgage rates have fallen to the lowest level of the year as European turmoil caused investors to pour money into the safe haven of U.S. government securities.
WASHINGTON (AP) -- Turmoil in the stock market and the European debt crisis are making life easier for American homebuyers and families looking to refinance: Mortgage rates are inching closer to a record low.
The window of opportunity may close soon. Home loan rates will rise if investors grow more confident and shift money out of the safety of government bonds, which influence mortgage rates.
For now, though, rates are tantalizingly low. The average 30-year fixed-rate loan sank to 4.78 percent this week, the lowest this year and barely above the record of 4.71 percent set in December. And 15-year loans are at their lowest rates in two decades.
"Strike now," suggested Greg McBride, senior financial analyst at Bankrate.com.
Some homeowners are doing just that. Applications to refinance surged this week to the highest level in seven months, the Mortgage Bankers Association said.
Anxiety over the European crisis has caused global investors to snap up Treasury bonds, which they view as much safer than other investments. Treasury yields have fallen as a result, taking mortgage rates down, too.
When the crisis eases, and especially if the American economy recovery stays on track, expect investors to move out of bonds and back into stocks. That would make mortgages more expensive.
"If the economy finally really shows sustained improvement, rates are definitely going to go up," said Fred Chamberlin, a consultant with Alpine Mortgage Planning in Eugene, Ore.
He suggests that homeowners looking to refinance move fast and not hold out for even lower rates. "If you want the bottom, the only way you're going to know it is when you've missed it," Chamberlin said.
Refinancing isn't right for everyone who qualifies. It typically costs several thousand dollars in fees. Experts suggest calculating how long it will take to recover those fees with the lower loan rate.
As cheap as mortgages are these days, the number of loans being taken out to buy homes remains at its lowest point in more than 13 years. One reason is that a special tax credit for homebuyers expired last month. Many people had rushed to sign contracts by then.
Another obstacle: trouble qualifying for a mortgage. Borrowers need solid credit and a down payment of at least 3.5 percent. Banks tightened lending standards after millions of borrowers fell into default and foreclosure during the housing bust.
"They're really looking with a magnifying glass," said Steve Mevorah, a loan officer with Icon Mortgage Inc. in Las Vegas. "They're trying to make sure that they are flawless loans."
Analysts had expected mortgage rates to rise when the government ended a program designed to bolster the housing market. Instead, they fell because of fears that Greece would default on its debt.
Also keeping rates low is the government's decision last year to provide unlimited support through 2012 for Freddie Mac and Fannie Mae, which buy mortgages and package them into securities and help keep rates low.
Investors "are very comfortable with the guarantee that is in place," notes Credit Suisse mortgage strategist Mahesh Swaminathan. "That, for all practical purposes, is very strong government support."
Since the financial crisis ended, mortgages of all types have become more affordable -- from the 30-year fixed to adjustable varieties.
The premium that borrowers pay to take out "jumbo" loans for more expensive homes has dropped by a full percentage point since late 2008, to just 0.8 percent, for instance.
Wednesday, May 26, 2010
:::When to call your landlord:::
When to call your landlord
A fire or flooded apartment may be obvious call-worthy emergencies, but what about the stuff that doesn't set off alarms? Here's help deciding whether and when to call your landlord in 14 different scenarios.
By Leah L. Culler of MSN Real Estate
One of the biggest advantages to being a renter is that you don't have to deal with many of the hassles that come with homeownership, such as ongoing maintenance and major repairs. If your heater breaks, you call the landlord. If your roof is caving in, you call the landlord.
But when less obvious issues arise, it can be tough to know whether you should call for help or handle things yourself. You don't want to whine about every little thing or pester a busy landlord who may have dozens of tenants. On the other hand, you could be violating your lease by not calling.
Here are some common scenarios that leave many tenants wondering. We'll tell you whether you should call, when to call and why you should call.
Scenario No. 1: You wake up at 3 a.m. to a water leak that has soaked your entire apartment.
"One of the reasons you (need to call) is because you actually have a duty to make sure that things don't get worse," says attorney Janet Portman, author of "Every Tenant's Legal Guide."
The landlord will likely be more familiar with the property than you. He may know where the water main is, how to turn it off and where the leak may be coming from.
"If you think it's rude to call in the middle of the night, you've deprived yourself of knowledge that could have lessened the damage," Portman says.
"Fire, flood or blood, as we say," says Robert Griswold, a longtime property manager who wrote "Property Management for Dummies."
Scenario No. 2: Your smoke detector doesn't seem to be working.
Before calling your landlord, make sure that the batteries in the detector aren't dead and that the detector is attached correctly to the wall or ceiling. Once you're sure it's not an issue you can easily correct, contact your landlord.
In most states, landlords are required to provide working smoke detectors. The landlord should bring a new detector over or ask you to replace it and reimburse you.
Griswold says not to delay in contacting your landlord when your detector's not working. "There have been so many cases where people have died," he says.
Scenario No. 3: You want to install new shelving and paint the kitchen wall.
You should definitely get permission before making any improvements or alterations in your rental. If the change you want to make will improve the unit or increase its value, your landlord may even be willing to pitch in with money or labor. But in some cases, a landlord can hold onto your safety deposit to undo your "improvements" if you failed to ask permission.
Scenario No. 4: You see a rat in your kitchen.
Call your landlord. How soon to call depends on how threatened you and your family feel.
"If you have kids around, for instance, that rat needs to be dealt with right away," says Bill Deegan, executive director of the American Tenants Association. "They can bite."
If the rodent has scurried back into its hiding place under a cabinet and you feel safe enough in your bedroom upstairs with the door closed, you can put off that call until a reasonable hour. Do call your landlord the very next day, however, even if it's a weekend.
"It's certainly a serious matter in terms of health and safety," Portman says.
And while a landlord is usually the one responsible for calling in a pest-control company and eliminating a pest problem, tenants are sometimes the cause of the problem and won't be off the hook.
"If your terrible housekeeping has invited the ants in, for example … they can charge you for that service," Portman says.
Scenario No. 5: You fall down the stairs and break your leg.
First, ask yourself why you fell. Are these stairs dangerous or did you just have too many martinis?
If you're at fault, take care of it yourself. See a doctor, and be more careful.
But if your home has wobbly, rotting or uneven stairs, your landlord is likely at fault. It doesn't matter whether you knew the stairs were dangerous. You may have mentioned your concern the day you moved in and your landlord said he didn't have the money to fix the problem. His inability to pay for new stairs does not excuse him of his responsibility to provide a safe and habitable residence.
Let your landlord know what happened, but begin to document your case immediately. See a doctor. Keep a pain log. Take pictures of the premises where you were injured.
What about a lawyer? That's always an option to bear in mind, if your landlord is being uncooperative. But Deegan, Griswold and Portman all agree that it's best to resolve the situation without attorneys. Many leases have a mediation clause that will give you guidance on how to handle disputes. By staying out of court, you'll save money and, hopefully, retain a friendlier relationship with your landlord.
Scenario No. 6: You find mold in your apartment.
Call your landlord, but wait until normal weekday business hours. Most visible household mold, particularly in the bathroom, is the result of poor housekeeping and is harmless.
"The only stuff you need to worry about is usually stuff you can't even see: soaked drywall, subfloors, the back of your closet," Portman says.
That said, the mere mention of mold will probably bring your landlord over to take a look, as some mold can be a serious health threat. And if it's anything other than a little mold in the shower, it's possible that there is a pipe or drainage leak somewhere.
"Every landlord who is concerned about maintenance is going to want to know about that," Portman says. "That's got to be dealt with."
But that mold in the shower is something you can take care of yourself. Make sure your bathroom is getting enough air circulation and be more diligent in your cleaning.
"You need to be involved in prevention," Griswold says.
Scenario No. 7: You're concerned about an increase in break-ins in your neighborhood.
Call your landlord, but do so during normal business hours. He may have some ideas for how to avoid crime at your place. Document your request, making a note of when you contacted your landlord and why, as well as his response.
There are probably some simple, inexpensive steps you and your landlord can take together. You can upgrade locks, add locks to windows, install better lighting and trim the landscaping to eliminate hiding places.
"If he refuses to cooperate, and later there is a break-in or assault and the lock was flimsy, you have a good case against the landlord for whatever has happened to you," Portman says.
If you live in a large apartment complex and the crime is specific to your building, it is the responsibility of the landlord to make sure the grounds are secure.
If your landlord is responsible for a number of units in your area, he may want to help coordinate some neighborhood activism, Griswold says, but adds that the landlord is not ultimately responsible for your personal safety. You can get involved in or organize a neighborhood watch group to help keep the area safer. You also can call the police. Many departments are willing to send an officer to a community to talk about the current crime level and ways to help you feel safer.
Scenario No. 8: You're having a friend come stay for a few days … or a few weeks.
There's no need to let your landlord know if someone is staying only a few days.
"It's none of their business," Griswold says. "The landlord doesn't need to know who you're visiting with or dating or what your social life is."
But at some point, that guest becomes an occupant. Your lease agreement likely specifies how much time a guest is allowed to stay with you and continue to be a guest. Any longer than that set amount of time — often two weeks — and you should make your landlord aware of the situation. A friend who comes to crash for the weekend and ends up staying three months has become a resident and needs to be screened by your landlord and added to the lease.
Scenario No. 9: You're thinking about getting a dog.
If your lease says "no pets," you already know the answer. Likewise, if your lease says that your unit allows pets and there is no clause about landlord approval, head over to the local shelter and pick out a new best friend. Make sure you are aware of any size and breed restrictions, and stay within those rules. The only time you need to check with your landlord is if your lease says pets are allowed only with landlord consent. Keep in mind that many landlords will charge a pet deposit or pet rent.
Of course, there's no harm in asking your landlord whether she would be willing to make an exception to her "no pets" rule. Griswold acknowledges that some landlords and property managers have been more lenient because of the economy, and would rather keep a quality tenant who they believe would be a responsible pet owner.
Scenario No. 10: You (or your partner) are about to have a baby.
You don't need to notify your landlord.
"The reason is that the baby is not like your friend from college who has come to town and is crashing with you," Portman says.
Having a baby does not mean there is another person on your lease. Portman says she doesn't think any state's occupancy rules would treat that newborn as an additional occupant who would justify imposing an occupancy limit.
So, in general, you need to call your landlord only if you want him to give you a baby gift.
Scenario No. 11: Your neighbors (who have the same landlord) are noisy until the wee hours.
You should definitely call your landlord, but not during those wee hours.
This is assuming that you have already talked to your neighbors and asked them to quiet down. If they're making it impossible for you to sleep, the proper response from your landlord is to insist that they knock it off. And if they don't, she should evict them.
"They've made it impossible for you to quietly enjoy your rental," Portman says.
Griswold suggests that you also contact the police if there is a continuing problem with noise. Your area likely has a noise ordinance and the police will be able to document any violation, which may help your landlord when it comes time to evict.
Scenario No. 12: You suspect your neighbors (who have the same landlord) are doing something illegal.
Your response depends on what illegal activity you suspect. If you think your neighbors are dealing drugs, definitely contact your landlord, who will then call the police. If your neighbors come home with a van full of what you believe to be stolen goods, you can call the police first (since they might be able to come quickly and catch them in the act), but be sure to also notify your landlord.
Griswold urges tenants to be careful in any situation involving illegal activity and always keep your own personal safety in mind. Don't approach your neighbors and accuse them of a crime.
Scenario No. 13: You learn the home you are living in is in foreclosure.
Yes, go ahead and call your landlord to verify that the home is in foreclosure. The most important thing, Portman says, is to make sure you keep paying rent. Under federal legislation, your lease will survive the foreclosure, but make sure you know whom you should be paying. If you get behind on rent, you will lose that lease protection. If you are notified of the foreclosure by a bank, contact the bank to see who should be getting your rent check. Beyond that, laws vary, and Portman is reluctant to give any advice other than to find out what your local laws say about the situation.
Scenario No. 14: Your roommate won't do the dishes — or pay the rent.
In most cases, there's nothing your landlord can do, so don't bug him.
"He has no power to force your roommate to pay his share of the rent or stop being a slob," Portman says.
Your landlord is not there to play mediator. And so long as each of you is named on the lease, you're both independently liable to the landlord for all of the rent. Unfortunately, you have no ability to kick a roommate out if he’s not paying rent or won't do his chores.
In "Every Tenant's Legal Guide," Portman advises renters to screen roommates carefully and to put all the ground rules in writing. If you end up in court for a roommate dispute, the judge can't force anyone to do the dishes, but he can enforce any financial agreements.
Know your landlord and your lease
Many of the above scenarios highlight the importance of understanding what's included in your lease before you sign. While maintenance is most commonly the landlord's responsibility, for example, you should definitely double-check the agreement to verify what you might be on the hook for.
"One thing the tenant should look for before they go sign the lease is whose responsibility it is if the stove goes out and that kind of thing," Deegan says.
And before you ever move into a rental unit, you should get to know your landlord and his communication style. It's part of the "dance" you do when you look at a place and negotiate rent, Portman says.
Ask questions like, "Are you a hands-on landlord?" and, "Is there someone I should call instead?"
Find out whether your landlord uses a management company. Determine whether he prefers that you call or e-mail when you need something that's not an emergency (or maybe he'd rather you text him or post a message on his Facebook wall).
"Make it clear that you intend to be a responsible tenant," Portman says. "Any landlord who is responsible is going to let you know what the channels of communication are."
A fire or flooded apartment may be obvious call-worthy emergencies, but what about the stuff that doesn't set off alarms? Here's help deciding whether and when to call your landlord in 14 different scenarios.
By Leah L. Culler of MSN Real Estate
One of the biggest advantages to being a renter is that you don't have to deal with many of the hassles that come with homeownership, such as ongoing maintenance and major repairs. If your heater breaks, you call the landlord. If your roof is caving in, you call the landlord.
But when less obvious issues arise, it can be tough to know whether you should call for help or handle things yourself. You don't want to whine about every little thing or pester a busy landlord who may have dozens of tenants. On the other hand, you could be violating your lease by not calling.
Here are some common scenarios that leave many tenants wondering. We'll tell you whether you should call, when to call and why you should call.
Scenario No. 1: You wake up at 3 a.m. to a water leak that has soaked your entire apartment.
"One of the reasons you (need to call) is because you actually have a duty to make sure that things don't get worse," says attorney Janet Portman, author of "Every Tenant's Legal Guide."
The landlord will likely be more familiar with the property than you. He may know where the water main is, how to turn it off and where the leak may be coming from.
"If you think it's rude to call in the middle of the night, you've deprived yourself of knowledge that could have lessened the damage," Portman says.
"Fire, flood or blood, as we say," says Robert Griswold, a longtime property manager who wrote "Property Management for Dummies."
Scenario No. 2: Your smoke detector doesn't seem to be working.
Before calling your landlord, make sure that the batteries in the detector aren't dead and that the detector is attached correctly to the wall or ceiling. Once you're sure it's not an issue you can easily correct, contact your landlord.
In most states, landlords are required to provide working smoke detectors. The landlord should bring a new detector over or ask you to replace it and reimburse you.
Griswold says not to delay in contacting your landlord when your detector's not working. "There have been so many cases where people have died," he says.
Scenario No. 3: You want to install new shelving and paint the kitchen wall.
You should definitely get permission before making any improvements or alterations in your rental. If the change you want to make will improve the unit or increase its value, your landlord may even be willing to pitch in with money or labor. But in some cases, a landlord can hold onto your safety deposit to undo your "improvements" if you failed to ask permission.
Scenario No. 4: You see a rat in your kitchen.
Call your landlord. How soon to call depends on how threatened you and your family feel.
"If you have kids around, for instance, that rat needs to be dealt with right away," says Bill Deegan, executive director of the American Tenants Association. "They can bite."
If the rodent has scurried back into its hiding place under a cabinet and you feel safe enough in your bedroom upstairs with the door closed, you can put off that call until a reasonable hour. Do call your landlord the very next day, however, even if it's a weekend.
"It's certainly a serious matter in terms of health and safety," Portman says.
And while a landlord is usually the one responsible for calling in a pest-control company and eliminating a pest problem, tenants are sometimes the cause of the problem and won't be off the hook.
"If your terrible housekeeping has invited the ants in, for example … they can charge you for that service," Portman says.
Scenario No. 5: You fall down the stairs and break your leg.
First, ask yourself why you fell. Are these stairs dangerous or did you just have too many martinis?
If you're at fault, take care of it yourself. See a doctor, and be more careful.
But if your home has wobbly, rotting or uneven stairs, your landlord is likely at fault. It doesn't matter whether you knew the stairs were dangerous. You may have mentioned your concern the day you moved in and your landlord said he didn't have the money to fix the problem. His inability to pay for new stairs does not excuse him of his responsibility to provide a safe and habitable residence.
Let your landlord know what happened, but begin to document your case immediately. See a doctor. Keep a pain log. Take pictures of the premises where you were injured.
What about a lawyer? That's always an option to bear in mind, if your landlord is being uncooperative. But Deegan, Griswold and Portman all agree that it's best to resolve the situation without attorneys. Many leases have a mediation clause that will give you guidance on how to handle disputes. By staying out of court, you'll save money and, hopefully, retain a friendlier relationship with your landlord.
Scenario No. 6: You find mold in your apartment.
Call your landlord, but wait until normal weekday business hours. Most visible household mold, particularly in the bathroom, is the result of poor housekeeping and is harmless.
"The only stuff you need to worry about is usually stuff you can't even see: soaked drywall, subfloors, the back of your closet," Portman says.
That said, the mere mention of mold will probably bring your landlord over to take a look, as some mold can be a serious health threat. And if it's anything other than a little mold in the shower, it's possible that there is a pipe or drainage leak somewhere.
"Every landlord who is concerned about maintenance is going to want to know about that," Portman says. "That's got to be dealt with."
But that mold in the shower is something you can take care of yourself. Make sure your bathroom is getting enough air circulation and be more diligent in your cleaning.
"You need to be involved in prevention," Griswold says.
Scenario No. 7: You're concerned about an increase in break-ins in your neighborhood.
Call your landlord, but do so during normal business hours. He may have some ideas for how to avoid crime at your place. Document your request, making a note of when you contacted your landlord and why, as well as his response.
There are probably some simple, inexpensive steps you and your landlord can take together. You can upgrade locks, add locks to windows, install better lighting and trim the landscaping to eliminate hiding places.
"If he refuses to cooperate, and later there is a break-in or assault and the lock was flimsy, you have a good case against the landlord for whatever has happened to you," Portman says.
If you live in a large apartment complex and the crime is specific to your building, it is the responsibility of the landlord to make sure the grounds are secure.
If your landlord is responsible for a number of units in your area, he may want to help coordinate some neighborhood activism, Griswold says, but adds that the landlord is not ultimately responsible for your personal safety. You can get involved in or organize a neighborhood watch group to help keep the area safer. You also can call the police. Many departments are willing to send an officer to a community to talk about the current crime level and ways to help you feel safer.
Scenario No. 8: You're having a friend come stay for a few days … or a few weeks.
There's no need to let your landlord know if someone is staying only a few days.
"It's none of their business," Griswold says. "The landlord doesn't need to know who you're visiting with or dating or what your social life is."
But at some point, that guest becomes an occupant. Your lease agreement likely specifies how much time a guest is allowed to stay with you and continue to be a guest. Any longer than that set amount of time — often two weeks — and you should make your landlord aware of the situation. A friend who comes to crash for the weekend and ends up staying three months has become a resident and needs to be screened by your landlord and added to the lease.
Scenario No. 9: You're thinking about getting a dog.
If your lease says "no pets," you already know the answer. Likewise, if your lease says that your unit allows pets and there is no clause about landlord approval, head over to the local shelter and pick out a new best friend. Make sure you are aware of any size and breed restrictions, and stay within those rules. The only time you need to check with your landlord is if your lease says pets are allowed only with landlord consent. Keep in mind that many landlords will charge a pet deposit or pet rent.
Of course, there's no harm in asking your landlord whether she would be willing to make an exception to her "no pets" rule. Griswold acknowledges that some landlords and property managers have been more lenient because of the economy, and would rather keep a quality tenant who they believe would be a responsible pet owner.
Scenario No. 10: You (or your partner) are about to have a baby.
You don't need to notify your landlord.
"The reason is that the baby is not like your friend from college who has come to town and is crashing with you," Portman says.
Having a baby does not mean there is another person on your lease. Portman says she doesn't think any state's occupancy rules would treat that newborn as an additional occupant who would justify imposing an occupancy limit.
So, in general, you need to call your landlord only if you want him to give you a baby gift.
Scenario No. 11: Your neighbors (who have the same landlord) are noisy until the wee hours.
You should definitely call your landlord, but not during those wee hours.
This is assuming that you have already talked to your neighbors and asked them to quiet down. If they're making it impossible for you to sleep, the proper response from your landlord is to insist that they knock it off. And if they don't, she should evict them.
"They've made it impossible for you to quietly enjoy your rental," Portman says.
Griswold suggests that you also contact the police if there is a continuing problem with noise. Your area likely has a noise ordinance and the police will be able to document any violation, which may help your landlord when it comes time to evict.
Scenario No. 12: You suspect your neighbors (who have the same landlord) are doing something illegal.
Your response depends on what illegal activity you suspect. If you think your neighbors are dealing drugs, definitely contact your landlord, who will then call the police. If your neighbors come home with a van full of what you believe to be stolen goods, you can call the police first (since they might be able to come quickly and catch them in the act), but be sure to also notify your landlord.
Griswold urges tenants to be careful in any situation involving illegal activity and always keep your own personal safety in mind. Don't approach your neighbors and accuse them of a crime.
Scenario No. 13: You learn the home you are living in is in foreclosure.
Yes, go ahead and call your landlord to verify that the home is in foreclosure. The most important thing, Portman says, is to make sure you keep paying rent. Under federal legislation, your lease will survive the foreclosure, but make sure you know whom you should be paying. If you get behind on rent, you will lose that lease protection. If you are notified of the foreclosure by a bank, contact the bank to see who should be getting your rent check. Beyond that, laws vary, and Portman is reluctant to give any advice other than to find out what your local laws say about the situation.
Scenario No. 14: Your roommate won't do the dishes — or pay the rent.
In most cases, there's nothing your landlord can do, so don't bug him.
"He has no power to force your roommate to pay his share of the rent or stop being a slob," Portman says.
Your landlord is not there to play mediator. And so long as each of you is named on the lease, you're both independently liable to the landlord for all of the rent. Unfortunately, you have no ability to kick a roommate out if he’s not paying rent or won't do his chores.
In "Every Tenant's Legal Guide," Portman advises renters to screen roommates carefully and to put all the ground rules in writing. If you end up in court for a roommate dispute, the judge can't force anyone to do the dishes, but he can enforce any financial agreements.
Know your landlord and your lease
Many of the above scenarios highlight the importance of understanding what's included in your lease before you sign. While maintenance is most commonly the landlord's responsibility, for example, you should definitely double-check the agreement to verify what you might be on the hook for.
"One thing the tenant should look for before they go sign the lease is whose responsibility it is if the stove goes out and that kind of thing," Deegan says.
And before you ever move into a rental unit, you should get to know your landlord and his communication style. It's part of the "dance" you do when you look at a place and negotiate rent, Portman says.
Ask questions like, "Are you a hands-on landlord?" and, "Is there someone I should call instead?"
Find out whether your landlord uses a management company. Determine whether he prefers that you call or e-mail when you need something that's not an emergency (or maybe he'd rather you text him or post a message on his Facebook wall).
"Make it clear that you intend to be a responsible tenant," Portman says. "Any landlord who is responsible is going to let you know what the channels of communication are."
Tuesday, May 25, 2010
:::::Put Savings (and Yourself) First With a Budget::::
Put Savings (and Yourself) First With a Budget
Personal savings have reached record lows, yet saving is essential to ensure a comfortable future. Learn how to track monthly expenses with a budget and potentially free up cash for saving.
BEFORE YOU START
- Speak to others in your family about the importance of working together to improve the household's bottom line and come up with cost-saving ideas.
- Figure out how much money you saved last year. What percentage of income did you set aside for the future?
- Plan to use any windfalls you may receive this year (a bonus or tax refund) to pay off debt and pursue financial goals.
TOPICS
1
Put Savings First With a Budget
Where does that money go? America, it seems, is in the midst of a savings crisis. Personal savings rates have dropped in recent years and remain low by historical standards as many people continue to spend beyond their means.
If you're among those Americans who can't seem to save, it might be time to create a budget. A budget allows you to understand where the money goes and may help you free up cash for important savings goals, such as college and retirement.
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Getting Started
Setting up a budget will require some work, but the benefits more than offset the time invested. How you create your budget is up to you. You may choose a piece of financial planning software, such as Microsoft Money or Quicken, or you may choose the paper and pencil route. The above worksheet is a simple yet inclusive budget that you can use to get started.
The first element of any budget is your income, or how much money you receive each month. This can include paychecks, legal settlements, alimony, royalties, fees, and dividends from investments that you do not reinvest. Once you know what your monthly income is, you can use a budget to make sure you don't spend more than you earn, thus helping to reduce debt and freeing up cash for savings.
Next, you need to know how you spend your money. Start by tracking your spending for a month. Gather bills and receipts, and don't forget to include newspapers from the corner store and trips to the soda machine. Don't assume any expense is too small to record.
Write down your expenses and break them into categories. Using the budget worksheet as an example, we find Fixed Committed Expenses -- mortgage, loan, and insurance payments that stay the same from month to month; Other Committed Expenses -- things you can't live without, like food, utilities, and clothing; and Discretionary Expenses -- things you like but don't necessarily need.
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Less Spending = More Savings
Once you know where the money goes, it's time to analyze your expenses. There probably isn't much you can do about Fixed Committed Expenses without moving or getting rid of the family car. However, if these expenses are greater than your monthly income, you are probably carrying too much debt to effectively save.
You may find some room to economize in Other Committed Expenses, but look at Discretionary Expenses first. This is typically the easiest place to reduce spending. Begin by canceling magazine subscriptions to titles you don't read. Eat fewer meals out, or choose less expensive restaurants. Across much of the country, you can rent two DVDs for the price of a single adult ticket to a movie and throw in some microwave popcorn for a dollar more.
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Digging Deeper
Once you've reduced discretionary spending, look at those Other Committed Expenses. Can you reduce the grocery bill with coupons or more economical meals? How about taking public transportation instead of cabs?
One area to closely examine is credit card debt. If a high balance is keeping you from saving, you need to find ways to trim those monthly payments. Call your credit card company and ask them for an interest-rate reduction, or shop around for a card with a lower rate. You can find a list of low-rate cards through CardWeb (1-301-631-9100 or online at www.cardweb.com). Beware of low introductory "teaser" rates that increase to much higher rates after six months.
You could also consider a home equity loan, which may offer a tax deduction, or a consolidation loan. Make sure that you'll be able to afford the monthly payments before you take the loan. Banks can foreclose on a home equity loan within 90 days if you miss payments.
If your savings are still being crushed under the weight of debt, or if you're having trouble making minimum monthly payments and covering necessary expenses, consider getting some help. The nonprofit National Federation for Credit Counseling (call 1-800-388-2227, or visit www.nfcc.org) can help you set up a budget and negotiate payment schedules with lenders for a modest fee. Once you start paying off your credit cards, the extra money can be used to build savings.
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The Goal: More Savings
Once you've figured out where to economize, you can enter amounts in the Expected column of the budget. Notice that Savings and Children's Education appear under Fixed Committed Expenses. This is to encourage you to pay yourself first, a key rule of saving. By setting aside a certain amount each month for savings, you can build toward your goal without missing the money. You may be able to set up a payroll savings plan through your bank or credit union. Also look into any employer-sponsored retirement plans you may have at work, which potentially offer tax benefits along with savings for the future.
It might also help to set a savings goal, both for short- and long-term needs. Studies have revealed that families with savings goals tend to save more.
Remember that your budget is a living document. As your circumstances change, so will your goals and needs. Review your budget every few months to make sure it reflects your goals and to see if you are saving as much as you possibly can.
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SUMMARY
- You can use computer software or a pencil and paper to create a budget.
- Analyze your spending for a month to see where your income goes. If your living expenses are greater than your income, you'll need to find ways to economize.
- Your spending can be broken down into three categories: Fixed Committed Expenses, Other Committed Expenses, and Discretionary Expenses.
- To free up cash for savings, begin by reducing Discretionary Expenses, then look at Other Committed Expenses.
- Pay down credit-card debt aggressively. Once the debt is paid off, direct the extra money to savings.
- Set aside some of each paycheck for savings goals. Ask your bank or credit union about payroll savings plans and investigate your employer-sponsored retirement plan.
- Review your budget periodically to make sure it is still in line with your needs and goals.
CHECKLIST
- Start carrying a pocket-sized notebook and pen or pencil to record purchases throughout the day.
- If you plan to use computer software to help create your budget, begin shopping around for the best deal.
- Set a new savings goal for the year ahead -- such as saving 5% or 10% of income for retirement and other priorities.
- If you still don't know where to start, consider seeking advice from a trusted financial advisor.
Monday, May 24, 2010
Help for first-time homebuyers
Help for first-time homebuyers
Here are 6 ways to finance your first home purchase, with the rules, wrinkles and benefits of each.
By Marilyn Lewis of MSN Real Estate
Even though the first-time homebuyer tax credit ended April 30, there are still many ways the government provides help and incentives to get first-timers into the housing market. MSN Real Estate turned to EJ Hawkins, housing counselor with the nonprofit ClearPoint Financial Solutions, for a snapshot of each option. With all mortgages, the interest rate you get will depend on your credit score and market rates at the time you buy.
1. FHA-insured loans
The Federal Housing Administration doesn’t make loans, it insures them. You buy the insurance and the government sets the rules and repays your lender’s investment in case you default.
The rules:
Down payments are as low as 3.5% (example, for a $230,000 home, you’d pay $8,050 in cash).
Your FICO credit score (read “Boost your credit score”) must be 580 or above. (Read “Think you're ready to buy a home?” to learn about scores and loans.)
Find more information at HUD.gov or read “FHA loans get dramatically costlier.”
The good:
The requirements are pretty easy, so newbies can qualify.
If you haven’t yet built a strong credit score – and don’t have a record of late payments, missed payments or a foreclosure – you can use "nontraditional" credit sources, such as cell phone or other utility bills, rent payments or medical bills, to qualify.
The FHA limits extra charges ("points" and fees) for things such as title insurance and settlement and escrow fees. These can add up, otherwise. (To see all possible closing costs, download a .PDF of the HUD1 settlement form that your lender uses to disclose all your costs when you close the sale.)
You can use gifts — from family, for example — or a local government loan or grant for your down payment. (With conventional loans, it has to be all your own money.) You could conceivably pay nothing for the down payment.
You don’t need the big bank reserves that conventional loans require.
The wrinkles:
You have to buy mortgage insurance. C’mon, you didn’t really expect all this for free, did you? And you’ll need a chunk o’ change upfront to close the purchase.
Funky properties are out. On this, the government can be fussy. The property has to be in "turn-key" shape with no major repairs needed so you can move right in. Even chipping paint can sour a deal, Hawkins says. But the times are with you: In markets where sellers far outnumber buyers – which is most markets these days – sellers may be happy to make the repairs in order to sell the place.
If the property has been expanded or has an addition, the FHA wants to see local government permits for the work.
2. FHA 203K loan
This type of FHA loan lets you purchase and repair a fixer-upper or foreclosure property. We’re not talking spa bathrooms and a haute-cuisine kitchen. The loan is for replacing or repairing basic home systems such as the roof, furnace, plumbing, wiring and floors.
The rules
The buyer finds three licensed contractors who submit bids for repairs.
The lender examines the bids and rules out any that don’t meet program guidelines.
The buyer hires one of the approved contractors.
Repairs are done in phases. After each phase, a lender’s inspector examines and approves or rejects the work.
The benefits:
Uncle Sam insures your mortgage, and loans you money for authorized repairs. For example, a lender may offer you — based on the appraised value of the property you’re buying — a mortgage of $100,000 plus a $50,000 loan for repairs.
You repay both loans with a single monthly payment.
The wrinkles:
The rules are strict to protect buyers, Hawkins says.
Repairs must all be done before you can take possession.
3. City, county and state grants and loans
Every state has a housing finance agency (find yours here). These disperse federal, state and local money and oversee programs to help make housing affordable.
The benefits:
Many agencies have first-time-buyer assistance programs — grants or loans.
The amounts vary greatly from state to state, running from as little as $2,500 to as much as $150,000. They are mainly targeted at low- to moderate-income individuals and can sometimes have restrictions on where you purchase. These loans can be used to subsidize the loan you are obtaining from your lender and give you more purchasing power.
The wrinkles:
"You have to get in quick because these programs are not well-funded. It’s first-come, first-served, and when they run out of money they don’t have any more to lend," Hawkins says.
City, county and state programs may target certain low- to moderate-income neighborhoods for improvement, limiting your purchase to these areas.
Some programs are offered only to low-income buyers.
Other options
4. VA loans. If you’re a veteran, you might qualify for a VA Guaranteed Home Loan from the Department of Veterans Affairs, with no down payment — although you must buy mortgage insurance. Read more at Bankrate.com.
Find your dream home
5. Navy Federal Credit Union. The Navy Federal Credit Union is offering no-down-payment mortgages of up to $650,000 for qualified members. Department of Defense military and civilian personnel and their families can join the credit union.
6. Conventional loans
Private lenders, including credit unions, banks and mortgage brokers, vary in their fees and services. It pays to shop around. Keep in mind:
If your down payment is less than 20% of the property’s cost, you’ll need to buy private mortgage insurance.
You won’t need to buy mortgage insurance if you put 20% or more down.
Need help deciding if you should get a conventional loan? Read: "Which mortgage is right for you?"
Here are 6 ways to finance your first home purchase, with the rules, wrinkles and benefits of each.
By Marilyn Lewis of MSN Real Estate
Even though the first-time homebuyer tax credit ended April 30, there are still many ways the government provides help and incentives to get first-timers into the housing market. MSN Real Estate turned to EJ Hawkins, housing counselor with the nonprofit ClearPoint Financial Solutions, for a snapshot of each option. With all mortgages, the interest rate you get will depend on your credit score and market rates at the time you buy.
1. FHA-insured loans
The Federal Housing Administration doesn’t make loans, it insures them. You buy the insurance and the government sets the rules and repays your lender’s investment in case you default.
The rules:
Down payments are as low as 3.5% (example, for a $230,000 home, you’d pay $8,050 in cash).
Your FICO credit score (read “Boost your credit score”) must be 580 or above. (Read “Think you're ready to buy a home?” to learn about scores and loans.)
Find more information at HUD.gov or read “FHA loans get dramatically costlier.”
The good:
The requirements are pretty easy, so newbies can qualify.
If you haven’t yet built a strong credit score – and don’t have a record of late payments, missed payments or a foreclosure – you can use "nontraditional" credit sources, such as cell phone or other utility bills, rent payments or medical bills, to qualify.
The FHA limits extra charges ("points" and fees) for things such as title insurance and settlement and escrow fees. These can add up, otherwise. (To see all possible closing costs, download a .PDF of the HUD1 settlement form that your lender uses to disclose all your costs when you close the sale.)
You can use gifts — from family, for example — or a local government loan or grant for your down payment. (With conventional loans, it has to be all your own money.) You could conceivably pay nothing for the down payment.
You don’t need the big bank reserves that conventional loans require.
The wrinkles:
You have to buy mortgage insurance. C’mon, you didn’t really expect all this for free, did you? And you’ll need a chunk o’ change upfront to close the purchase.
Funky properties are out. On this, the government can be fussy. The property has to be in "turn-key" shape with no major repairs needed so you can move right in. Even chipping paint can sour a deal, Hawkins says. But the times are with you: In markets where sellers far outnumber buyers – which is most markets these days – sellers may be happy to make the repairs in order to sell the place.
If the property has been expanded or has an addition, the FHA wants to see local government permits for the work.
2. FHA 203K loan
This type of FHA loan lets you purchase and repair a fixer-upper or foreclosure property. We’re not talking spa bathrooms and a haute-cuisine kitchen. The loan is for replacing or repairing basic home systems such as the roof, furnace, plumbing, wiring and floors.
The rules
The buyer finds three licensed contractors who submit bids for repairs.
The lender examines the bids and rules out any that don’t meet program guidelines.
The buyer hires one of the approved contractors.
Repairs are done in phases. After each phase, a lender’s inspector examines and approves or rejects the work.
The benefits:
Uncle Sam insures your mortgage, and loans you money for authorized repairs. For example, a lender may offer you — based on the appraised value of the property you’re buying — a mortgage of $100,000 plus a $50,000 loan for repairs.
You repay both loans with a single monthly payment.
The wrinkles:
The rules are strict to protect buyers, Hawkins says.
Repairs must all be done before you can take possession.
3. City, county and state grants and loans
Every state has a housing finance agency (find yours here). These disperse federal, state and local money and oversee programs to help make housing affordable.
The benefits:
Many agencies have first-time-buyer assistance programs — grants or loans.
The amounts vary greatly from state to state, running from as little as $2,500 to as much as $150,000. They are mainly targeted at low- to moderate-income individuals and can sometimes have restrictions on where you purchase. These loans can be used to subsidize the loan you are obtaining from your lender and give you more purchasing power.
The wrinkles:
"You have to get in quick because these programs are not well-funded. It’s first-come, first-served, and when they run out of money they don’t have any more to lend," Hawkins says.
City, county and state programs may target certain low- to moderate-income neighborhoods for improvement, limiting your purchase to these areas.
Some programs are offered only to low-income buyers.
Other options
4. VA loans. If you’re a veteran, you might qualify for a VA Guaranteed Home Loan from the Department of Veterans Affairs, with no down payment — although you must buy mortgage insurance. Read more at Bankrate.com.
Find your dream home
5. Navy Federal Credit Union. The Navy Federal Credit Union is offering no-down-payment mortgages of up to $650,000 for qualified members. Department of Defense military and civilian personnel and their families can join the credit union.
6. Conventional loans
Private lenders, including credit unions, banks and mortgage brokers, vary in their fees and services. It pays to shop around. Keep in mind:
If your down payment is less than 20% of the property’s cost, you’ll need to buy private mortgage insurance.
You won’t need to buy mortgage insurance if you put 20% or more down.
Need help deciding if you should get a conventional loan? Read: "Which mortgage is right for you?"
Friday, May 21, 2010
:::::: Mortgage Basics:::::::::
Mortgage Basics
Adjustable or floating rate, 15-year or 30? How much mortgage can you afford? These are just a few of the many questions home buyers will find information on in this report.
BEFORE YOU START
- Take a fresh look at your household budget to determine how much you can spend on a mortgage each month.
- Request free copies of your credit report. (You're entitled to receive a free one annually from each of the nation's main credit reporting agencies.)
- Familiarize yourself with all of the variables generally associated with financing a home, such as interest rate policies, terms, points, fees, etc.
1Financing the American Dream
1
Financing the American Dream
Buying a home is the biggest financial investment most of us will ever make. As with any large project or goal, it requires dealing with a variety of complex issues. The best approach is to divide the process into manageable tasks. The following deals with the first steps of gathering your records, determining what you can afford, and understanding mortgage options.
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Put Your Own Financial House in Order
Before you go looking for a home, you should determine how much home you can afford. Most lenders will prequalify you to borrow up to a certain amount. Prequalification allows you to focus in on a realistic price range and makes you a more attractive buyer. Whether or not you want to prequalify, eventually you'll need to complete a loan application and it may take some time to gather and assemble the required information.
It's also a good idea to review your credit report. Contact local lenders to determine which credit bureaus they use. Then contact the credit bureaus and request a copy of your credit report (in most states, credit bureaus are required to provide individuals with a free copy of their report). Review your report to ensure that all information is correct. If you have past credit problems, don't lose hope. Be prepared to present a rationale for each slipup, and demonstrate an improvement in your ability to pay bills on time.
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How Much Mortgage Can You Afford?
The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Two income-to-debt ratios established by Fannie Mae are standard requirements for conventional mortgages. The first requirement is that monthly mortgage principal and interest payments (P&I), plus insurance and property taxes, cannot exceed 28% of the buyer's gross monthly income (some exceptions may apply to increase this limit to 33%). The second requirement limits total monthly debt payments (housing, credit cards, car payments, etc.) to 36% of gross monthly income. In addition to these requirements, you may have to pay 10% to 20% down on the total purchase price to qualify for a conventional mortgage.
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Types of Mortgages
How much house you can buy also depends on your mortgage's term and interest rate. The term is the length of time (usually 15 or 30 years) over which payments will be paid. The rate can be fixed (meaning it doesn't change over the loan's term) or adjustable (it fluctuates with market conditions). Thirty-year fixed-rate mortgages remain the most popular. The longer term lowers the monthly payment, while the fixed rate provides stability over the life of the loan. Given relatively low interest rates, these mortgages are attractive to buyers planning to stay at least six or seven years in their new home. The drawbacks are low principal payments in the early years, and the risk that market rates will decline over the term. However, if your credit history is sound and you have sufficient income, you can usually refinance your mortgage when rates decline.
A 15-year term lowers the interest rate, reduces total interest payments, and increases principal payments. But it also increases monthly payments. If you can't afford the higher payments now, you might opt for a 30-year mortgage. If there are no prepayment penalties, you can make additional principal payments as your income increases. Making just one extra monthly payment a year will pay off a 30-year mortgage in less than 22 years and can save tens of thousands of dollars in interest costs. If you plan to stay in a home no more than three years, you might want an adjustable-rate mortgage (ARM). ARMs offer initial rates that are lower than fixed mortgages. At some point, usually after the first year, rates are tied to market conditions and are subject to potential rate increases. Most ARMs include a cap on rate increases in any given year, as well as over the life of the loan. Some ARMs offer initial rates at least 2% below fixed rates and limit increases to 1% annually and 5% to 6% over the life of the loan. Many home buyers are attracted by the affordability of an ARM during the initial period. However, you should be confident that your future income will be sufficient if both interest rates and your monthly payments increase.
Another popular mortgage involves a balloon payment. A balloon is a lump-sum payment that pays off the loan in full after a fixed period of time. Generally the rates on balloon mortgages are 1/4% to 3/4% less than on 30-year fixed mortgages, but during an initial period of between 3 and 15 years, payments are similar. After this period, the remaining outstanding principal balance is either due in full or subject to refinancing. This is a good option for home buyers who plan to sell before the final payment is due. But because property values fluctuate, you may not be able to sell when you want. You may also face higher payments if you are forced to refinance at a higher rate, and there is also a risk that you may not be in a position to refinance when the balloon becomes due.
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Interest Rate Points
Points are interest paid in advance to reduce the rate on a loan. One point is equal to 1% of the mortgage amount. The general rule is that 1 point is worth 1/8 of 1% off the loan rate. The decision to pay points for a lower rate is based on how much the seller is willing to contribute to points, how long you plan to stay in the house, and how important lower payments are compared to higher closing costs. You will need to calculate the long-term value of points based on these factors, keeping in mind that points are generally tax deductible in the year paid.
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Other Alternatives
If you cannot afford a conventional mortgage, there are a variety of alternatives. An anxious seller will sometimes offer owner financing. Federal Housing Administration (FHA) loans offer down payments as low as 3%, but may require the buyer to purchase mortgage insurance. (The FHA is a government agency responsible for insuring affordable housing mortgages.) The Veterans Administration (VA) offers no-money-down mortgages to qualified veterans of the U.S. military. Finally, there are local affordable housing advocates that offer low-cost, low down-payment loan alternatives. For further information, contact the FHA, VA, Fannie Mae, or your local mortgage lender or real estate broker.
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SUMMARY
- The first step in acquiring a home mortgage is to gather the information you'll need to include in a mortgage application.
- Review your credit report by ordering a copy from the credit bureaus used by local mortgage lenders.
- Prequalifying for a mortgage lets you know how much you can afford and makes you a more attractive buyer.
- Conventional mortgages limit housing costs to 28% of gross income and total debt payments to 36% of gross income.
- Mortgage terms are usually 15 or 30 years. The longer the term, the lower your monthly payment, but the higher your overall interest costs.
- Thirty-year loans often permit additional principal payments. One additional monthly payment per year will reduce a 30-year loan to 22 years.
- Interest rates are fixed or variable over the term of the loan. Variable rates may be best for buyers who plan to sell within three years.
- Generally speaking, one point is worth 1/8 of 1% off the loan rate.
- A balloon payment is a lump sum payable at the end of a specified term.
- Points and interest on mortgages or home equity debt are usually tax deductible.
CHECKLIST
- When your credit reports arrive, review them for accuracy. Correct any mistakes immediately.
- Get prequalified for a loan. Paying off debts ahead of time might qualify you for a better mortgage.
- If you're a veteran, contact the U.S. Veterans Administration to find out whether you're eligible for a no-money-down mortgage.
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