Mortgage loans in USA are the most sought after thing in the US finance industry. Over time it has the not only amass huge amount of money by the sub prime lending but also has contributed to the economy of the USA. This got worse when the Subprime lending default piled up and at certain stage it boomeranged. This resulted in a huge recession of the global economy.

The sum prime crises began in the year 2005-06 with the high default rates on “subprime” and adjustable rate mortgages (ARM). The pursuit of rising housing prices had encouraged borrowers to go for difficult mortgages in the hope to refinance it at more favorable terms. However, things never go as we predict and the worst was near, nobody ever thought in their wildest of the dream that this will happen in reality. But it happened with the housing prices started to drop moderately in 2006-07 in many parts of the U.S. On one hand the refinancing became more difficult on the other hand defaults and foreclosure activities increased dramatically. Home prices failed to rise up as anticipated and ARM interest rates reset higher. Housing properties were subject to foreclosure surged to nearly 75%.

The Economic Stimulus Package Act of 2008

The timely intervention by the US federal reserves by announcing an Economic Stimulus Act of 2008, this made the scenario more placid. It was mainly targeted to secure and assist the low and middle income citizens. It also gave support to the businesses by offering them suitable tax incentives. If we go by the announcements in the stimulus package act it says that all recipients would receive at least $300 and an extra $300 per dependent under the age of 17. The maximum pay that a person would receive would be not more than $600. Individuals who have an annual income over $75,000 are not liable to receive any monetary funds.

The underline variables that govern mortgage loans

There are many types of mortgages but few of them remain same irrespective of any country. They are then put under certain rules and polices of the country. The specific variable which define the mortgages are

• Rate of interest: It is fixed for life, in most cases of the loan, but on certain conditions they can be changed at certain pre defined-periods.
• Duration: mortgage loans quite specifically have a long duration. Some mortgage loans may have no amortization, or require full repayment of any remaining balance at a certain date.
• Amount and frequency of the payment: The amount paid per period may change or the borrower may have the option to increase or decrease the amount paid.

If you want to own your home free and clear and you know that you are years away from being able to do it, then you should check out a mortgage accelerated ownership program. These programs will help you to pay off your mortgage faster by adding one interest free monthly payment to the premium to your payments each year. This one payment can really add up, especially since the payment goes entirely to your principal and not to the interest on your mortgage account.

So how does it work? The theory behind the mortgage accelerated ownership program is simple and easy to understand. Start with this:

• There are 52 weeks in a year.
• You are paid (in most cases) every 2 weeks.
• That means that you get paid 26 times in a year.
• In most cases, you take your 2 paychecks a month together to pay for your mortgage.
• So you pay your mortgage 12 times a year – that’s 24 paychecks.

Where do the other two paychecks go? In most cases, nowhere. Those two “extra” paychecks get placed into a savings account or worse yet; they are spent as soon as they come in since they are “extra”. With a mortgage accelerated loan program, however, those two extra paychecks go right onto your mortgage to create a 13th monthly payment every year, dropping your principal balance by the full amount of a month’s mortgage payment.

There are several ways to do this kind of program, one of which is to simply add a certain amount to your own monthly payment all by yourself. The problem with this is that because you are not enrolled in any special program with your bank, you might be tempted to slack off when there are other better things to spend your money on. Unfortunately, it seems as if there is always something better to spend your money on than extra mortgage payments, and the “program” simply doesn’t work unless you are dedicated to making it work.

A better option is to find out from your bank if you can enroll in a mortgage accelerated loan program through them. They will either bill you every other week for the amount of half your normal mortgage payment, or they will deduct the money automatically, either from your bank account or from your paycheck. This will help you make the payments whether you “want to” or not, because they are coming directly out of your cash flow before you even see it.

Because there are an extra two paychecks in this kind of plan, the balance of those two payments goes directly onto your mortgage, reducing your debt. This can take a good deal of time off of your mortgage, especially if you are settled into a 30 year mortgage already, and are looking for ways to shave off a couple of years.

If your bank or lender does not have an accelerated mortgage repayment program, then consider doing it yourself. You should write out a check for half the amount of your monthly mortgage payment every time you get paid without fail. If your bank will not let you send these checks in individually, then hold onto your first check until you can send both together. Send them two at a time rather than waiting and writing out one every other paycheck, or you may start to allow yourself to slide back into only 12 payments a year.

Also check with your bank to make sure that you will not be penalized for making an extra monthly payment during the course of the year. If they are charging you heavy fees for paying “too much” on your mortgage, then it might not be worth the money that you put onto your premium because of the high cost. If this is the case, then you might want to consider refinancing to get rid of this stipulation. You will still have to pay the fees for an early repayment, but it might be less if it is done all at once, at least.

Another option, especially if you like your bank, is to warn them that you plan to refinance because of the high fees on extra payments. Ask if they would be willing to waive those fees in return for the continuation of your patronage. They might not agree, but it is always good to ask, and you might get just what you are asking for if you talk to the lending division and make your position clear. With no extra payment penalties, your mortgage accelerated loan program or the decision to accelerate your payments will help you own your home free and clear much earlier.

Sometimes I find it difficult to listen to all of the complaints that I hear from mortgage loan officers today about how poorly they are doing in the business due to the downturn in home sales and mortgage activity. I find these complaints especially interesting when our company this year has experienced its largest growth ever in the history of our being in business. What is the key to our success? Our being willing to change with the mortgage industry’s ever changing environment. If you want to succeed you need to realize that you need to adapt and learn some “new tricks”.

The last 6 months to a year, the mortgage industry is different than it has ever been before. In fact, it is so different; many people don’t understand their job anymore. I believe that as an LO, you have to have an understanding of what your actual job is and at least some basic training requirements necessary to succeed in the industry before you can set yourself up to actually be a loan officer.

Before you can hang up a sign that says, “I’m a mortgage broker or I’m a loan officer”, …thinking that because it’s easy to get a license and to become a loan officer, you need to realize that in the mortgage industry it’s not always easy to know what is required of you, unless you have the proper training.

It used to be straightforward to be a “loan officer” and the industry formerly would support people who didn’t have a concept of what they were doing. This was because the mortgage industry simply could not hire enough people to take all of the mortgage applications. There were millions and millions of loans being written and virtually any “warm body” could write them.

The AE’s helped the new LO’s, their lenders helped them; when they needed help, they had someone that they could call to “bail them out”.

What you have now are 236 less lenders than you had a year or so ago and you have companies that don’t even have AE’s or Reps any more because they simply can’t afford to pay them.

These companies have a fraction of the mortgage activity that they use to have. Consequently, they have underwriters who are completely overwhelmed by the influx of government loans because this seems to be the product more of our lenders are encouraging.

The real problem comes when you couple the emphasis on FHA and VA government loans in the industry with LO’s who are trying to submit government loan applications and think they can submit them like they did during the sub-prime era. This is unconditionally no longer the case.

So what you have are people who have no experience submitting government loans that are presenting documents to more than one lender because they may have been denied previously. Quite often the LO needs to restructure and re-submit the loan, basically because the loan officer doesn’t really understand how to properly submit the 1003.

They don’t understand because they were never forced to learn during the crazy days of the sub-prime marketplace.

History has thrust us into a position where our loan officers now need to know how to originate loans. LO’s all over the country are sitting by themselves with a very limited support system, which is made up of fewer “support” people than it ever has had in the past.

You have mortgage company’s like ours who are adding additional support personnel for our LO’s because we have recognized the drop in the vendor support. But unfortunately, our company is in the minority of mortgage companies that are actually expanding and growing during this downturn of business and can afford to provide sufficient support personnel to assist our LO’s.

For many LO’s, it appears that they need some of the most basic training, like for instance, how to simply complete an application and the 1003. The idea that an individual does not know how to ask basic questions or fill out a 1003 correctly may sound ridiculous to some, nevertheless, the necessity for these basic skill sets and compliance are more prevalent today than ever before, and I believe that training in these areas is necessary.

We see thousands and thousands of loans. Of those coming from the general population of the new LO’s that we hire off the street, I would not be surprised to learn that 90% of them send in applications to processing incomplete.

With the new, stringent requirements imposed by most mortgage companies today, the loan officer needs to understand that they now have to complete all fields on the 1003 and also with correct dates that comply with regulations.

Let me provide you several examples of what we are not seeing completed on the 1003 today;

*Years of schooling isn’t completed,

*Borrowers birthdays aren’t given

*Documentation necessary if there were less than 2 years of employment is not provided

*History of ownership

*Rent history

*How many children in the family *Correct mailing address

*Correct dates that are in compliance with regulations

*The list goes on and on…

These may have been completed in the past by the lender’s Rep or AE, and they may seem like little things reflecting back on the past days of the “Wild West sub-prime years”, but today, your declaration has to be perfect if you want the application to get past underwriting.

In today’s demanding marketplace, the HMDA section has to be perfect and the REO has to be done, and has to be done correctly. These are items that often may have been left blank a year ago, and “slipped by” because someone would have completed it for the LO.

When we were in the subprime heyday, 1003 applications quite often were written haphazardly and unfortunately nobody really cared because the LO had an AE doing follow up for them.

Occasionally, a lender would force the LO to complete the information and would end up telling the LO exactly what to put on the 1003. The lender would end up contacting the client for information, and in turn, create a photocopy of the application in which they had written exactly what the LO was to put in the blanks. They would then send it back to LO and have the LO write in the correct data. They would then have the borrower sign it and send it back to them.

Obviously, while we all know of companies that used to do this, it was never an acceptable practice. I’m not implying that it was fraudulent from the standpoint that they were falsifying information, but they did tell the LO exactly what they needed to put into the 1003 and we all know that is in violation of our industry’s most basic compliance regulations.

While our company never allowed this practice, and I do not have a lot of interaction outside of our company, I doubt that there are any reps left who are going to provide this “service” for the LO…that century doesn’t exist any more.

Those lenders who had that level of “service”, or at least, what loan officers perceived as service, were basically good lenders that regarded their “services” to the loan officers as a necessary evil to get their loans closed; sadly, they knew that they would not be able to close many mortgages if they did not provide these “services”.

Well, let me tell you; that environment no longer exists. What you have now are conventional lenders like Flagstar, Chase, Citi Banks; people who never thought of providing “services” like these because they assume that the loan officer knows what their responsibilities are and as conventional lenders they simply will not offer to do the LO’s work for them.

My position is that at this historical point in the mortgage industry, we need all mortgage companies to focus on providing their loan officers’ more basic training. If we continue to ignore the necessity for proper training in these basic areas, our already over-regulated industry will be overloaded even more with new compliance issues and regulations placed on us before we know what hits us.

If we as an industry start providing the proper support and training, and insist on higher standards of training and compliance, we will see more professional LO’s providing proper paperwork and as a result closing more mortgage loans in a fraction of the time it is currently taking due to incomplete 1003’s and unfinished documentation.

After all, isn’t this why we are in the mortgage business?

Sometimes I find it difficult to listen to all of the complaints that I hear from mortgage loan officers today about how poorly they are doing in the business due to the downturn in home sales and mortgage activity. I find these complaints especially interesting when our company this year has experienced its largest growth ever in the history of our being in business. What is the key to our success? Our being willing to change with the mortgage industry’s ever changing environment. If you want to succeed you need to realize that you need to adapt and learn some “new tricks”.

The last 6 months to a year, the mortgage industry is different than it has ever been before. In fact, it is so different; many people don’t understand their job anymore. I believe that as an LO, you have to have an understanding of what your actual job is and at least some basic training requirements necessary to succeed in the industry before you can set yourself up to actually be a loan officer.

Before you can hang up a sign that says, “I’m a mortgage broker or I’m a loan officer”, …thinking that because it’s easy to get a license and to become a loan officer, you need to realize that in the mortgage industry it’s not always easy to know what is required of you, unless you have the proper training.

It used to be straightforward to be a “loan officer” and the industry formerly would support people who didn’t have a concept of what they were doing. This was because the mortgage industry simply could not hire enough people to take all of the mortgage applications. There were millions and millions of loans being written and virtually any “warm body” could write them.

The AE’s helped the new LO’s, their lenders helped them; when they needed help, they had someone that they could call to “bail them out”.

What you have now are 236 less lenders than you had a year or so ago and you have companies that don’t even have AE’s or Reps any more because they simply can’t afford to pay them.

These companies have a fraction of the mortgage activity that they use to have. Consequently, they have underwriters who are completely overwhelmed by the influx of government loans because this seems to be the product more of our lenders are encouraging.

The real problem comes when you couple the emphasis on FHA and VA government loans in the industry with LO’s who are trying to submit government loan applications and think they can submit them like they did during the sub-prime era. This is unconditionally no longer the case.

So what you have are people who have no experience submitting government loans that are presenting documents to more than one lender because they may have been denied previously. Quite often the LO needs to restructure and re-submit the loan, basically because the loan officer doesn’t really understand how to properly submit the 1003.

They don’t understand because they were never forced to learn during the crazy days of the sub-prime marketplace.

History has thrust us into a position where our loan officers now need to know how to originate loans. LO’s all over the country are sitting by themselves with a very limited support system, which is made up of fewer “support” people than it ever has had in the past.

You have mortgage company’s like ours who are adding additional support personnel for our LO’s because we have recognized the drop in the vendor support. But unfortunately, our company is in the minority of mortgage companies that are actually expanding and growing during this downturn of business and can afford to provide sufficient support personnel to assist our LO’s.

For many LO’s, it appears that they need some of the most basic training, like for instance, how to simply complete an application and the 1003. The idea that an individual does not know how to ask basic questions or fill out a 1003 correctly may sound ridiculous to some, nevertheless, the necessity for these basic skill sets and compliance are more prevalent today than ever before, and I believe that training in these areas is necessary.

We see thousands and thousands of loans. Of those coming from the general population of the new LO’s that we hire off the street, I would not be surprised to learn that 90% of them send in applications to processing incomplete.

With the new, stringent requirements imposed by most mortgage companies today, the loan officer needs to understand that they now have to complete all fields on the 1003 and also with correct dates that comply with regulations.

Let me provide you several examples of what we are not seeing completed on the 1003 today;

*Years of schooling isn’t completed,

*Borrowers birthdays aren’t given

*Documentation necessary if there were less than 2 years of employment is not provided

*History of ownership

*Rent history

*How many children in the family *Correct mailing address

*Correct dates that are in compliance with regulations

*The list goes on and on…

These may have been completed in the past by the lender’s Rep or AE, and they may seem like little things reflecting back on the past days of the “Wild West sub-prime years”, but today, your declaration has to be perfect if you want the application to get past underwriting.

In today’s demanding marketplace, the HMDA section has to be perfect and the REO has to be done, and has to be done correctly. These are items that often may have been left blank a year ago, and “slipped by” because someone would have completed it for the LO.

When we were in the subprime heyday, 1003 applications quite often were written haphazardly and unfortunately nobody really cared because the LO had an AE doing follow up for them.

Occasionally, a lender would force the LO to complete the information and would end up telling the LO exactly what to put on the 1003. The lender would end up contacting the client for information, and in turn, create a photocopy of the application in which they had written exactly what the LO was to put in the blanks. They would then send it back to LO and have the LO write in the correct data. They would then have the borrower sign it and send it back to them.

Obviously, while we all know of companies that used to do this, it was never an acceptable practice. I’m not implying that it was fraudulent from the standpoint that they were falsifying information, but they did tell the LO exactly what they needed to put into the 1003 and we all know that is in violation of our industry’s most basic compliance regulations.

While our company never allowed this practice, and I do not have a lot of interaction outside of our company, I doubt that there are any reps left who are going to provide this “service” for the LO…that century doesn’t exist any more.

Those lenders who had that level of “service”, or at least, what loan officers perceived as service, were basically good lenders that regarded their “services” to the loan officers as a necessary evil to get their loans closed; sadly, they knew that they would not be able to close many mortgages if they did not provide these “services”.

Well, let me tell you; that environment no longer exists. What you have now are conventional lenders like Flagstar, Chase, Citi Banks; people who never thought of providing “services” like these because they assume that the loan officer knows what their responsibilities are and as conventional lenders they simply will not offer to do the LO’s work for them.

My position is that at this historical point in the mortgage industry, we need all mortgage companies to focus on providing their loan officers’ more basic training. If we continue to ignore the necessity for proper training in these basic areas, our already over-regulated industry will be overloaded even more with new compliance issues and regulations placed on us before we know what hits us.

If we as an industry start providing the proper support and training, and insist on higher standards of training and compliance, we will see more professional LO’s providing proper paperwork and as a result closing more mortgage loans in a fraction of the time it is currently taking due to incomplete 1003’s and unfinished documentation.

After all, isn’t this why we are in the mortgage business?

What Happened With the Mortgage Industry?

We have all heard about the collapse of the sub prime mortgage industry, but do we understand exactly what is involved? Certainly if you are a victim in this crisis, you may have some idea about what is going on, but few people are aware of how connected one part of our economy is to the other. The collapse of the sub prime industry has affected everyone in the housing market, buyers and sellers, those with sub prime mortgages and those without. It has also affected contractors, real estate agents and anyone else who makes a living in the housing industry.

To simplify the problem that developed in the mortgage industry, you first need to understand that it is generally assumed that housing prices will always increase. While this is true over the long term, in the short term housing prices had risen rapidly to an artificial high. At the same time, many mortgage lenders where giving sub prime mortgages. A sub prime mortgage is one that is considered more risky that a traditional, or prime, mortgage. Sub prime mortgages went to people with problem credit, were buying a more expensive house than a traditional lender would loan, or had some other quirk that made them unattractive to a traditional lender. Many of these mortgages had an adjustable interest rate. When interest rates increased, the monthly mortgage payment increased as well. Trying to refinance became a nightmare as the bottom fell out of the housing market, and homes were appraising for much less than the amount that was owed on them. Foreclosures increased, and the cycle expanded, as other credit markets became nervous and less willing to loan money, which is one of the driving forces of our economy.

What is a Credit Crunch?

Simply put, a credit crunch is what happens when banks become less willing to lend money, or interest rates rise, making it more expensive to borrow money. A credit crunch has a trickle down effect on the economy as a whole. When money is more difficult to borrow, the economy slows down. Much of our economy is driven by credit, and a slow down in home purchasing, new home construction and auto sales can have a staggering effect on the economy as a whole. Problems that develop in one segment of the economy have a spill over effect into other areas of the economy.

How does it Affect the Consumer?

The effect of the current credit crunch on the consumer that is interested in purchasing a home can be negative. In times of a credit crunch, lenders are less likelihood to lend money, the charge higher interest rates and tighten their lending standards. With as much as 40% of the population considered to be problems borrowers, it is easy to see how the current credit crunch affects the mortgage industry.

Interested in Buying?

If you are looking for a home, don’t let the current credit crunch scare you away. Although lenders are nervous right now, if you are considered a good risk, there is money available. How to know if you are a good risk? Check your credit reports and report any errors. Make sure that you pay your bills, both utility bills and credit card bills, before the due date. Know how much home you can comfortably afford, and do not go over that amount. For the savvy home buyer there are many benefits to the current credit crunch.

What if your credit is not so perfect? It is still possible to get a loan. Banks are going to be less interested in nontraditional loans, such as no-document loans or interest only loans. While you house shop make every effort to reduce your debt and pay your bills on time. Have 20% of the asking price available as a down payment to eliminate the need for private mortgage insurance, a move that can save you over a hundred dollars each month. If you are turned down for a loan, ask the lender what you can do to improve your credit and how long you should wait before you apply again. While the current credit crunch has tightened up the mortgage industry, it has not stopped it.

Are you applying for your first mortgage? Buying a home can be scary, and getting a mortgage can be confusing. If you are buying your first home, make sure that you understand the following facts about mortgages. Know what to expect going into the deal and you’ll be much more prepared to deal with costs and other issues.

First, when you apply for a mortgage, you’ll likely get pre-approved for a certain amount. This gives you a starting point. You’ll know your price range when you look at houses and you’ll have an idea of the closing costs and interest rate you’ll be paying. The mortgage lender will give you this information as a Good Faith Estimate. Those figures will be good for a limited amount of time, but when you really do find a home and apply for the mortgage, the rates shouldn’t change much.

After you get pre-approved for a mortgage, you should begin house hunting. During this time, you should be savings up for your down payment, as well as for closing costs. In most cases, a mortgage lender will want you to have about 20% of the total cost to put up as a down payment. If you have less than that, you will probably still be able to get a mortgage as long as you have decent credit. However, if you have less than 20% to put down, your mortgage lender may require you to purchase private mortgage insurance until you have the full 20% paid off. This is an extra expense for which you must be prepared.

Speaking of extra expenses, don’t forget to plan for closing costs. Most people don’t realize that the process of getting a mortgage can be extremely expensive. It is important that you are prepared to deal with all closing costs, which usually, in total, run about $3000 to $6000 depending on your mortgage situation and where you live. You can add these to the originally mortgage, but if you do so, you’ll have to pay more in interest, so it is always a good idea to try to pay them off right away. Included in closing costs are fees for appraisal, underwriting, long distance calling, traveling, document preparation, title insurance, title transfer, lawyers (if needed), survey, and more.

After negotiating with a seller over the price of the house, it is time for you to get approved for the mortgage. During this time, you deal with be in escrow, with an escrow company holding your down payment. The mortgage company with which you apply will look at all of your information, including your debt to income ratio and your credit score, and offer you an interest rate on the mortgage loan that you’d need to purchase the house. They’ll also go over additional costs with you (like the closing costs), as well as fees you’ll be required to pay if you do things like miss payments or pay off the mortgage extremely early. On top of that, you and your mortgage lender will have to talk about the mortgage term – the length of time it will take you to repay the mortgage. In general, a longer term means lower monthly payments, but a short term means a lower interest rate.

You’ll also be able to talk to your mortgage lender about paying for points. Points are set amounts of money you can pay to lower your interest rate by one percent. There may be a limit as to how many points you can purchase, but in most cases, you’ll want to pay for one or two points at least, if you have the money.

With your mortgage, you’ll also become aware that not all mortgage rates are created equally. In most cases, you’ll be offered and adjustable interest rate, with caps as to how high it can jump in a year and over the life of the loan. As the national rate changes, so will your interest rate. However, on the other hand, you might also opt for a fixed interest rate. This might not be offered right away, but if you refinance your mortgage, you can often get the fixed interest rate.

Getting your first mortgage is tough. The process is long, and it is easy to get confused if you’ve never done it before. However, with a good real estate agent and mortgage lenders on your side, you should be able to figure out the best mortgage option for you. Make sure you do your research, and you’ll be able to get a mortgage that makes sense for your situation.

Mortgages can help you purchase a home, even when you don’t have $100,000 or more saved up to do so out of pocket. However, mortgages aren’t free. In order to get a mortgage, you have to agree to pay the mortgage lenders a fee in the form of interest. However, interest isn’t a fee that is set in stone. Depending on a number of factors, you might be offered a higher or lower interest rate. One of these factors is your credit score.

Your credit history is a compilation of all of your financial records over the past seven years. This information is reported on a credit history report, which is compiled by three major companies – Experian, Equifax, and TransUnion. Creditors – including mortgage lenders – can order your credit history report from any of these major credit-reporting bureaus. Using this credit history report, these lenders will decide what interest rate to offer you on your mortgage.

When talking about your credit history, you’ll often hear people talk about your credit score. A credit score is simply a number that reflects an overview of your credit history. In most cases, your credit score will serve as a way for mortgage lenders to qualify you or deny your approval for the loan. Having a lower credit score is not the end of the world, but it may make mortgage lenders determine that you should be in a higher interest rate bracket.

How does this work, exactly? Well, when you start out in the financial world, you don’t have any credit. As a result, your credit score is moderately low, but not horribly bad. Every time you pay a bill on time or otherwise show that you are financially responsible, your credit score rises a bit. Every time you miss a payment or do something else financially irresponsibly, your credit score drops a bit.

When a mortgage lender is looking at dozens or maybe even hundreds of applications for mortgages, he or she doesn’t have time to go through every single one right off the bat, especially since many of the people pre-approved may never actually decide to take a mortgage. So, mortgage lending companies instead set certain limits. For example, your credit score might have to be over 600 to qualify for any kind of credit. Every mortgage lender has a different magic number, and sometimes these numbers can be very specific (ie, you need to be above a 589). Therefore, work to increase your credit score point by point – every little bit matters!

After your credit score qualifies, you may be divided into even more groups. These brackets will determine the credit rate you are offered. Of course, lenders will look at people who are on the fence between brackets. It is at this point that your credit history means a lot. If your credit score is lower because of mistakes you made over 5 years ago and since then you’ve cleaned up your act, you might get bumped down to a lower interest rate. It is never too late to start improving your credit.

Are credit scores the final say when it comes to your mortgage’s interest rate? Not at all. There are many other things that also affect a lender’s decision about the rate you’ll be offered. If your debt to income ratio is higher, you’ll have a higher interest rate, for example. You can also expect a higher interest rate if the home is not your primary residence, if you include closing costs in with the mortgage premium, and if your total real estate price tag is extremely high. Mortgage lenders consider your credit score as just a part of the equation.

So, that means that you need to do all that you can to improve your credit score if you are going to be applying to mortgage lenders anytime soon. Some of the best ways to improve your credit are to use the following tips:

 

 

• Close any credit card accounts that you don’t open. The higher your overall credit limit, the lower your score will be.

   

• Correct any mistakes you might see on your credit history report.

   

• Pay your bills on time.

   

• If you have past bills that have fallen to the wayside, talk to a debt consolidation company or negotiate a new payment plan with the lender so that everyone is happy.

   

• Don’t carry huge balances on your credit cards. Just because you only have to pay the minimum doesn’t mean that you shouldn’t try to pay more if possible.

Remember – your credit score is the key to your interest rate, so do your best to keep it as high as possible!

Recent developments relating to mortgage laws are going to make Pennsylvania homebuyers happy. In the online version of the Philadelphia Inquirer, an important news article was published on July 8, 2008 regarding five bills that were signed by Governor Rendell. These bills are intended to provide added layers of protection for Pennsylvania homebuyers with their mortgages as well as to keep a tight rein on the state’s mortgage industry.

Foreclosure: an essential element in mortgage laws

The term “mortgage” encompasses a whole gamut of other concepts such as “default” and “foreclosure.” In light of the present economic situation and sub-prime mortgages causing people to lose their homes, it is good to be aware of what the law provides in case of a foreclosure in Pennsylvania.

First, let’s tackle foreclosure. Pennsylvania laws stipulate that uncontested foreclosures take 120 days or longer before they can take effect. To execute on a foreclosure, lenders go to court and have what is called a judicial foreclosure. The court that decides the foreclosure case is called a Court of Common Pleas. After deliberations, the property is then sold.

Note, however, that when a homeowner defaults on a loan, foreclosure is not automatic. Generally, it is when a homeowner misses a payment for two consecutive months that lenders take action. Lenders will issue a lis pendens – a written and registered document that issues a public notice that the property is being foreclosed upon.

Mortgage laws require that there be two pre-foreclosure notices. The first falls under Act 6 which is a notification of the intention to foreclose. This is sent to the homeowner within 60 days of defaulting. The second one is under Act 91 wherein the homeowner is advised that he or she may qualify for financial assistance under the HEMAP – homeowners emergency mortgage assistance program.

Five bills signed by Governor Rendell

On July 8, 2008, Governor Rendell signed five bills that were drafted to protect homebuyers and to eliminate any risks for improper activity and behavior on the part of mortgage lenders and brokers.

Generally, these bills provide that:

people who sell mortgage loans must now be licensed by the state. Not only a background check is required, but also proof that the mortgage loan seller has completed training and is certified by the Department of Banking of Pennsylvania. prepayment penalties be strictly regulated real estate appraisers be penalized for misconduct require mortgage companies to provide state notification when they intend to foreclose on a property the state will make public enforcement activities against mortgage companies

Pennsylvania’s Department of Banking’s HB 2179 oversees the licensing and training of individuals who sell mortgage loans. They must demonstrate competence in the mortgage loan industry and must undergo certification.

As for prepayment penalties, the new mortgage laws provide that homeowners don’t end up having to pay for expensive and rising mortgage rates because of some prepayment penalty provisions. This bill will apply to mortgage amounts of $217,873,000 or less.

Senate Bill 484 (SB 484) on the other hand makes provisions for homebuyers to gain access to additional information about potential mortgage companies or sales people, while Senate Bill 485 was drawn up in order for homebuyers to have more confidence that the appraised value of a property is sound and reflects current market values.

Misconduct on the part of an appraiser is subject to a penalty of $10K per violation.

It used to be that when a foreclosure notice is issued, it is sent only to the homeowner and then filed in the borrower’s home county. Senate Bill 486 has changed that. It now requires every foreclosure notice to be sent to the Penssylvania Housing Finance Agency so that the foreclosure can be monitored in real time. In this manner, the state can spot potential trouble areas enabling it to intervene in a timely manner.

People who have mortgages will also be delighted about the two new loan programs launched by the Governor: Refinance to an Affordable Loan program (REAL) and Homeowner Equity Recovery Opportunity (HERO) which was put in place to help homeowners facing foreclosure.

In fact, in a separate online article, Governor Rendell was saying that all homeowners in Pennsylvania who have any concerns about meeting their mortgage obligations should call the state for assistance immediately .

These bills – or reforms as viewed by many – arose from a 2005 report released by Pennsylvania’s Department of Banking. The report was entitled Losing the American Dream: A Report on Residential Mortgage Foreclosures and Abusive Lending Practices in Pennsylvania.

It is a decision that is almost as important as which house you purchase – which type of mortgage to get. Choosing the right mortgage for your specific needs can potentially save you thousands of dollars over the term of the mortgage. Your two basic options when it comes to a mortgage will be a fixed rate (FRM) or an adjustable (ARM) mortgage, although you may also be able to qualify for other options such as an FHA loan or a VA loan.

Most home buyers take out a fixed rate mortgage – around 70% of all mortgages are fixed rate as opposed to adjustable. A fixed rate mortgage is exactly what it sounds like: the interest rate on your loan will not change, regardless of the economy or whether interest rates rise or fall. The terms and conditions of a fixed rate mortgage are also protected by law. An adjustable rate mortgage will go up or down depending on the interest rate at the time. Whether you should choose a fixed rate or adjustable mortgage depends on the general state of the economy along with your financial situation and the risk you are willing to take.

If interest rates are low when you take out a mortgage, or if you just do not want to take the risk of them increasing, you are probably better off with a fixed rate mortgage. If you have a large mortgage, whereby even a slight rate increase may mean a big increase in your monthly mortgage payment – you are perhaps better off with a fixed rate. If you are simply the cautious type who does not like taking a risk, a fixed rate mortgage is typically the best option for you.

The obvious advantage is that the interest rate does not change – and neither will the amount of your monthly payment. You always know exactly how much you will be paying each week and can thus budget more accurately; the amount of your monthly payment will only increase if the amount of insurance rates or the amount of property taxes increases. Some borrowers consider it easier to plan for other big expenses, such as college funds and retirement, with a fixed rate mortgage.

A fixed rate mortgage does not take into account the cost of living or inflation. In other words, as time goes by and you are perhaps earning more money and everything else costs that much more – your mortgage payment is going to stay the same. Arguably, this can mean more money in your pocket – in 20 years from now, you may be earning more money than you are now, but your monthly house payments are going to stay the same.

The biggest disadvantage of a fixed rate mortgage is that you run the risk of missing lower payments when the interest rate goes down. The difference in the amount that you pay each month can be substantial if you have an adjustable rate mortgage and the interest rate is lowered. This not only saves you money each month, but also potentially helps you pay off your mortgage sooner. Of course, nobody can ever accurately predict when interest rates are going to drop, although it is sometimes possible to have some indication and base your decision upon that.

A change in the interest rate can make a huge difference in determining the amount that you end up paying for your home. A homeowner with a 30-year mortgage can enjoy average savings of around $50,000 over the term of their mortgage with the interest rate being lowered by just one point. And an increase in the interest rate of just one or two percent can mean monthly payments that are between $50 and $250 higher, depending on the cost of your home. The decision to take a fixed rate or adjustable mortgage may also depend on whether you are taking out a 15 or 30-year mortgage.

One compromise of sorts is to take out a fixed rate mortgage and then refinance your loan when interest rates are lowered. Another option with a fixed rate mortgage (or an adjustable rate mortgage) is to pay extra each month towards the principal, thus saving a large amount in interest charges – as well as making the term of the mortgage shorter and owning your home sooner. Make sure that any extra amount that you pay is going towards the principal and not the interest.

It is a huge decision – whether to play it safe and take the fixed rate, or take a chance and go with the adjustable rate mortgage. Ultimately, the decision is yours; but be sure to get some good financial advice before deciding. A fixed rate mortgage has many advantages and disadvantages; you just have to decide which is best for your financial situation.

If you are just about to buy a house, one of your most important decisions, almost as important as which home you buy, is what type of mortgage to take out. You basically have two choices; a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM) Choosing a mortgage that best fits your specific needs can potentially either save or cost you a great deal of money over the term of the mortgage.

Around 70% of homebuyers today choose a fixed rate mortgage, rather than an adjustable rate mortgage. A fixed rate mortgage is exactly what it sounds like. The interest rate on the loan doesn’t change, regardless of whether interest rates in general go up or down. An adjustable rate mortgage may go up or down, depending on the interest rate at the time. Your decision may be influenced by your overall financial situation, the present state of the economy and the cost of your house.

The overall amount that you end up paying for your home can be greatly influenced by even a small change in the interest rate. A lowering of the interest rate by just one point can mean that a homeowner with a 30 year mortgage can enjoy average savings of around $50,000 over the term of their mortgage. An increase in the interest rate of just one or two percent can mean monthly payments that are between $50 and $250 higher, depending on how much you paid for your home. Whether you are taking out a 15 or 30 year mortgage may also influence your decision to take out an adjustable rate or fixed rate mortgage.

The biggest benefit of a fixed rate mortgage is the peace of mind that comes with knowing that regardless of how bad the economy is the rate on your mortgage loan won’t increase; neither will your monthly payment amounts. In fact, the terms and conditions of a fixed rate mortgage are protected by law. A fixed rate mortgage is an ideal option for those buyers who just don’t want to take a risk, or consider themselves the cautious type when it comes to finances.

Another benefit of a fixed rate mortgage is that it makes it easier for the homeowner to budget the expense. Your mortgage payment is probably your single biggest expense and you always know exactly how much the monthly payment will be. Some buyers believe that this makes it a little bit easier to plan and budget for some of life’s other big expenses. Certain things like college funds and retirement for example. With a fixed rate mortgage, the amount of the monthly payment will only increase if there is an increase in the amount of insurance rates or property taxes.

A fixed rate mortgage is not affected by inflation or the cost of living. Supposing you have a monthly mortgage payment of $700; this amount will still be the same after five, ten, and twenty years have gone by. Even though everything else has increased in cost, your mortgage payment will stay the same. One way to offset this is to consider the possibilities in the future. Chances are you could have a more disposable income as time passes. You could be earning a higher salary, but still paying the same every month for your home.

If you prefer the safer option of the fixed rate mortgage, one solution would be to take out a fixed rate mortgage and then refinance your loan if and when interest rates are lowered. This approach keeps your options open. If interest rates go down sufficiently to justify the cost of refinancing, you can do just that; if rates stay where they are or go up you will be glad you have the fixed rate mortgage.  Some financial experts advise that it is only worth refinancing if the interest rate will be at least 2% lower than your current rate, although that decision entirely is up to you.

Another strategy that can be applied towards either a fixed rate or adjustable mortgage is to pay an extra amount each month towards the principal. By doing this regularly, you can potentially save a large amount in interest charges. It can also make the term of the mortgage shorter and you may be able to own your home sooner. Make sure that you specify that any extra amount that you pay is going towards the principal and not the interest. By doing this, if you have a fixed rate mortgage and the rate is not as low as it could be, you are getting ahead a little bit.

Ultimately the decision of whether to take a fixed rate mortgage or an adjustable rate mortgage is yours. Although several factors may influence your decision, one of the biggest questions to ask yourself is how much of a risk you want to take.