Thursday, November 27, 2008

Pre-qualify for a Mortgage Loan

Pre-qualification is just a term used for an assurance given by the lender in form of a certificate or letter specifying the maximum loan amount. This helps you to determine your budget, before buying a house or any such property. Based on your financial status, like your earnings, credit history, savings and debt, they decide the net mortgage loan you can qualify for. In short, with the help of financial information you provided, the lender calculates your affordable loan. This however is useful for all the three parties involved: the lender, you (the borrower) and the seller.

The pre-qualify process is usually free of fee payment. Also you can go online, like mortgage calculator, to find out how much you qualify by just giving the details of your income, credit score and debt ratio. Once you are done with this pre-qualification, you can go ahead to decide how much loan you would like to take. Few of the advantages of using pre-qualify method are:
  • Thousands of dollars are saved during negotiation with the seller and paying a lower rate.
  • You get to know your actual price range.
  • You will be considered as a serious buyer for the real estate agents.
  • The overall procedure of mortgage application will be faster, since you have already provided the lender with your financial information.

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Tuesday, November 25, 2008

Why do you need Mortgage Brokers?

At first let us consider the term Mortgage Broker. Just like an insurance broker, a Mortgage broker works with you to secure the deal that best suits your needs. He is basically a middleman between the lender and the borrower. The Mortgage brokers are independent and trained professionals dealing with various financial institutions, instead of only one, which helps them to assist you with different kinds of mortgages available as per your needs and requirements. The brokers are given a commission based on the borrowed amount.

In today's fast paced life, the most important factor is Time. Everybody is so much involved with their day to day activities, there is hardly any time to spend on researching the mortgages available, about interest rates, fees and closing cost, and their comparisons. Moreover, if you approach any lender, a number of forms need to be filled again and again for the several approaches,thus being a time consuming business. Whereas, with a Mortgage broker, the form filling work is done only once that they use for different quotes. At the same time, you are able to access around 75-100 lenders, banks, investors and other financial bodies.

The mortgage market is not that simple to understand for an individual who does not have any finance background. Undoubtedly a broker is far better placed and also have the details on the latest offers available. Sometimes, there might be situations when you have a bad credit rating, like you got to take in more loan than the property is worth. Normally no one but a mortgage broker can take the best possible route. Choosing the wrong one can cost you huge amount of money. Mortgage Brokers excel because of their knowledge of financial institutions, and thus can help you save on your mortgage dollar.

So don't forget to call your Mortgage Broker first!

Friday, November 21, 2008

Which one to choose : Fixed Rate Mortgage Or Adjustable Rate Mortgage?

It is a difficult task to choose between a fixed rate mortgage or an adjustable rate mortgage (ARM), as it greatly depends on the present market scenario and on your individual needs. Let me briefly describe these two types of mortgage rates and their pros and cons.

Fixed Rate Mortgages

According to these loans you have to pay the same amount of interest throughout the term of the loan.That is here you are able to fix the interest rate that suits your needs. Although the interest and the principal varies for every month,the net payment remains the same,which is very convenient for most of the homeowners.

The Fixed Rate is quite simple to understand and helps you to know where you'll exactly stand in near future.The main advantage being you are not affected by the sudden hike in the interest rate. This is recommended for long term loan when the interest rates are comparatively less.

However, once you have the fixed rate mortgage, it is a cumbersome task to take advantage of the dropping rates as it needs a lot of paperwork and an extra cost in refinancing.

Adjustable Rate Mortgages (ARMs)

With an adjustable rate mortgage, the rate of interest is on a constant move, of ups and downs.Most of us are attracted by this because initially you need to give a "teaser" (discounted) interest rate , which is much less than the fixed rate. Then after a certain period of time,the rates will fluctuate according to the general market value.

This is a good option for those people who are aware that their income will increase in future and/or you are about to sell your house within 5 years or so. Also you don't have to refinance when the interest rate falls.

Hope now you have some idea on which of these mortgage rates will be beneficial for you. Regardless of the choice you make, do remember to check out all the probabilities required to avoid costly mistakes.

Wednesday, November 19, 2008

Insure your Old Age with Reverse Mortgage

It is truly said that old age is accompanied by its own share of problems.At this stage of life the expenses are generally much more than his/her earnings. Mostly its the limited pension that is the source of income. Together with the health care problems and financial insecurity comes the dependency factor which prevents them to lead their lives respectfully. To avoid such scenario and get financial security, insure your old age with Reverse mortgage.

What is Reverse Mortgage?

In short, it's a government sponsored and insured loan for the senior homeowners, who have attained the age of 62 years or more, to convert the home equity into cash. They can take it as an ongoing income or a lump sum amount. One of the conditions being that your home must be your own primary residence during the period of the loan.That is here you are using your home as your tax-free income provider, without making any repayment until you are moving out or selling the property. So its basically a life time financial support for the senior citizens.

So if you are one of them who would like to spend your golden old age independently without any financial crisis and with self respect, go for Reverse Mortgage. However please do consult a professional for the better results.

An Acronym for Mortgage Payment : PITI

In many situations when you are dealing with Mortgage Loan or some related articles, you will come across the term PITI. Though the pronunciation is similar to the word 'pity', obviously the actual meaning is far too different. PITI is an acronym used by the lender for the periodic, typically monthly, mortgage payment.The abbreviation stands for the four components: Principal, Interest, Taxes and Insurance. Let me give you the basic idea of PITI.


Mortgage principal is referred to as the original balance of your loan. As the monthly payments are made you are gradually reducing the outstanding amount together with the interest due for that month. You will also notice that in the early years the principal component is very less as compared to the later stage of the mortgage period.


This is a percentage of the principal amount that is charged by the lender from you to give the loan to purchase the property. There are two types of interest rates: Fixed and Adjustable. In the first case, the interest rate does not alter during the term, whereas for the latter, the rate changes at regular interval of time.


The third component represents the taxes associated with mortgage loan. It can be a considerable portion of your overall mortgage loan, and the rate changes for different places. Hence it is advisable to check out the local tax rate before investing.


Homeowner's insurance provides protection to your property from unforeseen calamities or damages.This is generally collected by the lender to pay your insurance company.

You can watch this video to further clear your concept of PTTI.

Friday, November 14, 2008

What is Mortgage Insurance?

"The only thing certain about life is that nothing about it is."
The Mortgage Insurance refers to a special type of insurance policy which helps you to buy any property with a low down payment. This kind of policy guarantees to repay your mortgage loan in the event of death, or perhaps disability of the mortgagor (i.e,one who borrowed the mortgage). This ensures that your family need not worry atleast for ownership of the property in your absence.

MI provides a level of security to both the mortgagor and the mortgagee. It protects the financier from excess risk when around 80% or more of the total amount is taken as a loan.

*Private Mortgage Insurance - It is a default mortgage insurance provided by the private companies.In other words,this is to protect the lenders from loss in case of default (who has not met legal agreement).Hence another term for PMI is Lenders Mortgage Insurance or LMI.In this case, comparatively lower down payments are allowed.

*Mortgage Insurance Premium - Similar to PMI, this also provides protection for the lender in the event of non-payment,however here they are generally Government loan products.

Regardless of the type of mortgage insurance you're on, like business mortgage, rental mortgage,medicine mortgage, home mortgage or whatever, the most important aspect is to have a Mortgage Insurance.

Wednesday, November 12, 2008

Figure out Monthly Payments using Mortgage Calculator

Everybody is familiar with the word Calculator. It's an electronic device used for performing a wide range of simple and complex computations. As the name suggests, we can infer that Mortgage Calculators must be used for calculations of mortgage loans.

Mortgage Calculator is an important software tool which is a very convenient way for the loan applicant to calculate various mortgage offers. It can be used based on the information given by the borrower.The factors, for example are, the loan amount, the down payment, interest rate options, estimated annual tax and annual insurance. The basic format looks somewhat like this:

If you are interested in determining your monthly payments, use the Calculator.

The figures are only a guide, please do refer a professional on Mortgage Loan for the exact result.

Tuesday, November 11, 2008

Home Mortgage in Layman Words:

A home is more than just a house — it’s the foundation of a long-term financial and emotional security for you and your family.These days you hear people talking about their home mortgages a lot . Home mortgages are also everywhere and yet many people still have a idea about what a Mortgage really is.

A mortgage is not really a loan but a method of using property as security for the payment of debt. It is a document that protects the interest of the lender with your property itself. To be more specific regarding the terminology, you are the borrower who is referred as the mortgagor, and the lender,who takes and hold your mortgage, is called the mortgagee.

Home mortgage can be used for purchasing the home, constructing a new home, refinancing the home, or restructuring the home. You need to compare various loan lender information to fill the form, which contains details like loan amount needed, loan purpose, estimated value, monthly income, borrower contact details etc. The way it works is : the buyer and the seller comes to an agreement regarding the final amount of money required for down payment,to purchase the home.The remaining is then figured in with the current taxes,interest rates,insurance costs and other related charges in relevance to the type of loan you are getting.This net amount is what we call Mortgage.

The most important thing for you and your family is obtaining the best program paired with the best interest rate. With all of today’s conveniences, obtaining a home purchase mortgage is really pretty simple.