If you are in dire need of money and don’t have the financial means for a large cash transaction to buy a house, then opting for a home mortgage is worth consideration.

Basically, a mortgage refers to a long-standing credit that a debtor obtains from a financial institution or from a property seller.

In most cases, the house is the usual collateral for the mortgage, thus the term “home mortgage”. In turn, the mortgage lender will be entitled to some legal rights upon the property as long as the mortgage is in full force or until the debtor pays back the loan.

A home mortgage serves as security for loans, thus giving the lender the power to acquire the property through foreclosure in the event that the borrower fails to pay the loan on time.

Generally, a home mortgage is comprised of a large loan. That’s why in most cases a home mortgage can take 15 to 30 years before the borrower can pay back the due amount.

In a home mortgage, the due amount to be paid by the borrower stipulates the principal amount of the mortgage and the interest owed relative to the outstanding balance. The real estate taxes and property insurance are also factored into the total mortgage balance.

Some home owners who find it difficult to make their mortgage payments may opt for refinancing of their mortgage. But for those who wish to pay off a home mortgage quickly, there are things to be considered…

First, make sure you have a stable source of income. Organize your overall financial assets to ensure that paying off your mortgage will not over-extend your cash flow. There are many such considerations that should be carefully planned and organized before resorting to pay-off your home mortgage.

It’s also important to your financial security to have a ready reserve of cash just in case of emergencies. This can be in the form of stocks and bonds, a bank savings account, or any other readily available form of cash.

Paying off your home mortgage can be a rewarding experience, but be sure to consider your overall financial status before making the decision to do so. The wrong decision can put you at great financial risk.

If you think that you are ready for the mortgage “experience” and that you have your finances securely organized, then by all means, go for it. After all, nothing beats a worry-free, mortgage-free financial status.

For years, banks and financial advisors have been recommending that you pay extra cash into your mortgage, to cut down the huge interest amount and reduce the period over which you pay back the loan.

For example, if you borrow $200 000 over 30 years at a rate of 5%, your monthly repayments would be around $1074. Over 30 years, you would actually pay $1074 x 360 (months), which is $386 640.
That’s $186 640 in interest!

If you could find an extra $246 a month, and pay $1320 a month into the mortgage, you’d cut 10 years off the repayment period - the loan would be fully paid in only 20 years. Moreover, your total payments would be $316 664, saving $69 756!

The flaw in this technique is that it ignores the time value of money.

Everyone knows that money is worth less now than it was when they were younger. If you take that $1074 mortgage repayment, for instance, in 30 years time, when the last payment is due, it would only be worth $437 in today’s money.

A dollar now is always better than a dollar in a year’s time, or in 10 year’s time.

How does the time value of money affect our example?

You cannot simply subtract the mortgage interest amount for a 20 year mortgage from the interest on a 30 year mortgage. What you need to do is calculate the Present Value of each mortgage.

The Present Value of a 30 year mortgage with repayments of $1074 at a 5% interest rate is $200 066.

The Present Value of a 20 year mortgage with repayments of $1320 at a 5% interest rate is $200 066.

The two repayment schemes are exactly equal.

The $69 756 ’saving’ in the interest rate is really just the effect of adding the extra $246 a month into the repayments - in fact, that $246 a month adds up to $59 040 over 20 years.

What if you took that $246 a month and invested it in, for example, mutual funds?

If you could get a return of 10% p.a., after 20 years you would have $186 804. With inflation at 3%, that would be worth $102 597 in today’s money.

Why would the banks recommend that you pay off your mortgage quickly? Surely the longer the income stream lasts, the better?

The banks love being able to prove that their recommendations will ’save you money’. But in reality, the banks do understand the time value of money. They know the true value of that extra $246 a month that you’re giving them now, not in the future. And the shorter the time you take to repay the mortgage, the lower their risk, and the sooner their money comes back to them to be loaned out again.

There are some arguments for paying your mortgage back quickly - for one thing, the quicker you pay, the quicker your equity grows. But you should understand that every dollar you give the bank now is a dollar that you can’t inves

Buying your first home can be both thrilling and scary and getting your first mortgage is usually part of the equation. Obtaining a mortgage can be confusing and stressful for many people, especially if this is a new experience. Without a doubt your home, even if it’s a starter home, is and will be, one of the biggest investments of your life. With that in mind it is important to take the mortgage process slowly and not rush or skip important steps.

One of the very first steps necessary in the mortgage process is to decide if you want to go with a direct lender or a brokerage service. Dealing directly with lenders can, in most cases be a little bit cheaper because you don’t have to pay a brokerage commission. However, a brokerage service can find lenders that are most suitable to the needs of the borrower and also take care of the many administrative tasks involved in the process. That is what you are paying them to do.

For first time homebuyers there are many programs that can assist including, but not limited to, FHA, VA and other specialized programs that vary based on where you live. Any quality mortgage company will be able to supply a listing of programs suitable to the lenders needs. In many cases these programs can be quite helpful in assisting in that first home purchase.

It is also important that you pre-qualify for a mortgage. That way you will know in advance how much home you can afford which in many cases will save you time, aggravation and in some instances embarrassment. You can go on the Internet and use any one of the free mortgage calculators available to help you figure out what your monthly payments might look like. Filling out that application and getting pre-approved is a must for any one seeking a mortgage.

You should also ask a lot of questions about anything that you may not fully understand. Find out the difference between a fixed and adjustable rate mortgage. You must also find out about any fees that may be charged to you. Some fees, quite frankly, can be avoided by the educated shopper so shop around. Buying a home is similar to buying anything else, only on a much larger scale. You always want to get the best deal possible and remember to never, ever sign anything that you don’t fully understand.

When the going gets tough and the tough just keeps on going, mortgage lenders may seem like godsend angels at your doorstep.

Due to some unavoidable circumstances, more and more people are getting deeper into debt. As a result, many people are seeking alternatives for dealing with their financial problems, and ways they can minimize and consolidate their expenses. One way to do this is by securing a mortgage.

Basically, a mortgage is a legal record or document designed to protect the mortgage lender against delay of payment or the debtor’s refusal to pay the debt.

A mortgage lender can be any financial institution or even an individual who has the capacity to lend money to the borrower. There are, actually, various types of mortgage lenders. The key in selecting a mortgage is to choose the right one that fits your needs. Look for a mortgage that has the capacity to lend you the right amount of money at a reasonable rate of interest.

The most common and well-known mortgage lender is the bank. You can opt to choose the bank as your mortgage lender for reliability, convenience, and nippy approval on loans. Banks generally work faster in processing your loans as compared to other mortgage lenders. Banks are also a one-stop center for all your lending needs.

You can also secure a mortgage through a mortgage broker. A mortgage broker is a type of mortgage lender that usually acts as a middleman and finds the appropriate loan that best fits your needs.

Finally, you may want to consider credit unions and thrifts as other types of lending institutions where mortgages can be secured.

Whatever type of mortgage lender you choose; your credit history will have a definite influence on the placement of a mortgage and availability of money.

Whichever form of mortgage you choose, be sure to do your homework before making a final decision. Get recommendations from friends or relatives who know reliable mortgage lenders. As a final step in the process, be sure to check the mortgage lender’s credentials so you can be certain that your financial transactions will be secure and dependable.

You really have to pay more attention on these things. After all, it’s your money that’s at stake if things will not go on smoothly. So, it would be better to be sure with your mortgage lender even if it means you’re the one who is asking for favor.

Have you heard that commercial about interest-only mortgages…the one where you’re told about what a wonderful benefit it is to have a low, low mortgage payment and all the wonderful tax write-offs you will receive?

Before you decide to buy now and pay later, that is pay “big time” later, take a moment to enlighten yourself a bit more about these so-called “interest only mortgages.” Think about it for a moment. If you just pay the interest on your home, will you ever start paying on principal and will you ever earn any equity into your property?

By definition, a mortgage is a temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt. Simplified, that means you borrow money from a financial institution and they essentially buy your house and you pay it back. How can this happen if you’re just paying interest? More accurately, interest-only mortgages are a temporary reprieve for paying off a traditional mortgage. You may actually be prolonging the inevitable and eventually making it even more costly to pay off your mortgage.

Far too many people are in debt way over their heads because of interest-only mortgages. They took advantage of attractive offers to buy now and pay later. With an interest only payment you’re keeping the principal at minimum value while continuing to pay interest at 100%. With a more conventional mortgage you’d be slowly dwindling down the total interest amount.

Most interest-only payment schedules are offered on Adjustable Rate Mortgages (ARMs), but they can also be found on a fixed rate mortgage. Interest-only payment periods almost never run for the entire term of the loan which is typically 15 or 30 years. Depending on the terms of your contract, you could be expected to start paying on the principal in five, seven or ten years. Once the interest-only period ends, your monthly payment will go up because then you’ll be paying on both principal and interest.

Conversely, interest-only mortgages can be a good thing for some people. For those people wanting to purchase a bigger/better home for a lower down payment AND who anticipate moving within seven years, the interest-only payment method may be the way to go. However, keep in-mind that in a “down” realestate market you generally won’t be building equity and making money by doing it this way. The majority of the money made from investing in real estate comes from an increase in value to the home. The average person moves every seven years anyway. Gone are the days when people stay in a home thirty years. Hence, if you anticipate moving before you’ll have to start paying on the principal, then an interest-only payment may be ideal for you.

There’s a great deal of fine print to any mortgage. Evaluate your own goals; be vigilant when reviewing the terms on the loan you’re considering before acting.

If you are considering buying a home or have spent many years saving in preparation of buying a home, the questions and process involved in buying a home can be extremely stressful. As exciting as it is to begin looking for your new home, there are many unexpected costs and details to be considered before contacting a real estate agent. Home buyers should be aware of every aspect involved in purchasing a home before they take that big step towards home ownership.

You will want to get the most value possible for your money. You should be aware of every detail in regard to the home you wish to purchase. Home inspections can reveal many hidden flaws and problems that could cost you thousands of dollars in repairs. Be aware of your right to a home inspection and contact a professional, licensed home inspector.

Compare the mortgage terms and interest rates offered by various mortgage lenders. Even a slight difference in your interest rate can add up to thousands of dollars over the length of your mortgage. A pre-approval from the lender of your choice will not only give you added confidence when shopping for a new home, but could give you added leverage when bargaining with the seller. A pre-approval will let you know the exact amount you are approved for and will save you time after your offer has been accepted by the seller.

Using a buyer agent is an excellent way to help protect your interests when shopping for a home. A buyer agent will be responsible for helping you get the best deal possible on your new home. While shopping for a home, be aware that certain features can adversely affect the resale value of the home. Detached garages and swimming pools can actually lessen the value of the property. Protect your investment by educating yourself on the home buying process and the way property is appraised.

You can make the home buying process fast and painless if you take some precautions along the way. Choose your lender carefully. Interest rates and closing costs vary from lender to lender and the difference could mean thousands of dollars over time. There are numerous flexible loan programs available. Finding the loan that will best suit your long term needs will be of great value to you when it is time to sell the home. Just a half point difference in your interest rate will translate into a lot of money over the years.

Keep in mind that there are additional costs involved in purchasing a home. Homeowners association fees, furniture, annual heating and cooling costs, and homeowners insurance need to be considered when planning to purchase a new home. Buying a new home does not have to be stressful and frustrating. Make sure you know the facts and your home buying experience will be quick and painless.

I just HATE filling out applications, why can’t they just take all that info off our credit report, you know it’s all there? Anyway, getting a mortgage after a bankruptcy isn’t the funnest thing. Our bankruptcy is less than two years old so FHA doesn’t want anything to do with us, even though we’re going to put $70,000 down on the house. You would think that would be enough for them to see that we’re not going to just walk away. It’s funny, they gave us a loan way back when we first financed this house and we were so less credit stable back then, it’s just hard to see it the way they do. I think it’s just government employees who don’t have the guts to make a decision outside of the guidelines.

Anyway, enough about FHA loans, now let’s talk about conventional loans and not so conventional loans. Well, so far I’ve talked with two loan officers. The first one was referred to me by our realtor, so early on I called him and he pulled our credit reports. He said it wasn’t bad, even with the bankruptcy our scores were 624 and 629 which are fairly decent, even FHA only requires a 580. He said our debt to income ratio may be a problem but if we could pay down the car with the big payment to less than 10 payments, they wouldn’t count that against us in the calculations. That’s good, I called and we have 14 payments left but by the time we close, we’ll have less than 10 and if we need to, we can pay it down with the proceeds from the sale of our house.

Anyway, things were rolling along and this officer wanted an application, two months of paycheck stubs, two months of bank statements and a copy of our bankruptcy papers. Just about that time, we started looking at the new construction houses and guess what, they all want you to use THEIR lender and they pay you handsomely to do so. A couple of examples of what the builders do is, take Pulte, if we use their lender, in the neighborhood we were looking, they would discount the price of their inventory houses $13,500!! THAT’S A LOT OF DINERO!! They also pay 2% of your closing costs and pay for your title policy. The builder we’re using isn’t quite as generous but they will pay $500 toward your closing costs and 12 months of your pre-paid insurance. Well, it’s enough to make me use their preferred lender over mine. So, I called their guy.

I really like him, he really seemed to know his stuff. He took down all the pertinent info and right away knew we wouldn’t be financed on what they call “A” paper, we wouldn’t be “A-” either. But he really felt we were strong enough to find a lender on “B” paper, it’s just that the interest rate would be higher. Well, we knew that going in, heck, we just filed bankruptcy, we really couldn’t expect any better.

So, he made some phone calls to people he called “investors” and they said no problem. Basically, most “A”, “A-”, and FHA lenders need your debt to income ratio to be 41% or less. That means your house payment, your car payments and your minimum credit card payments can’t equal more than 41% of your monthly gross salary. Well, I think we would fit in that category IF we pay down our big car payment, which I think we’re going to have to do anyway. But with “B” lenders, they will take it out 50%. And since we’re going to put over 50% down payment, she told him that she would take us with up to 55% debt and a credit score as low as 510. Wow! I guess we’re in!

The only downside is the interest rate. He said an ARM 2 yr or ARM 3 yr would be best. The 2 yr will be at 7.45% and the 3 yr will be at 7.70%. We could get a fixed 30 year but the rate would be 8.45% and there’s a pre-payment penalty. I don’t think we want to do that. There’s a pre-payment penalty on the 2 and 3 yr ARMs as well but only during the first 2 and 3 years (respectively). So after that we would be able to refinance to a better loan. He said once we get a few years outside of the bankruptcy, as long as we keep our credit stable, we should be able to get a fairly decent loan.

Now, we just need to decide if we want a 2 yr ARM or a 3 yr ARM. Oh, I also asked exactly what an ARM loan is. He explained that the rate is locked in for the first 2 or 3 years, whichever we choose. After that it’s based on a margin above an index rate which will all be defined in the loan. Normally that rate is much higher than we’re going to want to pay, so in the 11th month before the freeze period is up, we will need to apply for refinancing.

So, do we want a 2 year ARM or a 3 year ARM? Well, we’re thinking to go 3 years. The rate is higher but it’ll only be about $12 more per month. Three years will give us more time out from the bankruptcy so our credit will be better and we’ll be able to get a better long-term loan. That’s what the loan officer told me and it makes perfect sense. Plus, doesn’t two years just go by in the blink of an eye? For heaven’s sake, it’ll seem like no time has past and we’ll be refinancing. Three years will just give us some time to settle in, it just seems to feel better.

So the loan officer emailed the application to me and I tried to fill it out today. I got most of it done but I need Brent to help me tonight. Then we need to see our sales person because it wants the address and legal address and all that stuff. Anyway, at least we got the ball a rollin’.