The government offers many schemes to help those in need to own their own home. While these schemes may not be in the form of direct loans, they are certainly helpful if the borrower qualifies. They can be accessed through the official federal government website. The US Federal Housing Administration (FHA) also finances new homebuyers, first or second homebuyers and those with low incomes.
FHA offer loans for housing that can be advantageous to the borrower who has a loan from another lender. If the terms of the loan were difficult to meet, re-financing would be a viable alternative. Loans that were acceptable a decade ago are now no longer attractive due to the change in interest rates and other things. Refinancing with an FHA loan could save you a great deal of money, especially if you’ve years to go on your present loan.
FHA loans traditionally have a lower interest rate than those offered by banks and other lending institutions. Because it is a government program, you can have peace of mind that there are no scams operating within the ranks. Whether you would save anything by refinancing depends on the terms of your present loan. FHA may not suit everyone, but it’s certainly worth looking into, especially if your needs have changed. For instance, you may now need to free up some cash for other areas such as education.
While we speak of FHA loans, the term is something of a misnomer in that the FHA does not actually make the loans, but it insures the loans that are made by private lenders. To get this assistance, you need first to contact a number of lenders and ask if they originate FHA loans.
Having the insurance paid by the FHA gives the lender confidence to make the loan that he might otherwise not make. It lowers the costs of low and middle-income earners, allowing them to access a loan for which they might not otherwise qualify.
FHA mortgage insurance does not factor in the borrower’s credit score like more conventional loans do. With a conventional loan, the amount of insurance required soars as the credit score plummets; with FHA it stays the same. This can save the borrower thousands of dollars per year on his loan.
Other initiatives funded by the federal government include grants via such schemes as the American Dream Down Payment Initiative.
This is the third post of our series on getting the best home mortgage.
Tuesday, August 12, 2008
Monday, August 11, 2008
Are Bi-Weekly Mortgages a Good Idea?
This is the second post of our series on getting the best home mortgage
Bi-weekly mortgage advertisements claim to save you lots of money over the life of your loan and help you to pay if off years faster. They do this by the simple routine of paying half of your monthly payment every fortnight, rather than one payment per month. This actually works out to thirteen months instead of twelve and that’s where the savings come in. Of course, you also have to pay a ‘small’ set-up fee and various other sundry fees and charges to the people who will do this for you.
That’s all right if you don’t mind paying out money unnecessarily. Just remember that mortgage lenders don’t actually accept half-payments, so your money is sitting in a holding fund for two weeks of the month - along with a lot of other people’s money - and the company that is doing you such a big favor is making interest off it, as well as the fees that they charge you for that privilege.
So why not do the same thing yourself and keep all those extra fees and charges? Here is an easy way to do it. You can take that extra monthly payment and divide it by twelve, than add one 12th onto each monthly payment. That would pay off that extra month by the end of the year. You do have to earmark that extra sum as a payment off of the capital, not the interest.
Doing it yourself in this way actually works out three months ahead of the way the bi-weekly crew do, because they wait until the end of the year when your extra payments have accrued to the full extra monthly payment. You, on the other hand, have been doing it per month, which brings the capital and thus the interest down more quickly.
Now your bi-weekly mortgage company will claim that the average borrower doesn’t have the self-discipline to make those extra payments. This is a load of - candy. If you have the discipline to write out a big check twelve months per year, you can certainly add that extra bit on. Better still, you can set up automatic payments online so that the money is deducted automatically.
Just as an example, if you take a loan of $100,000 at an interest rate of 8% and make the principal reduction equal to the monthly payments of $733.76, you would be saving $43,852. And you’d be finished seven years earlier. How good is that?
Bi-weekly mortgage advertisements claim to save you lots of money over the life of your loan and help you to pay if off years faster. They do this by the simple routine of paying half of your monthly payment every fortnight, rather than one payment per month. This actually works out to thirteen months instead of twelve and that’s where the savings come in. Of course, you also have to pay a ‘small’ set-up fee and various other sundry fees and charges to the people who will do this for you.
That’s all right if you don’t mind paying out money unnecessarily. Just remember that mortgage lenders don’t actually accept half-payments, so your money is sitting in a holding fund for two weeks of the month - along with a lot of other people’s money - and the company that is doing you such a big favor is making interest off it, as well as the fees that they charge you for that privilege.
So why not do the same thing yourself and keep all those extra fees and charges? Here is an easy way to do it. You can take that extra monthly payment and divide it by twelve, than add one 12th onto each monthly payment. That would pay off that extra month by the end of the year. You do have to earmark that extra sum as a payment off of the capital, not the interest.
Doing it yourself in this way actually works out three months ahead of the way the bi-weekly crew do, because they wait until the end of the year when your extra payments have accrued to the full extra monthly payment. You, on the other hand, have been doing it per month, which brings the capital and thus the interest down more quickly.
Now your bi-weekly mortgage company will claim that the average borrower doesn’t have the self-discipline to make those extra payments. This is a load of - candy. If you have the discipline to write out a big check twelve months per year, you can certainly add that extra bit on. Better still, you can set up automatic payments online so that the money is deducted automatically.
Just as an example, if you take a loan of $100,000 at an interest rate of 8% and make the principal reduction equal to the monthly payments of $733.76, you would be saving $43,852. And you’d be finished seven years earlier. How good is that?
Sunday, August 10, 2008
What to Do If You Can’t Make Your Mortgage Payment
It’s every persons nightmare; not being able to make those mortgage payments. You may have lost your job, be facing surgery or had some really big, unexpected bills and now you have no money left to pay for your mortgage. So, what to do?
Hiding in the closet will get you nowhere, so avoid the temptation. The first thing to do is get in touch with your loans officer or lending institution and tell them of the problem. They may be able to suggest a solution. Mostly they don’t do anything until two payments have been missed. This will give you a bit of leeway to come up with a way to get that money - but make it legal or you’ll be in more trouble.
Perhaps you or another member of the family could take on a second job. If the problem is only for this one month, then maybe a friend or family member can lend you the one payment. If you are truly desperate, move the kids into one bedroom and rent out the other one. This might be just enough to see you through a tough time.
If your home is big enough, you may be able to close off a door and make a flat out of half the house. This would bring in more rent than a single room. Whatever you do be sure to open all the mail you get from your lender so that you know what’s going to happen. The first one or two will give you information on how to prevent foreclosure, while any after that will probably tell you about the legal action they are taking.
Foreclosure laws are different in every state, so you’ll need to find out what the laws are in your state. Your state government housing office will be able to tell you.
Meanwhile, if all your plans for extra money fail, you need to call the Center for Foreclosure Solutions on 888-495 (HOPE) 4873. Don’t be embarrassed; you’ll have plenty of company in the myriads of other callers. Here you will find many financial counselors, investors and mortgage servicers and other people who are trained to help those in your situation.
Another place to call is a Housing Counseling Agency approved by HUD. The number is 800-569-4287. Or you could go to the HUD website to look up one that may be closer to you.
Many people think that paying off their credit card is the most important thing to do after buying food, but this is not right. Credit card debt cannot take away your home; missed loan payments can. Do whatever you can to keep up those payments.
Hiding in the closet will get you nowhere, so avoid the temptation. The first thing to do is get in touch with your loans officer or lending institution and tell them of the problem. They may be able to suggest a solution. Mostly they don’t do anything until two payments have been missed. This will give you a bit of leeway to come up with a way to get that money - but make it legal or you’ll be in more trouble.
Perhaps you or another member of the family could take on a second job. If the problem is only for this one month, then maybe a friend or family member can lend you the one payment. If you are truly desperate, move the kids into one bedroom and rent out the other one. This might be just enough to see you through a tough time.
If your home is big enough, you may be able to close off a door and make a flat out of half the house. This would bring in more rent than a single room. Whatever you do be sure to open all the mail you get from your lender so that you know what’s going to happen. The first one or two will give you information on how to prevent foreclosure, while any after that will probably tell you about the legal action they are taking.
Foreclosure laws are different in every state, so you’ll need to find out what the laws are in your state. Your state government housing office will be able to tell you.
Meanwhile, if all your plans for extra money fail, you need to call the Center for Foreclosure Solutions on 888-495 (HOPE) 4873. Don’t be embarrassed; you’ll have plenty of company in the myriads of other callers. Here you will find many financial counselors, investors and mortgage servicers and other people who are trained to help those in your situation.
Another place to call is a Housing Counseling Agency approved by HUD. The number is 800-569-4287. Or you could go to the HUD website to look up one that may be closer to you.
Many people think that paying off their credit card is the most important thing to do after buying food, but this is not right. Credit card debt cannot take away your home; missed loan payments can. Do whatever you can to keep up those payments.
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