Spotting a Bad Mortgage Broker

Seems as of lately, everyone wants to buy a home. And the most convenient way to do this in a “rush, rush world” like today, is by applying for a mortgage loan. Let’s face it: the mortgage business is booming right now. There are hundreds, if not thousands, of brokers trying to lure you in. As a result, you have to keep careful, you have to watch out for crooked mortgage companies. These companies are out there, so don’t fool yourself into thinking otherwise. These companies don’t care if you lose your home, your savings, or even if you go bankrupt. Companies like these especially like to prey on the first time home buyer.



So, be forewarned! These companies are looking out for themselves, not you. When you start your hunt for a mortgage, make sure you don’t fall into their traps, no matter how seductive their deals may sound.



Here are a few tips to help you determine whether the company you are dealing with is legitimate:



1. Beware if the lender doesn’t give you a good faith estimate of what the closing cost will be. Under The Real Estates Settlement Act, a mortgage broker must provide you with this information within three days once you have applied for a loan. An honest lender will give this to you without a problem, as there is nothing to hide. Some of the better brokers will even give you a good faith estimate on your pre–qualifying information. Also, watch out for any company that won’t give you information up front, such as interest rate and other fees.



2. Beware if the lender says it is ok for you to lie about any information, especially about your income, to increase your chances of approval. Any sort of lying on any loan form is classified as fraud and is a criminal act. If a broker is encouraging you to do such a thing, use your common sense. If the broker gives you the leeway to do it, then they will probably have no problem committing fraudulent acts upon you. Of course, there are exceptions to the rule. Just make sure to ask about this should the situation arise.



3. Beware of interest rates that are amazingly low or incredibly high. Low interest rates can be very tempting, especially when they beat everyone else by two or three percent. You may think that this will save you money, but in the long run, it will only cost you more, since most loans with significantly lower interest rates tend to increase dramatically throughout the lifetime of the loan. People with a less than perfect credit rating usually fall victim to high interest rates that range anywhere between two and three percent higher than everyone else. There are many places online that offer to check interest rates against your credit and can give you an accurate estimate of how much you should be paying. Make sure you are doing your homework.



4. Proceed with caution if you feel pressured into applying for a mortgage loan that you don’t understand or can’t financially afford. If you do feel unsure of anything with the loan, ask your broker to explain it to you in detail, or go to someone else who you know can trust. If you are being pressured to go with a certain company for a loan, proceed with caution. Never take a loan because you feel like you are being forced into it.



When searching for a mortgage, make sure the contract does not differ from the original contract. Companies that ask for more signers, credit insurance, or prepayment penalty fees are probably looking for ways to make money off of you, and quite honestly, don’t have your best interest in mind. In this case, you should take your business elsewhere.



These many things you should look for when mortgage loan hunting so you are not caught in a trap by a corrupt company. If you are ever in doubt, don’t use the company, as there are many more to choose from that will be happy to take your business. Not to mention, these other companies will be able to offer you assistance with anything you are unsure of.

Adjustable Rate Mortgages vs. Fixed Rate Mortgages

Buying a home can be an exciting and stressful time for anyone. While you may be excited at the prospect of owning your own home, especially if it is your first home purchase, the idea of choosing between all of the many different types of mortgages may leave you feeling confused and apprehensive.



Two of the most common choices you’ll find in the mortgage market are adjustable rate mortgages and fixed rate mortgages. Fixed rate mortgages are the most traditional type of home mortgage, offering a fixed interest rate that does not change throughout the life of your loan. There are a number of important advantages associated with this type of mortgage. First, if you are budget conscious, this type of mortgage will give you the peace of mind in knowing that your monthly mortgage amount will not change. You can budget the remainder of your financial obligations without worrying about a changing mortgage payment to throw things off.



An adjustable rate mortgage works differently. With this type of mortgage you may be able to obtain a lower interest rate than would normally be available with a fixed rate mortgage; however, the interest rate is not fixed. This means that your monthly mortgage rate may change as interest rates change. With such a mortgage you may not be able to regularly plan your budget due to such fluctuations. While there is usually a cap that will keep the interest rate from fluctuating too much, even a little fluctuation can be too much for some homeowners. Of course, there is also the possibility that interest rates will drop and if that is the case, because your mortgage is adjustable, your monthly payments will drop right along with the interest rate.



When deciding whether a fixed rate or adjustable rate mortgage is your best choice, you need to give thought to several factors. Ask yourself whether it is more important to be able to plan your monthly budget without wondering whether your mortgage will fluctuate or whether you would prefer to receive a lower interest rate in the beginning of your mortgage.



Remember that if you decide you would like to obtain the advantages of both you do have other options available to you. For example, if you feel the interest rate offered to you on a fixed rate mortgage is too high but you want the security of not having to worry about a fluctuating interest rate you can always buy down your interest rate by purchasing points. This will mean more up front costs for your mortgage; however, it may be worth it to decrease the interest rate, especially if interest rates are currently high.



If you do elect to go with an adjustable rate mortgage make sure you understand exactly how high the rates may go as well as ensure you have enough ‘wiggle’ room in your monthly budget to cushion increases if they occur. This may help to keep you out of a tight spot and possibly losing your home due to rising interest rates.

40 Year Mortgage: New Hope For Prospective Home Owners

Think that rising interest rates have priced you out of the home buying market? Think again. There are some new mortgage options that make it easier than ever to buy a home, namely, a 40-year mortgage.



Traditionally, when purchasing a home, most people take out a 30-year mortgage. But recently, the federal government has introduced new loan options that make it possible to extend the loan over an additional 10 years, making the total pay off period 40 years.



If that sounds like a huge amount of time, take a few moments to consider the following facts:



A 40-year loan lets you get into a house now, not wait until your earning potential increases.



Just because you take out a 40-year loan does not mean you have to stay with a 40-year loan. You can easily refinance in a few years.



You may opt to sell the home in a few years. Getting into a home now allows you to begin building wealth in home equity. When you sell your home, you can take the profits and invest in your next home, with a standard mortgage term loan.



What does a 40-year loan offer? Simply put, with a 40-year loan you can afford to buy more home with less income. Using an average home price of $200,000 and interest rates today, a 40-year mortgage means have almost 5% more home buying power with the standard income/debt ratio than they would with a 30-year loan.



This mortgage option also gives buyers a little more flexibility. Many buyers would have had to consider interest only loans or adjustable rate mortgages. As the national interest rates increase, adjustable loans and interest only loans can quickly catch unsuspecting buyers in a position of being forced out of the home. Their monthly payment increases as interest rates increase, increasing over their allotted budget.



If you are confident in your wage earning potential and the possibility that it will increase over time, you may want to consider some of the programs that are combined with the 40-year mortgage. This mortgage option is available as a hybrid loan. Meaning you can combine the 40-year loan with another loan program, like interest-only or adjustable-rate loan.



Owning a home is a dream of many people. It not only makes sense because it gives you an opportunity to stop paying rent to a landlord, but it starts you on the path to investing your money in your home. Owning real estate is the number one way that people save money and it is now possible to save money even if your income is slightly lower than traditional home buying rates.



Talk with a mortgage consultant to day and discuss your options. You may be surprised at just how affordable it is to buy a home.