Category Archives: Home Loan
Obama’s home loan modification plan is officially known as the Making Home Affordable (MHA) plan. This plan is expected to reach up to 9 million families, so that they can refinance or modify their loans in the meantime they can look for jobs and hold their houses during this economic recession. Even if you think you won’t qualify, Learning about the requirements for modifying your home loan might surprise you.
The first criteria for modification is that your loan has to be a Fannie Mae or Freddie Mac insured loan. One also must be the primary resident of the house in order to refinance or modify your home loan under the plan. At the present time loans that are qualified under the MHA plans has to be either Fannie Mae or Freddie Mac insured loan in order to get special refinancing and modifying loans under the MHA plan.
The MHA plan gives homeowners tow separate options. The first avenue is refinancing; the second is modifying their loan. Borrowers who have not yet fallen behind on mortgage payments and owe below 105% of the principal of their loan can take advantages of a special refinance. It’s important to know that borrowers who are still current on payments can refinance under the MHA act. Borrowers whose mortgage payment are on time and owe below 105% of the principal of their loan can take advantages of a special refinance.
People who have been paying their current as well as people who have fallen short on their mortgage payments can get loan modification. As long as you own and occupy the house and have monthly payments that exceed 31% of your gross monthly income.
If you’re having difficulty making ends meet and paying your monthly mortgage premiums, then getting a loan modification with the government-sponsored MHA plan could be for you.
The loan modification plan target at-risk borrowers and adjusts the terms of their mortgages so they will pay below 31% of their gross monthly income. This is called their debt-to-income (DTI) ratio. The first step is for lenders to reduce the interest rate to a floor of 2% to try to meet a 38% DTI. If the interest rates hit the floor and still do not meet the 38% DTI, then further modifications can be made. The lender can extend the loan for up to 40 years, and then they can begin to forbear principal on the loan. After meeting the 38% DTI, lenders and the Treasury will work together in a dollar-per-dollar matching program to bring the rate down to below 31% DTI for borrowers.
After coming to an acceptable modification, borrowers will have three months to prove that the new loan rates are something they can handle. If they keep current for a trial period of three months, the new mortgage terms stay fixed for the next five years. This is the procedure that the MHA plan uses to prevent foreclosures and let millions of U.S. families remain in their houses.
Refinancing involves taking out a new home loan to pay off an existing one. Refinancing is done primarily for two reasons: to save money through a lower interest rate, or to exchange a property’s equity for cash.
Say you have an adjustable rate mortgage and mortgage rates are beginning to rise. Refinancing (ideally to a fixed rate) would be the most sensible course of action as this would allow the borrower to avoid the high monthly payments associated with higher interest rates, as well as allow the borrower to move to a lower-risk loan. This can be a good idea regardless of what kind of mortgage you currently have
However, there’s more to think about than just interest rates when talking about refinancing. You could choose to refinance to decrease the term of your mortgage so that you can pay it off sooner. This is especially a good idea if your financial situation changes to allow you to afford higher monthly payments and can ultimately amount to thousands of dollars in interest savings.
Other homeowners choose to refinance not because they are overly concerned with saving money, but are instead looking for a “cash-out” type of mortgage where they can exchange some of the equity they hold in their home for cash. This is usually done by borrowers looking to a solution to pay off large debts, fund home improvement projects, or pay for other major expenses.
While refinancing very often seems like a great idea, it is not right for everyone. If you are considering refinancing, be sure that you explore your options thoroughly and consult with a financial adviser before making your decision.
People with bad credit often get disheartened when they are not approved for any kind of home loans from any reputed financial institutions or lenders. There are ways by which you should be able to get home loans from any reputable financial institution just like any other person with a good credit history.
Find out a good deal: Finding a good deal on real estate can be quite a challenging task, and if you get one, it will be very rewarding, especially for someone with a bad credit history. When you purchase a home at a cheap price and get equity in the property, the loan officer will consider your bad credit home loan as a partially secured loan. Talk to a mortgage broker to know how these kinds of transactions will help you in getting approved for a home loan.
Investigate creative financing: You need to be a little creative when you are shopping for a bad credit home loan. There are a variety of ways by which you can get approved for a bad credit home loan. Adjustable Rate Mortgage is one of the common ways by which people get approved for a home loan because their interest rates are quite low. Another way to get approved for a home loan is to involve the seller when you are applying for the loan. The seller can cover most part of the down payment on purchase. Or you can ask the seller to carry back a second mortgage that you repay back to them at a very low interest rate. These creative techniques will help you get an extra $10,000 while applying for the loan with bad credit.
Always believe in a down payment: prefer to make a down payment of at least 3% – 5% of the loan amount. Of course, the more you can put in a down payment, you will be paying less in interests on the remaining balance. A drop of 2% in the interest rate on a $150,000 loan can save you over $72,000 in interest over the course of a 30 year loan. Plus you borrow a less amount in financing. If required, wait for some months so that you can build up more funds to make a down payment to the loan company.
Shop around with different companies: always shop with different lenders while you are applying for a home loan. The interests and fees may vary with different lenders. The mortgage brokers will try to convince you that their skill and experience in the market has helped many people in need of home loans and they are going to help you too. Don’t be carried away by their words if they say that no one else is going to offer you a better deal than them, especially when you are having bad credit. Browse through the internet and you will find so many lenders in your area offering lucrative deals. An online mortgage specialist is often the best person to contact to get home loans for people with bad credit.
Improve your credit scores: While your credit is already bad, you may find out different ways to boost up your credit ratings. Review your latest credit report and go through all the items reported on your copy. You may find out some inaccurate items on your file that should be immediately disputed. Once the incorrect items are removed from your credit report, your credit scores will go up. Then you can contact the other creditors to whom you owe a balance and work out payment arrangements.
Bad credit doesn’t have to stop you from getting a mortgage even if it does make it more expensive. Home loans for people with bad credit are available from a variety of lenders who specialize in bad credit home loans. They can make it easy for you to finance your perfect home.