Applying for a mortgage loan is quite an important step for many people. However, many are quite adamant about actually applying for the mortgage loan simply because people are not sure what they need to qualify for one. The qualifications of a mortgage loan are actually not that complicated.
Here are some of the general guidelines of how you can qualify for a mortgage loan:
1. If you have filed for bankruptcy, you should wait for at least 2 years since your final discharge date.
2. If you have had an foreclosures, there should have been at least 3 years since the foreclosure had been finalized.
3. You should have had no late payments with your previous credits for at least one year (12 months). But if you have had a great credit record for several years and you had some little occasions of late payment, your application might still be considered. Usually, lenders watch out for late payments that are 30 days behind or more.
4. Your rental payment history might also be checked. You should have punctual payments for at least, the last 2 years to prove that you pay on time.
5. Usually you might get disqualified for a mortgage loan if the government has guaranteed your student loan to be default. However, there are cases the disqualification may be lifted provided that you have renegotiated your repayment schedule for the loan and you have made punctual payments again for the past year.
6. All of your account that is in a collection status should be repaid prior to the application for the mortgage loan.
7. Judgments ordered by the court should already have been paid in full. Those cases that involve child support should have payments that are current and caught up.
8. If you are self-employed or your income is based on commission, you would usually need to have been receiving a steady income from that source for at least two years in such a way that the lender would be able to account for your average income. There may be some exempted cases, however.
9. Lenders would usually only account for bonus or overtime pay as part of the “qualifying” source of income if you have had a history of bonus or overtime pay from your present employer for at least a year or two. Your employer should verify how much overtime hours you have served or how much bonus income you would be getting for such sources of income to be considered.
10. If you have two jobs, your secondary income may usually be counted as part of the qualifying income when you have had a continued history of earning from both jobs in the past two years, otherwise, only one job may be included in the qualifying income.
11. If you have been receiving income through child support, you should have been receiving income consistently. You would be required to submit a history of the payments made for the child support. Usually, if your child support status has just been awarded recently, it might not be considered as a qualifying source of income.
12. If you are currently being sued, or if you are currently involved in any legal matter such as an ongoing divorce suit, you might have to wait until the lawsuit becomes settled before you could apply for a mortgage loan.
What is the point of these qualifications?
Lenders carefully scrutinize your qualifications in order to ascertain how much the maximum amount of money you could afford to pay them ever month. They do so by fitting your information into certain formulas that give fairly accurate predictions. Should these predictions prove that you can afford to pay the monthly dues that will be stipulated by the loan, you are most likely to be granted the mortgage loan.
The importance of having a clean or at least a decent record cannot be over stressed when it comes to getting a mortgage loan. However, if you have had some small stains in your record, lenders provide considerations such as specified above. Knowing these, you can pretty much estimate if you would be able to qualify for a mortgage loan or not.
Monday, December 29, 2008
Tuesday, December 16, 2008
How To Find Poor Credit Home Mortgage Lenders
What would you do if you have very poor credit yet you so desperately want to buy a house and have a home you could call your own?
Relax, there is a solution to your predicament. Though having poor credit would usually make home purchasing a tad difficult, it is not entirely impossible.
The following are some of the options one could consider in finding poor credit lenders.
Ask, ask, ask
It is okay if you ask the seller to be the one who will carry the housing loan. If in case the seller somehow still has money owed on the house, it is possible to acquire a mortgage wraparound.
Basically, this type of mortgage allows one to make a payment every month on a mortgage that is existing as well as additional payment that will cover the other balance.
Pursue an option for lease
Via pursuing an option for lease, this allows one to set the current purchasing price as well as apply a small portion of a particular rent every month towards the down payment.
After each lease period (usually between twelve to thirty six months), the prices should then have increased and should have equity accrued.
Be aware that if such an option is not utilized, money paid to a particular seller will not be returned.
Increase, increase, increase
It is okay to increase the price you are more than willing to pay to a particular seller.
After which, asking the seller to credit the money to you back in order for that to be utilized as a down payment for cost closing is perfectly fine.
Do not be afraid to borrow
Borrowing money from relatives and friends would help in defraying costs for closing as well as in increasing down payment.
Also, borrowing from retirement or pension plans is another way to increase down payment.
Maybe a mortgage broker could help
Availing the mortgage that is best for you could probably be helped by availing the services of a broker.
This could be done by contacting local and state realtor boards for the list of brokers in your local area. You could also ask around your own circle of real estate friends or agents for additional references.
All in all, buying a home is easy as long as you are willing to spend the necessary time to expend the energy needed to buy the home of your dreams. Because, believe it or not, it is possible.
Relax, there is a solution to your predicament. Though having poor credit would usually make home purchasing a tad difficult, it is not entirely impossible.
The following are some of the options one could consider in finding poor credit lenders.
Ask, ask, ask
It is okay if you ask the seller to be the one who will carry the housing loan. If in case the seller somehow still has money owed on the house, it is possible to acquire a mortgage wraparound.
Basically, this type of mortgage allows one to make a payment every month on a mortgage that is existing as well as additional payment that will cover the other balance.
Pursue an option for lease
Via pursuing an option for lease, this allows one to set the current purchasing price as well as apply a small portion of a particular rent every month towards the down payment.
After each lease period (usually between twelve to thirty six months), the prices should then have increased and should have equity accrued.
Be aware that if such an option is not utilized, money paid to a particular seller will not be returned.
Increase, increase, increase
It is okay to increase the price you are more than willing to pay to a particular seller.
After which, asking the seller to credit the money to you back in order for that to be utilized as a down payment for cost closing is perfectly fine.
Do not be afraid to borrow
Borrowing money from relatives and friends would help in defraying costs for closing as well as in increasing down payment.
Also, borrowing from retirement or pension plans is another way to increase down payment.
Maybe a mortgage broker could help
Availing the mortgage that is best for you could probably be helped by availing the services of a broker.
This could be done by contacting local and state realtor boards for the list of brokers in your local area. You could also ask around your own circle of real estate friends or agents for additional references.
All in all, buying a home is easy as long as you are willing to spend the necessary time to expend the energy needed to buy the home of your dreams. Because, believe it or not, it is possible.
Friday, November 28, 2008
How Home Loan Interest Rates Fared
The fluctuation of home mortgage rates is one of the benchmarks of the overall economy because interest rates are largely tied to the decisions made in New York by the Federal Reserve, among many other economic factors. Interest rates are adjusted according to the financial matters in the US such as exportation and inflation because such factors determine how easy or hard it would be to borrow and lend money.
Mortgage rates are used to help control the economy. If the movement of the economy is deemed to be too fast, higher rates are imposed so that individuals and corporations would be less willing to apply for loans. Conversely if the economy seems to be rather slow or stagnant, rates are lowered so that people would be more enticed to do more business transactions.
Trends in Home Mortgage Rates
It is quite interesting to know that mortgage rates have been lower than 8.5% since the year 1996, with the lowest rates of about 5.5% seen on the middle of 2005. While individuals might see an extremely different mortgage rate at a particular time due to other factors that affect rates (their salaries or credit histories), the trend has generally been observed to be generally consistent throughout financial circles.
The fall of interest rates from the high figures prior to 1996 has allowed a lot of people to buy their homes, purchase lands, or more to larger houses. Perhaps this reflects an effort to speed up the economy from that time up to now. However this year, the rates are rising probably because of an upsurge that the American economy has experienced in the previous year.
Current Home Mortgage Rates
Mortgage rates in the year 2006 are generally higher than that of the previous year with rates of about 6 percent for 30-year fixed rate mortgages (FRM). As of the 21st of September, 30-year FRMs have an average rate of 6.40%, while 15-year FRMs have an average rate of 6.06%. Adjustable Rate Mortgages (ARM) on the other hand are slightly lower with 5/1-year ARMs having an average interest rate of 6.08% and 1-year ARM having a mean rate of 5.54%.
The difference between this year’s and last year’s interest rates are not really significantly high as it would entail only a few hundred dollars increase in yearly payment rates. This probably would not stop a lot of people from getting mortgages, however if the rise continues, more people would become hesitant to get home loans.
Mortgage rates are used to help control the economy. If the movement of the economy is deemed to be too fast, higher rates are imposed so that individuals and corporations would be less willing to apply for loans. Conversely if the economy seems to be rather slow or stagnant, rates are lowered so that people would be more enticed to do more business transactions.
Trends in Home Mortgage Rates
It is quite interesting to know that mortgage rates have been lower than 8.5% since the year 1996, with the lowest rates of about 5.5% seen on the middle of 2005. While individuals might see an extremely different mortgage rate at a particular time due to other factors that affect rates (their salaries or credit histories), the trend has generally been observed to be generally consistent throughout financial circles.
The fall of interest rates from the high figures prior to 1996 has allowed a lot of people to buy their homes, purchase lands, or more to larger houses. Perhaps this reflects an effort to speed up the economy from that time up to now. However this year, the rates are rising probably because of an upsurge that the American economy has experienced in the previous year.
Current Home Mortgage Rates
Mortgage rates in the year 2006 are generally higher than that of the previous year with rates of about 6 percent for 30-year fixed rate mortgages (FRM). As of the 21st of September, 30-year FRMs have an average rate of 6.40%, while 15-year FRMs have an average rate of 6.06%. Adjustable Rate Mortgages (ARM) on the other hand are slightly lower with 5/1-year ARMs having an average interest rate of 6.08% and 1-year ARM having a mean rate of 5.54%.
The difference between this year’s and last year’s interest rates are not really significantly high as it would entail only a few hundred dollars increase in yearly payment rates. This probably would not stop a lot of people from getting mortgages, however if the rise continues, more people would become hesitant to get home loans.
Sunday, November 9, 2008
Home Sweet Home… But Can You Afford It?
You’ve finally found your dream house and are ready to commit but there’s that question of home mortgage affordability. Don’t let this thought scare you away just yet. Find out if you can go ahead and buy that house at last.
1. Know how much you have and how much you owe. How much income are you receiving at present? Is there a chance that it would increase? What will be your financial situation several years from now?
How much money do you owe to creditors? How much monthly payments do you make? Can you still afford to shell out more money after the bills are paid?
You’ll need a consistent source of income that can cover your mortgage and other expenses. Try to foresee possibilities that you’ll need to factor in: a new child, changes in the job, back-to-school plans and cash-flow five or several years from now. Be prepared to be in it for the long haul.
2. If your debts are well managed, then you can afford a home mortgage. The lender will approve your loan more quickly if he sees that your debt-to-income ratio is well within manageable range.
The lender will ensure that your payments will only total 33% or less of your monthly gross income. Otherwise, pay off some of your debts before applying for a home mortgage.
3. Decide which one you prefer: fixed, adjustable or balloon rates. Paying a fixed rate is a more popular choice because it can protect you from surges in interests while paying the lowest rate possible for an agreed period of time may be lighter on your budget, but your mortgage payment can go up later.
4. Interest rates will go up and down depending on the activity of the market. If you can read and understand market trends and economic indicators, you can save a lot of money.
5. Be prepared to pay a downpayment. Typically, it is about 20% of the total price. A house priced at $200,000 will require a down of $40,000. There are also loans with low or no-downpayments, but it will cost you in terms of equity in the long run.
6. You have enough money saved that’s equivalent to at least three months’ monthly income. This will help cover unexpected expenses that could affect your mortgage payments.
There is no fixed answer on the affordability of a home mortgage. It will all depend upon your income, debt, interest rate and other factors. If the home mortgage fits into your personal situation, then you can definitely afford it.
1. Know how much you have and how much you owe. How much income are you receiving at present? Is there a chance that it would increase? What will be your financial situation several years from now?
How much money do you owe to creditors? How much monthly payments do you make? Can you still afford to shell out more money after the bills are paid?
You’ll need a consistent source of income that can cover your mortgage and other expenses. Try to foresee possibilities that you’ll need to factor in: a new child, changes in the job, back-to-school plans and cash-flow five or several years from now. Be prepared to be in it for the long haul.
2. If your debts are well managed, then you can afford a home mortgage. The lender will approve your loan more quickly if he sees that your debt-to-income ratio is well within manageable range.
The lender will ensure that your payments will only total 33% or less of your monthly gross income. Otherwise, pay off some of your debts before applying for a home mortgage.
3. Decide which one you prefer: fixed, adjustable or balloon rates. Paying a fixed rate is a more popular choice because it can protect you from surges in interests while paying the lowest rate possible for an agreed period of time may be lighter on your budget, but your mortgage payment can go up later.
4. Interest rates will go up and down depending on the activity of the market. If you can read and understand market trends and economic indicators, you can save a lot of money.
5. Be prepared to pay a downpayment. Typically, it is about 20% of the total price. A house priced at $200,000 will require a down of $40,000. There are also loans with low or no-downpayments, but it will cost you in terms of equity in the long run.
6. You have enough money saved that’s equivalent to at least three months’ monthly income. This will help cover unexpected expenses that could affect your mortgage payments.
There is no fixed answer on the affordability of a home mortgage. It will all depend upon your income, debt, interest rate and other factors. If the home mortgage fits into your personal situation, then you can definitely afford it.
Tuesday, November 4, 2008
Home Mortgage Loan Types
Choosing the mortgage that is right for you is essential when one is involved in the process of home purchasing. Thus it is important that all options are understood.
Basically, the two things one should consider when considering a home loan is what type meets best your home purchasing needs as well as which loan offers the most ideal schedule for repayment.
The fixed mortgage rate loan types
Fixed rate home mortgage loans have an interest rate that basically remain the same for the whole life of the loan.
These payments have predictable monthly fees yet you are immune to any rising interest rates. Therefore, your interest and principal payments will not increase.
The adjustable home mortgage rate
Mortgages that are adjustable in rate have rates of interest that adjust in a periodic manner as based on the exiting conditions of the market.
The rate is initially fixed during the period of its introduction (anywhere between one year to a decade) and is usually lower compared to a mortgage that has its rate fixed.
After this period, the rate then adjusts every year or about semi-annually as based on the index of the market, however it cannot go beyond the pre-determined cap adjustment.
Jumbo home mortgage loans
The amount given out on this type of loan exceeds the amount established by corporations. Since jumbo home mortgage loans are sold and bought on a scale that is smaller, they have rates that are a little high compared to other type of home loans.
B/C home mortgage loans
These types of loans are given to those borrowers that have filed recently for foreclosure or bankruptcy or those who have late payments on their reports of credit.
The purpose of B/C home mortgage loans is the offer of temporarily financing to applicants until they could qualify for type A conforming financing.
Government home mortgage loan programs
One type of government loan programs is VA loans. These types of loans are definitely guaranteed by the US Department of Veterans Affairs.
This allows service persons or veterans to acquire home mortgage loans with terms that are favorable (usually in the absence of a down payment).
RHS home mortgage loan programs
RHS means Rural Housing Service if the USDA or the US Department of Agriculture. This type of loan guarantees residents in the rural area with very minimum costs for closing. Down payments are also unnecessary.
All in all, there are a lot of home mortgage loan programs available. It all depends on your needs, wants and means.
Basically, the two things one should consider when considering a home loan is what type meets best your home purchasing needs as well as which loan offers the most ideal schedule for repayment.
The fixed mortgage rate loan types
Fixed rate home mortgage loans have an interest rate that basically remain the same for the whole life of the loan.
These payments have predictable monthly fees yet you are immune to any rising interest rates. Therefore, your interest and principal payments will not increase.
The adjustable home mortgage rate
Mortgages that are adjustable in rate have rates of interest that adjust in a periodic manner as based on the exiting conditions of the market.
The rate is initially fixed during the period of its introduction (anywhere between one year to a decade) and is usually lower compared to a mortgage that has its rate fixed.
After this period, the rate then adjusts every year or about semi-annually as based on the index of the market, however it cannot go beyond the pre-determined cap adjustment.
Jumbo home mortgage loans
The amount given out on this type of loan exceeds the amount established by corporations. Since jumbo home mortgage loans are sold and bought on a scale that is smaller, they have rates that are a little high compared to other type of home loans.
B/C home mortgage loans
These types of loans are given to those borrowers that have filed recently for foreclosure or bankruptcy or those who have late payments on their reports of credit.
The purpose of B/C home mortgage loans is the offer of temporarily financing to applicants until they could qualify for type A conforming financing.
Government home mortgage loan programs
One type of government loan programs is VA loans. These types of loans are definitely guaranteed by the US Department of Veterans Affairs.
This allows service persons or veterans to acquire home mortgage loans with terms that are favorable (usually in the absence of a down payment).
RHS home mortgage loan programs
RHS means Rural Housing Service if the USDA or the US Department of Agriculture. This type of loan guarantees residents in the rural area with very minimum costs for closing. Down payments are also unnecessary.
All in all, there are a lot of home mortgage loan programs available. It all depends on your needs, wants and means.
Wednesday, October 22, 2008
Getting A Home Mortgage From Chase
Chase (www.chase.com) offers programs that fit specific needs whether it’s your first home, your second or a new vacation home you’ve been planning to buy. They offer several options that may just be what you’re looking for.
What loans are available for me?
ARM (Adjustable Rate Mortgage), FRM (Fixed Rate Mortgage), conforming and jumbo loans are offered, along with special mortgage programs for low-to-medium income buyers, FHA or VA loans, low downpayment option or special credit needs. An interest only mortgage is also available for an agreed-upon period.
What do I do to apply for a loan?
After identifying your needs and the price range of your choice, you will need to prepare your documents before applying for a mortgage. Here is the initial list of documents you may be asked to prepare:
- SSS number or proof of permanent residency
- Last two months’ pay slip
- Last two years’ W-2 forms
- Last 3 months’ bank statements
- Last two years Federal tax returns
- Information on your current creditors
If you have already spoken with a seller of your chosen home, a signed contract of sale may also be required.
Applications may be done privately and securely online. An interactive tool can help you look for the loan that’s best for you. You can also call any Chase Mortgage Consultant at 1-800-873-6577 or find the nearest Chase branch and speak to a Loan Officer who can walk you through the loan process.
Online applications will be reviewed by a Mortgage Consultant who will then get in touch with you to ask for the required documents and other additional supports.
What happens next?
Chase will then order your credit report, so it’s best to review it first before application. Correct any errors so delays may be avoided during processing.
Chase does not require a home inspection, but it would be good to know the true condition of your home as evaluated by a professional.
A Home Analyst will order a property appraisal, property boundary survey, title search and insurance. A Closer will prepare the closing package which will include all the fees and closing payments required from you. He might establish an escrow account to pay the necessary taxes and insurance. He will then authorize the release of the mortgage funds. A Chase representative will get in touch with you to schedule the closing.
As with any other loan, it is best to check your best option before making a commitment. Information is given free online, through the phone or from a consultant who can discuss with you if Chase can offer the best choice to meet your needs.
What loans are available for me?
ARM (Adjustable Rate Mortgage), FRM (Fixed Rate Mortgage), conforming and jumbo loans are offered, along with special mortgage programs for low-to-medium income buyers, FHA or VA loans, low downpayment option or special credit needs. An interest only mortgage is also available for an agreed-upon period.
What do I do to apply for a loan?
After identifying your needs and the price range of your choice, you will need to prepare your documents before applying for a mortgage. Here is the initial list of documents you may be asked to prepare:
- SSS number or proof of permanent residency
- Last two months’ pay slip
- Last two years’ W-2 forms
- Last 3 months’ bank statements
- Last two years Federal tax returns
- Information on your current creditors
If you have already spoken with a seller of your chosen home, a signed contract of sale may also be required.
Applications may be done privately and securely online. An interactive tool can help you look for the loan that’s best for you. You can also call any Chase Mortgage Consultant at 1-800-873-6577 or find the nearest Chase branch and speak to a Loan Officer who can walk you through the loan process.
Online applications will be reviewed by a Mortgage Consultant who will then get in touch with you to ask for the required documents and other additional supports.
What happens next?
Chase will then order your credit report, so it’s best to review it first before application. Correct any errors so delays may be avoided during processing.
Chase does not require a home inspection, but it would be good to know the true condition of your home as evaluated by a professional.
A Home Analyst will order a property appraisal, property boundary survey, title search and insurance. A Closer will prepare the closing package which will include all the fees and closing payments required from you. He might establish an escrow account to pay the necessary taxes and insurance. He will then authorize the release of the mortgage funds. A Chase representative will get in touch with you to schedule the closing.
As with any other loan, it is best to check your best option before making a commitment. Information is given free online, through the phone or from a consultant who can discuss with you if Chase can offer the best choice to meet your needs.
Monday, October 13, 2008
Financing Choices for Home Mortgage
There are several ways to finance your home. In order to choose the most appropriate home mortgage for your personality and lifestyle, assess the different type of financing for home mortgage:
1) Fixed-rate mortgage
Fixed-rate mortgage are those with interest rates that remain the same until the life of the loan ends. For consumers who are looking for a stable rate that will not experience interest rate fluctuations, this home mortgage financing is a great deal.
A favorite among first time homebuyers and retirees, it can help in organizing and budgeting finances while protecting consumers from increase of interest rates. This kind of financing for home mortgage is best for consumers who plan to stay in their homes for more than 5 to 7 years.
2) Adjustable-rate mortgage (ARM)
Adjustable-rate mortgage, or simply ARM, is a kind of financing for home mortgage wherein the borrower and lender agrees on a certain interest rate that will periodically change. Interest rates will rise or fall, usually with regards to a specific index.
The advantage of an ARM is that the initial interest rate is usually lower than a fixed-rate mortgage. When the interest rate goes down, so will your payments. If you’re planning to keep a home for a short period, this mortgage financing is suitable for you.
3) Balloon Mortgage
A balloon mortgage is a loan that is amortized over longer period compared to the loan term. A balloon mortgage usually has a 15-year term, which is amortized over 30 years to make monthly payments controllable. When the 15-year term ends, you must repay the full principal due of the loan in one large sum, called the “balloon payment”.
When you plan to keep your home for a short time, this may be a practical financing plan. However, make sure to ask when the term ends to prevent possible financial problems.
4) Government loans
Through government lenders such as the Veterans Administration (VA) and the Federal Housing Administration (FHA), government loans often allows consumers with a lower down payment compared to traditional bank loans.
VA loans are perfect for veterans. Government loans are also suitable for consumers buying lower-priced homes with smaller down payments.
5) Convertible ARM (Adjustable-rate mortgage)
Convertible ARM usually starts out as an ordinary ARM, and then gives you an option to lock a fixed rate without refinancing. However, this option will only be offered after a specified time.
Knowing your financing options for home mortgage can save you money by preventing high interest rates and unworkable payment plans. Make sure to ask questions to learn which financing plan best fits your needs.
1) Fixed-rate mortgage
Fixed-rate mortgage are those with interest rates that remain the same until the life of the loan ends. For consumers who are looking for a stable rate that will not experience interest rate fluctuations, this home mortgage financing is a great deal.
A favorite among first time homebuyers and retirees, it can help in organizing and budgeting finances while protecting consumers from increase of interest rates. This kind of financing for home mortgage is best for consumers who plan to stay in their homes for more than 5 to 7 years.
2) Adjustable-rate mortgage (ARM)
Adjustable-rate mortgage, or simply ARM, is a kind of financing for home mortgage wherein the borrower and lender agrees on a certain interest rate that will periodically change. Interest rates will rise or fall, usually with regards to a specific index.
The advantage of an ARM is that the initial interest rate is usually lower than a fixed-rate mortgage. When the interest rate goes down, so will your payments. If you’re planning to keep a home for a short period, this mortgage financing is suitable for you.
3) Balloon Mortgage
A balloon mortgage is a loan that is amortized over longer period compared to the loan term. A balloon mortgage usually has a 15-year term, which is amortized over 30 years to make monthly payments controllable. When the 15-year term ends, you must repay the full principal due of the loan in one large sum, called the “balloon payment”.
When you plan to keep your home for a short time, this may be a practical financing plan. However, make sure to ask when the term ends to prevent possible financial problems.
4) Government loans
Through government lenders such as the Veterans Administration (VA) and the Federal Housing Administration (FHA), government loans often allows consumers with a lower down payment compared to traditional bank loans.
VA loans are perfect for veterans. Government loans are also suitable for consumers buying lower-priced homes with smaller down payments.
5) Convertible ARM (Adjustable-rate mortgage)
Convertible ARM usually starts out as an ordinary ARM, and then gives you an option to lock a fixed rate without refinancing. However, this option will only be offered after a specified time.
Knowing your financing options for home mortgage can save you money by preventing high interest rates and unworkable payment plans. Make sure to ask questions to learn which financing plan best fits your needs.
Sunday, October 5, 2008
Chronology: Financial Crisis Spreads From US to World Markets
The crisis in world financial markets began when prices started declining in the US real estate market in late 2006. So far, it is estimated that banks worldwide have had to writedown more than $550 billion in assets.
Here is a chronology of major events:
March/April 2007: New Century Financial corporation stops making new loans as the practice of giving high risk mortgage loans to people with bad credit histories becomes a problem. The International Monetary Fund (IMF) warns of risks to global financial markets from weakened US home mortgage market.
June 2007: Alarm bells ring on Wall Street as two hedge funds of New York investment bank Bear Stearns lurch to the brink of collapse because of their extensive investments in mortgage-backed securities.
July/August 2007: German banks with bad investments
Source DW-WORD.DE
Here is a chronology of major events:
March/April 2007: New Century Financial corporation stops making new loans as the practice of giving high risk mortgage loans to people with bad credit histories becomes a problem. The International Monetary Fund (IMF) warns of risks to global financial markets from weakened US home mortgage market.
June 2007: Alarm bells ring on Wall Street as two hedge funds of New York investment bank Bear Stearns lurch to the brink of collapse because of their extensive investments in mortgage-backed securities.
July/August 2007: German banks with bad investments
Source DW-WORD.DE
How Bad Will the Mortgage Crisis Get?
The credit markets are seizing up and the uncertainty recently drove up short-term interest rates for municipalities and some rock-solid institutions such as New York's Metropolitan Museum of Art to 20%. And now even so-called prime borrowers, the ones who were properly vetted, are being sucked into defaults on their mortgages. Yet it's still a relatively small number of institutions and individuals getting hurt by this not-yet-a-recession. So what's the worst that could happen?
Sorry we asked.
A number of economists and banking industry experts believe the subprime crisis could metamorphose into the biggest debacle to hit the sector since the savings and loan catastrophe of the 1980s, which caused some $500 billion in losses to the banking industry. And that means the future of a couple of name-brand financial institutions could be in jeopardy.
Much will depend on how far home prices tumble over the next few quarters, how high unemployment climbs, how many homeowners are pushed into foreclosure from rate resets, and, most importantly, how far the crisis spills into the conventional mortgage market and other parts of the credit sector. "The impact here could be far larger [than the S&L crisis] in terms of the dollar amount and the spillover effects into other parts of the economy, particularly the consumer," said Merrill Lynch economist Kathy Bostjancic.
Why? Home prices fell about 6% in 2007 and are expected to tumble another 15% in 2008, 10% in 2009 and 5% in 2010, said Bostjancic. Unemployment, which climbed to its highest level in two years in December at 5%, will hit 5.8% by year end and 6% in 2009, predicts Bostjancic. As this happens, she said, the crunch will likely expand into prime mortgages, home equity loans and credit cards, making it the worst consumer recession since 1980. The buildup of credit was "unprecedented" and is now unwinding, she said.
The Bush Administration's rate-freeze program for certain subprime homeowners and the recently passed stimulus/rebate package, along with the Federal Reserve's aggressive rate cuts, offer short-term fixes. But it won't stop the carnage. "The principal concern of the current credit crisis lies in the possibility that banks will eventually run out of capital," said Doug Duncan, chief economist with the Mortgage Bankers Association, in his updated 2008 forecast.
Many believe the government will ultimately step in with a housing industry bailout to the tune of hundreds of billions of dollars before it would allow a major bank to collapse.
Subprime horror stories have been making headlines for much of the past year as falling home prices, a pullback in housing demand, overbuilding, interest rate resets, growing defaults and tightening lending standards played havoc in the residential market. A flurry of mortgage companies, including American Home Mortgage Investment Corp., New Century Financial Corp. and Delta Financial Corp., filed for Chapter 11 bankruptcy protection.
Big banks took large write-downs, and chief executives from three of them — Citigroup's Charles Prince, Bear Stearns' James Cayne and Merrill Lynch's Stanley O'Neil — resigned. Citigroup and Merrill Lynch shook the market when Citigroup posted an $18.1 billion write-down, $9.8 billion loss, and 41% dividend cut, and Merrill Lynch posted its largest loss in the firm's 94-year history in the fourth quarter. Both warned of more write-downs ahead. "Who would have guessed the banks would have incurred the losses they've incurred already, especially on triple A investments," said Chip MacDonald, partner in the Atlanta office of Jones Day.
Experts fear this is just the tip of the iceberg. There are $1 trillion in outstanding subprime mortgages, with potential losses estimated at about $250 billion, said Bose George, an equity analyst with Keefe, Bruyette & Woods Inc. Columbia University professor Charles Calomiris pegs the losses even higher — at between $300 and $400 billion.
All of this comes as a large wave of ARM and hybrid mortgages are poised to reset this year — an event that could push the crisis into the conventional mortgage and credit markets. Once this happens, "it's almost impossible to imagine any bank or financial institution going unscathed and I would be very surprised if at least some aren't threatened," said Dean Baker, co-director of the Center for Economic and Policy Research, a Washington think tank. He believes the losses will easily exceed that of the S&L debacle.
Subprime borrowers, who had eye-poppingly low teaser rates of 7% to 8%, will see rates jump as high as 11% when they reset. Even conventional borrowers with ARM and hybrid mortgages could face a crunch, especially those who stretched their finances to buy a home, those who took advantage of loose lending standards by taking out big loans without showing documented proof they could afford it, and those whose home values have plummeted below the mortgage amount.
Merrill Lynch's Bostjancic said the biggest impact of rate resets, from a dollar perspective, will come in the third quarter of 2008. She sees losses from all loan defaults exceeding $500 billion in 2008.
There are already signs the turmoil is creeping into the conventional mortgage market and other credit areas. Indeed, 5.6% of all loans were at least 30 days overdue in the third quarter — the highest rate in 20 years , according to the Mortgage Bankers Association. Mark Greene, chief executive of credit analysis firm Fair Isaac Corp., warns that "losses on prime mortgages can easily be two to three times what they were on subprime mortgages." Delinquencies are also ticking up among credit cards and home equity loans, said Dennis Moroney, an analyst with TowerGroup Research.
"It kind of reminds me of the old cartoon of the little Dutch boy with his finger in the dyke, and while he's trying to plug up the subprime hole, there are leaks sprouting all around him," said Mark Fitzgibbon, director of equity research at Sandler O'Neill & Partners. "Subprime is just one small piece of of it."
Bostjancic said the credit crunch is already affecting consumer spending as U.S. retailers experienced the worst holiday sales season since 2001, and consumer confidence hit its lowest level in 20 years. "The amount of debt that's likely to go bad is virtually certain to be in the high hundreds of billions of dollars, and it wouldn't surprise me if it ends up crossing a trillion," said Baker.
Steve Persky, managing partner and chief executive of Dalton Investments LLC, believes the federal government would step in with a heavy-handed bailout before allowing a major bank to blow up. "I don't think the Fed will let a major bank fail," he said.
Still, some industry analysts and investors see opportunity in the beaten-down financial stocks and battered mortgage-backed securities market. "There are double-A and triple-A subprime-backed securities that have a 25% or 30% collateral cushion below them that are trading at 50 cents on the dollar," Persky said. "This presents one of the best distressed opportunities I've seen in years."
Sharon Haas, managing director of Fitch Ratings, admits investors "started to panic" and randomly slashed values on virtually all mortgage-backed securities, even those that aren't at risk. "The market just doesn't know how to value those securities," she said. It had better learn soon, or the price of that education will become astronomical.
By Janet Morrissey
Sorry we asked.
A number of economists and banking industry experts believe the subprime crisis could metamorphose into the biggest debacle to hit the sector since the savings and loan catastrophe of the 1980s, which caused some $500 billion in losses to the banking industry. And that means the future of a couple of name-brand financial institutions could be in jeopardy.
Much will depend on how far home prices tumble over the next few quarters, how high unemployment climbs, how many homeowners are pushed into foreclosure from rate resets, and, most importantly, how far the crisis spills into the conventional mortgage market and other parts of the credit sector. "The impact here could be far larger [than the S&L crisis] in terms of the dollar amount and the spillover effects into other parts of the economy, particularly the consumer," said Merrill Lynch economist Kathy Bostjancic.
Why? Home prices fell about 6% in 2007 and are expected to tumble another 15% in 2008, 10% in 2009 and 5% in 2010, said Bostjancic. Unemployment, which climbed to its highest level in two years in December at 5%, will hit 5.8% by year end and 6% in 2009, predicts Bostjancic. As this happens, she said, the crunch will likely expand into prime mortgages, home equity loans and credit cards, making it the worst consumer recession since 1980. The buildup of credit was "unprecedented" and is now unwinding, she said.
The Bush Administration's rate-freeze program for certain subprime homeowners and the recently passed stimulus/rebate package, along with the Federal Reserve's aggressive rate cuts, offer short-term fixes. But it won't stop the carnage. "The principal concern of the current credit crisis lies in the possibility that banks will eventually run out of capital," said Doug Duncan, chief economist with the Mortgage Bankers Association, in his updated 2008 forecast.
Many believe the government will ultimately step in with a housing industry bailout to the tune of hundreds of billions of dollars before it would allow a major bank to collapse.
Subprime horror stories have been making headlines for much of the past year as falling home prices, a pullback in housing demand, overbuilding, interest rate resets, growing defaults and tightening lending standards played havoc in the residential market. A flurry of mortgage companies, including American Home Mortgage Investment Corp., New Century Financial Corp. and Delta Financial Corp., filed for Chapter 11 bankruptcy protection.
Big banks took large write-downs, and chief executives from three of them — Citigroup's Charles Prince, Bear Stearns' James Cayne and Merrill Lynch's Stanley O'Neil — resigned. Citigroup and Merrill Lynch shook the market when Citigroup posted an $18.1 billion write-down, $9.8 billion loss, and 41% dividend cut, and Merrill Lynch posted its largest loss in the firm's 94-year history in the fourth quarter. Both warned of more write-downs ahead. "Who would have guessed the banks would have incurred the losses they've incurred already, especially on triple A investments," said Chip MacDonald, partner in the Atlanta office of Jones Day.
Experts fear this is just the tip of the iceberg. There are $1 trillion in outstanding subprime mortgages, with potential losses estimated at about $250 billion, said Bose George, an equity analyst with Keefe, Bruyette & Woods Inc. Columbia University professor Charles Calomiris pegs the losses even higher — at between $300 and $400 billion.
All of this comes as a large wave of ARM and hybrid mortgages are poised to reset this year — an event that could push the crisis into the conventional mortgage and credit markets. Once this happens, "it's almost impossible to imagine any bank or financial institution going unscathed and I would be very surprised if at least some aren't threatened," said Dean Baker, co-director of the Center for Economic and Policy Research, a Washington think tank. He believes the losses will easily exceed that of the S&L debacle.
Subprime borrowers, who had eye-poppingly low teaser rates of 7% to 8%, will see rates jump as high as 11% when they reset. Even conventional borrowers with ARM and hybrid mortgages could face a crunch, especially those who stretched their finances to buy a home, those who took advantage of loose lending standards by taking out big loans without showing documented proof they could afford it, and those whose home values have plummeted below the mortgage amount.
Merrill Lynch's Bostjancic said the biggest impact of rate resets, from a dollar perspective, will come in the third quarter of 2008. She sees losses from all loan defaults exceeding $500 billion in 2008.
There are already signs the turmoil is creeping into the conventional mortgage market and other credit areas. Indeed, 5.6% of all loans were at least 30 days overdue in the third quarter — the highest rate in 20 years , according to the Mortgage Bankers Association. Mark Greene, chief executive of credit analysis firm Fair Isaac Corp., warns that "losses on prime mortgages can easily be two to three times what they were on subprime mortgages." Delinquencies are also ticking up among credit cards and home equity loans, said Dennis Moroney, an analyst with TowerGroup Research.
"It kind of reminds me of the old cartoon of the little Dutch boy with his finger in the dyke, and while he's trying to plug up the subprime hole, there are leaks sprouting all around him," said Mark Fitzgibbon, director of equity research at Sandler O'Neill & Partners. "Subprime is just one small piece of of it."
Bostjancic said the credit crunch is already affecting consumer spending as U.S. retailers experienced the worst holiday sales season since 2001, and consumer confidence hit its lowest level in 20 years. "The amount of debt that's likely to go bad is virtually certain to be in the high hundreds of billions of dollars, and it wouldn't surprise me if it ends up crossing a trillion," said Baker.
Steve Persky, managing partner and chief executive of Dalton Investments LLC, believes the federal government would step in with a heavy-handed bailout before allowing a major bank to blow up. "I don't think the Fed will let a major bank fail," he said.
Still, some industry analysts and investors see opportunity in the beaten-down financial stocks and battered mortgage-backed securities market. "There are double-A and triple-A subprime-backed securities that have a 25% or 30% collateral cushion below them that are trading at 50 cents on the dollar," Persky said. "This presents one of the best distressed opportunities I've seen in years."
Sharon Haas, managing director of Fitch Ratings, admits investors "started to panic" and randomly slashed values on virtually all mortgage-backed securities, even those that aren't at risk. "The market just doesn't know how to value those securities," she said. It had better learn soon, or the price of that education will become astronomical.
By Janet Morrissey
FBI saw threat of mortgage crisis
WASHINGTON -- Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible.
"It has the potential to be an epidemic," Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said.
Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it's also clear that the FBI failed to avert a problem it had accurately forecast.
Banks and brokerages have written down more than $300 billion of mortgage-backed securities and other risky investments in the last year or so as homeowner defaults leaped and weakness in the real estate market spread.
In California alone, lenders have foreclosed on $100 billion worth of homes over the last two years and are foreclosing at a rate of 1,300 houses every business day, according to a recent report from ForeclosureRadar.com.
Most observers have declared the mess a gross failure of regulation. To be sure, in the run-up to the crisis, market-oriented federal regulators bragged about their hands-off treatment of banks and other savings institutions and their executives. But it wasn't just regulators who were looking the other way. The FBI and its parent agency, the Justice Department, are supposed to act as the cops on the beat for potentially illegal activities by bankers and others. But they were focused on national security and other priorities, and paid scant attention to white-collar crimes that may have contributed to the lending and securities debacle.
Now that the problems are out in the open, the government's response strikes some veteran regulators as too little, too late.
Swecker, who retired from the FBI in 2006, declined to comment for this article.
But sources familiar with the FBI budget process, who were not authorized to speak publicly about the growing fraud problem, say that he and other FBI criminal investigators sought additional assistance to take on the mortgage scoundrels.
They ended up with fewer resources, rather than more.
In 2007, the number of agents pursuing mortgage fraud shrank to around 100. By comparison, the FBI had about 1,000 agents deployed on banking fraud during the S&L bust of the 1980s and '90s, said Anthony Adamski, who oversaw financial crime investigations for the FBI at the time.
The FBI says it now has about 200 agents working on mortgage fraud, but critics say the agency might have averted much of the problem had it heeded its own warning.
"The FBI correctly diagnosed that mortgage fraud was epidemic, but it did not come close to meeting its announced goal," said William K. Black, who was a federal regulator during the S&L crisis and now teaches economics and law at the University of Missouri-Kansas City.
"It used everyday procedures and woefully inadequate resources to deal with an epidemic," he said. "The approach was certain to bring symbolic prosecutions and strategic defeat."
The mortgage debacle has laid bare a system marked by dubious practices at every stage of the process. Lenders often made loans to borrowers who had limited ability to repay them but little desire to pass up the dream of homeownership. Many loans lacked basic documentation, such as information about borrowers' incomes.
Still, mortgage companies could hardly sell them fast enough, packaging the loans as investment securities and peddling them to eager buyers on Wall Street.
The FBI defends its handling of the crisis, with officials contending that as home prices were rising several years ago, the trouble brewing in the mortgage market -- and the potential crimes behind it -- was not immediately apparent.
Officials said they began approaching mortgage companies and others in an attempt to raise awareness about the growing fraud problem. But the lenders had little incentive to cooperate because they were continuing to make money. Black says that in many cases, they were part of the fraud.
"Nobody wanted to listen," Sharon Ormsby, the chief of the FBI's financial crimes section, said in an interview. "We were dealing with the issue as best we could back then."
Over the last three years, the FBI and other agencies have brought dozens of mortgage-fraud cases. The bureau has rooted out foreclosure rescue schemes in which homeowners are tricked into signing over the deeds to their homes to operators who buried the properties even deeper in debt. Agents have disrupted cases of identity theft in which criminals open -- and exhaust -- home equity lines of credit and leave homeowners stuck with the bill.
Many of the cases have been relatively small, however, with about half the investigations involving losses of less than $1 million -- the size of two or three loans.
But the tepid response also reflects a broad realignment of law-enforcement priorities at the Justice Department in which mortgage fraud and other white-collar crimes have been subordinated to other Bush administration priorities.
That has reflected, in part, the ramp-up in national security and terrorism investigations after the Sept. 11 attacks. But the administration has also put more support behind efforts against illegal immigration and child pornography.
In a way, the mortgage debacle could not have come onto the FBI radar screen at a worse time. Just as Swecker was making his doomsday forecast, the FBI, under pressure from Congress and the White House, was creating a crime-fighting brain drain, transferring hundreds of agents from its criminal investigations unit into its anti-terrorism program. About 2,500 agents doing criminal work -- 20% or so of the entire force -- were affected.
Even as the number of new white-collar cases started declining, the Justice Department did pursue some high-profile corporate prosecutions, such as those arising from the collapse of Enron Corp. But some former prosecutors question the administration's current commitment to pursuing complex, high-stakes cases.
"I think most sitting U.S. attorneys now staring at the subprime crisis find scant resources available to pursue sophisticated financial crimes," said John C. Hueston, a Los Angeles lawyer who was a lead federal prosecutor in the trials of Enron executives Kenneth L. Lay and Jeffrey K. Skilling.
Absent a major shift in priorities and resources, he said, it is likely that the Justice Department and the FBI will continue on their current path of focusing on simple cases "that don't go to the heart of the problem."
The FBI says it has 21 open investigations into possible large-scale fraud related to the subprime meltdown. The Times reported last month that a federal grand jury in Los Angeles had subpoenaed records from three large California lenders: Countrywide Financial Corp. (now part of Bank of America Corp.), New Century Financial Corp. and IndyMac Federal Bank.
Among other possible targets, the FBI has said, are investment firms that sold billions in securities backed by shaky subprime mortgages and credit rating agencies that gave high marks to the now-worthless securities and failed to protect investors.
But it may be hard to jump-start such probes. Trying to prove that a major mortgage company intended to defraud buyers of its securities, for example, could take years of digging into records and testimony.
Moreover, some of those involved may have special legal protection: Credit rating firms have in other cases successfully asserted that their opinions about the values of securities are protected by the 1st Amendment.
"I am happy to have investigations going on, but these investigations should have taken place years ago," said Blair A. Nicholas, a San Diego lawyer representing investors who lost money in the collapse of several subprime mortgage lenders. "They seem to always get involved after the horse has left the barn. It is always cleaning up the mess rather than being proactive."
Could the crisis have been averted, or at least mitigated, if the FBI had intervened more forcefully?
"Until there is a catastrophic loss, there is no incentive to investigate criminal conduct," said Cynthia Monaco, a former federal prosecutor in New York. "Nor are there people coming forward with evidence" such as angry investors or whistle-blowing corporate employees, she said.
Even now, Monaco added, it is far from clear whether the damage -- suffered by investors and homeowners alike -- was the product of clear-cut fraud.
Ormsby says the FBI is more actively working with other federal investigative agencies in the hope they will pick up the slack. The Secret Service, for example, in a departure from its traditional missions of protecting presidents and heads of state and investigating counterfeiting, has assigned more than 100 agents to examine mortgage fraud, said spokesman Edwin Donovan.
The Justice Department is also starting to mobilize. The department offered what it described as a "basic seminar" on mortgage fraud cases to about 100 prosecutors last week at its national training academy in South Carolina.
By Richard B. Schmitt, Los Angeles Times Staff Writer
"It has the potential to be an epidemic," Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said.
Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it's also clear that the FBI failed to avert a problem it had accurately forecast.
Banks and brokerages have written down more than $300 billion of mortgage-backed securities and other risky investments in the last year or so as homeowner defaults leaped and weakness in the real estate market spread.
In California alone, lenders have foreclosed on $100 billion worth of homes over the last two years and are foreclosing at a rate of 1,300 houses every business day, according to a recent report from ForeclosureRadar.com.
Most observers have declared the mess a gross failure of regulation. To be sure, in the run-up to the crisis, market-oriented federal regulators bragged about their hands-off treatment of banks and other savings institutions and their executives. But it wasn't just regulators who were looking the other way. The FBI and its parent agency, the Justice Department, are supposed to act as the cops on the beat for potentially illegal activities by bankers and others. But they were focused on national security and other priorities, and paid scant attention to white-collar crimes that may have contributed to the lending and securities debacle.
Now that the problems are out in the open, the government's response strikes some veteran regulators as too little, too late.
Swecker, who retired from the FBI in 2006, declined to comment for this article.
But sources familiar with the FBI budget process, who were not authorized to speak publicly about the growing fraud problem, say that he and other FBI criminal investigators sought additional assistance to take on the mortgage scoundrels.
They ended up with fewer resources, rather than more.
In 2007, the number of agents pursuing mortgage fraud shrank to around 100. By comparison, the FBI had about 1,000 agents deployed on banking fraud during the S&L bust of the 1980s and '90s, said Anthony Adamski, who oversaw financial crime investigations for the FBI at the time.
The FBI says it now has about 200 agents working on mortgage fraud, but critics say the agency might have averted much of the problem had it heeded its own warning.
"The FBI correctly diagnosed that mortgage fraud was epidemic, but it did not come close to meeting its announced goal," said William K. Black, who was a federal regulator during the S&L crisis and now teaches economics and law at the University of Missouri-Kansas City.
"It used everyday procedures and woefully inadequate resources to deal with an epidemic," he said. "The approach was certain to bring symbolic prosecutions and strategic defeat."
The mortgage debacle has laid bare a system marked by dubious practices at every stage of the process. Lenders often made loans to borrowers who had limited ability to repay them but little desire to pass up the dream of homeownership. Many loans lacked basic documentation, such as information about borrowers' incomes.
Still, mortgage companies could hardly sell them fast enough, packaging the loans as investment securities and peddling them to eager buyers on Wall Street.
The FBI defends its handling of the crisis, with officials contending that as home prices were rising several years ago, the trouble brewing in the mortgage market -- and the potential crimes behind it -- was not immediately apparent.
Officials said they began approaching mortgage companies and others in an attempt to raise awareness about the growing fraud problem. But the lenders had little incentive to cooperate because they were continuing to make money. Black says that in many cases, they were part of the fraud.
"Nobody wanted to listen," Sharon Ormsby, the chief of the FBI's financial crimes section, said in an interview. "We were dealing with the issue as best we could back then."
Over the last three years, the FBI and other agencies have brought dozens of mortgage-fraud cases. The bureau has rooted out foreclosure rescue schemes in which homeowners are tricked into signing over the deeds to their homes to operators who buried the properties even deeper in debt. Agents have disrupted cases of identity theft in which criminals open -- and exhaust -- home equity lines of credit and leave homeowners stuck with the bill.
Many of the cases have been relatively small, however, with about half the investigations involving losses of less than $1 million -- the size of two or three loans.
But the tepid response also reflects a broad realignment of law-enforcement priorities at the Justice Department in which mortgage fraud and other white-collar crimes have been subordinated to other Bush administration priorities.
That has reflected, in part, the ramp-up in national security and terrorism investigations after the Sept. 11 attacks. But the administration has also put more support behind efforts against illegal immigration and child pornography.
In a way, the mortgage debacle could not have come onto the FBI radar screen at a worse time. Just as Swecker was making his doomsday forecast, the FBI, under pressure from Congress and the White House, was creating a crime-fighting brain drain, transferring hundreds of agents from its criminal investigations unit into its anti-terrorism program. About 2,500 agents doing criminal work -- 20% or so of the entire force -- were affected.
Even as the number of new white-collar cases started declining, the Justice Department did pursue some high-profile corporate prosecutions, such as those arising from the collapse of Enron Corp. But some former prosecutors question the administration's current commitment to pursuing complex, high-stakes cases.
"I think most sitting U.S. attorneys now staring at the subprime crisis find scant resources available to pursue sophisticated financial crimes," said John C. Hueston, a Los Angeles lawyer who was a lead federal prosecutor in the trials of Enron executives Kenneth L. Lay and Jeffrey K. Skilling.
Absent a major shift in priorities and resources, he said, it is likely that the Justice Department and the FBI will continue on their current path of focusing on simple cases "that don't go to the heart of the problem."
The FBI says it has 21 open investigations into possible large-scale fraud related to the subprime meltdown. The Times reported last month that a federal grand jury in Los Angeles had subpoenaed records from three large California lenders: Countrywide Financial Corp. (now part of Bank of America Corp.), New Century Financial Corp. and IndyMac Federal Bank.
Among other possible targets, the FBI has said, are investment firms that sold billions in securities backed by shaky subprime mortgages and credit rating agencies that gave high marks to the now-worthless securities and failed to protect investors.
But it may be hard to jump-start such probes. Trying to prove that a major mortgage company intended to defraud buyers of its securities, for example, could take years of digging into records and testimony.
Moreover, some of those involved may have special legal protection: Credit rating firms have in other cases successfully asserted that their opinions about the values of securities are protected by the 1st Amendment.
"I am happy to have investigations going on, but these investigations should have taken place years ago," said Blair A. Nicholas, a San Diego lawyer representing investors who lost money in the collapse of several subprime mortgage lenders. "They seem to always get involved after the horse has left the barn. It is always cleaning up the mess rather than being proactive."
Could the crisis have been averted, or at least mitigated, if the FBI had intervened more forcefully?
"Until there is a catastrophic loss, there is no incentive to investigate criminal conduct," said Cynthia Monaco, a former federal prosecutor in New York. "Nor are there people coming forward with evidence" such as angry investors or whistle-blowing corporate employees, she said.
Even now, Monaco added, it is far from clear whether the damage -- suffered by investors and homeowners alike -- was the product of clear-cut fraud.
Ormsby says the FBI is more actively working with other federal investigative agencies in the hope they will pick up the slack. The Secret Service, for example, in a departure from its traditional missions of protecting presidents and heads of state and investigating counterfeiting, has assigned more than 100 agents to examine mortgage fraud, said spokesman Edwin Donovan.
The Justice Department is also starting to mobilize. The department offered what it described as a "basic seminar" on mortgage fraud cases to about 100 prosecutors last week at its national training academy in South Carolina.
By Richard B. Schmitt, Los Angeles Times Staff Writer
Monday, September 22, 2008
Consult Professionals for Home Mortgage
Buying your dream home can be quite confusing. You are probably just like the millions of aspiring home buyers who do not have enough know-how to determine whether you are getting a great deal or not, you probably are not sure whether a particular home mortgage offer is right for you. If such is the case, it is best that you consult professionals so that you would know what to look for when buying a house or getting a home mortgage.
What to expect when consulting professionals for home mortgage?
You should expect home buying professionals to do the following for you when you consult them:
1. Check your qualifications to determine the price range that is affordable to you
2. Consider your preferences or wishes to look for homes that would fit your taste and requirements
3. Take you to the actual location of houses that would meet your specifications
4. Give you a good backgrounder on the area where the house is such as the profile of the community, where schools are, the location of hospitals, the rates of property taxes, specific building codes and regulations, the quality of services in the community, etc.
5. Give you the specifics of each property such as the zoning, the size of the house and lot area, the age of the property, the equipment there, the utilities, and the other important information about the property.
6. Be your representative to the seller and present what you can offer to them
7. Be the one to arrange the details of closing
8. Give you advice about mortgage lenders and rates, attorney for the real estate, title companies, and home inspectors.
9. Help you determine if the deals are good or not.
Tips when consulting with professional:
-Even if you already have a house in mind, be sure to as the professional to show you more houses. When buying a home, it is important that you see all options before closing a deal.
- Check for signs that you are being manipulated in a certain way either to veer you away from or to persuade you towards a particular house or community. If such as the case you can look for a second opinion.
- Always read everything carefully before signing. Even if it is the professional’s job to help you get a great deal out of a home or mortgage, you still have to be cautious when doing such a major purchase.
It is always best to consult professionals when you are confused about something. When getting home mortgage, a professional can help you make more sense of such important matters.
Sunday, September 14, 2008
Compare Home Mortgage Rates
One of the most essential factors of a person’s decision to get a home is how the mortgage rates fare for a particular time. Rarely can people afford to buy houses on a cash basis thus getting a home loan has been the norm for several decades already. But there are different types of mortgages and to get the best deals with home loans, it important to compare home mortgage rates.
Mortgage Rates 101
Mortgage rates are simply the payment people pay to lenders, such as banks and other financial institutions, for letting them borrow money. Mortgage rates are affected by numerous factors that generally affect the entire economy. And the varying rates make it possible for people to get the best deals at a particular time if the know how to compare them.
Mortgage rates are generally based on certain decisions of the Federal Reserve in New York. The Federal Reserve studies the current economic trends such as exportation and inflation to see how fast or slow the economy is moving.
If the economy is rather sluggish or inactive, mortgage rates are lowered so that people would be more encouraged to apply for loans and make business transactions. On the other hand, if the economy is moving rather too fast, mortgage rates are raised so that people and businesses would be discouraged to make investments or do transactions.
To get a good deal when buying a house, it is important for people to compare the mortgage rates across different times and different types. One may benefit from looking at the trends of the mortgage rates to see whether rates at a particular time are higher or lower when compared to rates in the past.
Current Home Mortgage Rates
The mortgage rates of this year is somewhat higher when compared to that of the year 2005. As of September 21, 2006, the average mortgage rate for 30-year fixed rate mortgages is 6.40 percent while for the 15-year fixed-rate mortgage it is 6.06 percent. For the 5/1-year adjustable-rate mortgage it is 6.08 percent and for the 1-year adjustable-rate mortgage it is 5.54 percent.
Apart from comparing home mortgage rates according to different periods, it is also important to compare interest rates according to individual lenders. This can easily be done through the internet by going to online mortgage and economic websites such as www.bizrate.com, www.bankrate.com, www.mortgagenews.com, www.mortgageloan.com, among many others.
Home mortgage rates are manageable if proper comparisons are made. To best deals are those made with the best comparisons.
Mortgage Rates 101
Mortgage rates are simply the payment people pay to lenders, such as banks and other financial institutions, for letting them borrow money. Mortgage rates are affected by numerous factors that generally affect the entire economy. And the varying rates make it possible for people to get the best deals at a particular time if the know how to compare them.
Mortgage rates are generally based on certain decisions of the Federal Reserve in New York. The Federal Reserve studies the current economic trends such as exportation and inflation to see how fast or slow the economy is moving.
If the economy is rather sluggish or inactive, mortgage rates are lowered so that people would be more encouraged to apply for loans and make business transactions. On the other hand, if the economy is moving rather too fast, mortgage rates are raised so that people and businesses would be discouraged to make investments or do transactions.
To get a good deal when buying a house, it is important for people to compare the mortgage rates across different times and different types. One may benefit from looking at the trends of the mortgage rates to see whether rates at a particular time are higher or lower when compared to rates in the past.
Current Home Mortgage Rates
The mortgage rates of this year is somewhat higher when compared to that of the year 2005. As of September 21, 2006, the average mortgage rate for 30-year fixed rate mortgages is 6.40 percent while for the 15-year fixed-rate mortgage it is 6.06 percent. For the 5/1-year adjustable-rate mortgage it is 6.08 percent and for the 1-year adjustable-rate mortgage it is 5.54 percent.
Apart from comparing home mortgage rates according to different periods, it is also important to compare interest rates according to individual lenders. This can easily be done through the internet by going to online mortgage and economic websites such as www.bizrate.com, www.bankrate.com, www.mortgagenews.com, www.mortgageloan.com, among many others.
Home mortgage rates are manageable if proper comparisons are made. To best deals are those made with the best comparisons.
Tuesday, September 9, 2008
An Introduction To Home Loan Interest Rates
Getting a home loan is one of the very important aspects of modern living, and one of the most important parts of this endeavor are interest rates. However, a lot of people cringe at the very mention of interest because of the common image that is another venue for expending money. But this intimidation in turn results into the little knowledge about interest rates that most people have.
To conquer the fear of something, one should know more about it. Here is a little some useful information about home loan interest rates that could help one get acquainted with home loans in general:
What are the two types of home loan interest rates?
There are two major types of home loan interest rates available for people who are planning to borrow money to buy a house. The first is the fixed rate home loan, in which there is a fixed interest rate as well as monthly dues extended over a fixed period of time, such as 15 years or 30 years. The second type is the adjustable rate home loan, where the interest rates vary up or down according to the fluctuation of the interest rates in the market.
Fixed Rate Home Loan Interest
Fixed-rate home loans are generally the more popular type of interest rate scheme among the two. They are very popular mainly because people are quite adamant about the image of their home payments falling down or rising up because of varying interest rates. People usually get fixed-rate home loans whenever the rates offered for a particular time are quite low, making the mortgages quite affordable for them.
Fixed-rate home loans are generally divided into two types according to the duration of loan 15 or 30 years. Some people believe that 30 years is quite reasonable, while other think that 15 years is more so. Here are the advantages and disadvantages of each type of fixed-rate home loans:
30-year Home Loan
This type of fixed rate loan provides the borrower a chance to loan money for a long time without being bothered by fluctuating payments and interest rates. Many people believe that this type of loan is more affordable because the monthly payment rates are significantly lower that those involved in a 15-year loan since the interest rate is distributed over a wider period of time. The smaller increments of monthly payments allow the borrower to allocate their resources to other investments, which may help them maintain their houses better.
The disadvantage of a 30-year home loan is that it takes very long for borrowers to develop equity since the payments made during the early portions of the loan term just go mostly to the interest instead of the principal.
When computing the overall interest rates, they are significantly higher than that of a shorter-term loan since the term for amortization is much longer. The interest rates for this type of loan are also significantly higher than for the 15-year home loan.
15-year Home Loan
This type of home loan is good for others because they allow the borrowers to develop equity significantly faster because the amortization schedule is shorter. When computing for the overall interest, the borrower would get a significantly lower total than those who are on a longer term. Interest rates for this type of loan are also significantly lower than for the 30-year home loan.
However, some people cannot afford this type of loan because the monthly payments may be very much higher than with the 30-year home loan. Typically, buyers could only acquire houses of smaller value than what they may be able to afford with a loan of a longer term.
Adjustable-rate Home Loans
Despite the idea of fluctuating interest rates, some people prefer adjustable-rate home loans. Those who do generally understand that the interest rates do not really rise or fall like a seesaw. Adjustable-rate home loans actually start with fixed rates for a particular, longer period and then followed by a significantly shorter period of adjustable interest rates.
What is good about adjustable-rate home loans is that the fixed interest rates for the initial period are very much lower than that of fixed-rate home loans. And this fixed-rate portion of the loan is very much longer than the adjustable part. For instance, the fixed-rate term might be 10 years long, while the adjustable rate term would be just a year. Some people actually get to save more in such scenario.
However, people still have to be careful when getting adjustable-rate home loans. Careful study must be made to ensure that interest rates in the adjustable part of the loan do not rise dramatically.
Knowing about the types of interest rates for home loans is an important factor when planning to borrow money to buy a house. To know more about home loan interest rates, it is best to consult with loan experts.
To conquer the fear of something, one should know more about it. Here is a little some useful information about home loan interest rates that could help one get acquainted with home loans in general:
What are the two types of home loan interest rates?
There are two major types of home loan interest rates available for people who are planning to borrow money to buy a house. The first is the fixed rate home loan, in which there is a fixed interest rate as well as monthly dues extended over a fixed period of time, such as 15 years or 30 years. The second type is the adjustable rate home loan, where the interest rates vary up or down according to the fluctuation of the interest rates in the market.
Fixed Rate Home Loan Interest
Fixed-rate home loans are generally the more popular type of interest rate scheme among the two. They are very popular mainly because people are quite adamant about the image of their home payments falling down or rising up because of varying interest rates. People usually get fixed-rate home loans whenever the rates offered for a particular time are quite low, making the mortgages quite affordable for them.
Fixed-rate home loans are generally divided into two types according to the duration of loan 15 or 30 years. Some people believe that 30 years is quite reasonable, while other think that 15 years is more so. Here are the advantages and disadvantages of each type of fixed-rate home loans:
30-year Home Loan
This type of fixed rate loan provides the borrower a chance to loan money for a long time without being bothered by fluctuating payments and interest rates. Many people believe that this type of loan is more affordable because the monthly payment rates are significantly lower that those involved in a 15-year loan since the interest rate is distributed over a wider period of time. The smaller increments of monthly payments allow the borrower to allocate their resources to other investments, which may help them maintain their houses better.
The disadvantage of a 30-year home loan is that it takes very long for borrowers to develop equity since the payments made during the early portions of the loan term just go mostly to the interest instead of the principal.
When computing the overall interest rates, they are significantly higher than that of a shorter-term loan since the term for amortization is much longer. The interest rates for this type of loan are also significantly higher than for the 15-year home loan.
15-year Home Loan
This type of home loan is good for others because they allow the borrowers to develop equity significantly faster because the amortization schedule is shorter. When computing for the overall interest, the borrower would get a significantly lower total than those who are on a longer term. Interest rates for this type of loan are also significantly lower than for the 30-year home loan.
However, some people cannot afford this type of loan because the monthly payments may be very much higher than with the 30-year home loan. Typically, buyers could only acquire houses of smaller value than what they may be able to afford with a loan of a longer term.
Adjustable-rate Home Loans
Despite the idea of fluctuating interest rates, some people prefer adjustable-rate home loans. Those who do generally understand that the interest rates do not really rise or fall like a seesaw. Adjustable-rate home loans actually start with fixed rates for a particular, longer period and then followed by a significantly shorter period of adjustable interest rates.
What is good about adjustable-rate home loans is that the fixed interest rates for the initial period are very much lower than that of fixed-rate home loans. And this fixed-rate portion of the loan is very much longer than the adjustable part. For instance, the fixed-rate term might be 10 years long, while the adjustable rate term would be just a year. Some people actually get to save more in such scenario.
However, people still have to be careful when getting adjustable-rate home loans. Careful study must be made to ensure that interest rates in the adjustable part of the loan do not rise dramatically.
Knowing about the types of interest rates for home loans is an important factor when planning to borrow money to buy a house. To know more about home loan interest rates, it is best to consult with loan experts.
Tuesday, August 12, 2008
Accepting A Higher Interest Rate
Interest rates are indefinite. They change from time to time. It is very normal that you are told to choose home loans that have very low interest rates so as not to burden your financial situation. This is a very wise and obvious choice any person will take especially if your aim is to pay for less.
Low interest rates aid in the reduction of more expenses but have you ever considered choosing a loan that has higher interest rates? As unwise as it may sound there are times that getting higher rates might be a better option for you. If you don’t really have that much of a choice because of your credit rating then this is one alternative you will initially have to bear.
Looking for a mortgage loan that will fit your budget is already difficult what more if your credit rating is as awful as hell. You have to wait for approval and accept the fact that you might get a lot of turn downs. This is normal for someone with that kind of background.
Relax though, it happened already and all you have to do is to face it. Your goal now is to pay for that house you have been wanting, focus on that and stop feeling sorry for yourself because that will not be of much help to your current situation.
Before you start saying to yourself that you won’t get that home loan, here are a few things to do so you can have a better edge in getting that loan.
For starters, it is always best to think positive. Positive thoughts will bring positive results. Do not be sad and depressed from one turn down. Be strong and realize it is not the end of the world. You have a lot of options.
Sit down and be honest with yourself. Write down your expenses. Cut all the unnecessary expenses in your list. Keep only those that are really important like your utilities, food and rent. Unimportant expenses must be out of your list. Know your monthly income and divide it according to your needs.
After all that division, look into what is left. That is what you can use to pay for your future loan without having to risk your health or your electricity.
Now that you know what you can really afford it is now time look around. Look around for companies that give loans for those who really need it and collect all information about them and what they can offer. Look into more than three companies so that you will have better options.
As with any home loan it is still best to search around for companies that give considerations to people who have a bad credit rating. They may give you a higher interest rate than the normal but looking at it in a better light; you will get that home loan. Hooray! You will get your house after all.
Hold down your horses. Just because you got your loan it doesn’t mean all is well now. You must remember to pay promptly and with the proper amount that was talked about.
Late payments have added fees that go along with them. Aside from the high interest rate you will add for the payment of your loan the late fees will further worsen your situation. You do not want such thing to happen especially if saving is your main priority.
Owning your own house gives us a sense of fulfillment that is unmatchable. This is because it is not simple in getting one specially if your salary is limited and may only suffice with your needs.
Do not fret though; companies that give home loans are good aids in achieving our dream. Just make sure you know what you’re getting yourself into and that you know every nook and cranny of the contract. Ignorance can never be an excuse.
Determination and proper research will be your key to your dreams. Remember the company is lending you this money because they trust you to keep your contract as discussed.
So Accept that interest rate and get that house you have always wanted to call your own. You deserve to have that roof on your head that is yours and yours only. After all you worked hard for every single penny.
Low interest rates aid in the reduction of more expenses but have you ever considered choosing a loan that has higher interest rates? As unwise as it may sound there are times that getting higher rates might be a better option for you. If you don’t really have that much of a choice because of your credit rating then this is one alternative you will initially have to bear.
Looking for a mortgage loan that will fit your budget is already difficult what more if your credit rating is as awful as hell. You have to wait for approval and accept the fact that you might get a lot of turn downs. This is normal for someone with that kind of background.
Relax though, it happened already and all you have to do is to face it. Your goal now is to pay for that house you have been wanting, focus on that and stop feeling sorry for yourself because that will not be of much help to your current situation.
Before you start saying to yourself that you won’t get that home loan, here are a few things to do so you can have a better edge in getting that loan.
For starters, it is always best to think positive. Positive thoughts will bring positive results. Do not be sad and depressed from one turn down. Be strong and realize it is not the end of the world. You have a lot of options.
Sit down and be honest with yourself. Write down your expenses. Cut all the unnecessary expenses in your list. Keep only those that are really important like your utilities, food and rent. Unimportant expenses must be out of your list. Know your monthly income and divide it according to your needs.
After all that division, look into what is left. That is what you can use to pay for your future loan without having to risk your health or your electricity.
Now that you know what you can really afford it is now time look around. Look around for companies that give loans for those who really need it and collect all information about them and what they can offer. Look into more than three companies so that you will have better options.
As with any home loan it is still best to search around for companies that give considerations to people who have a bad credit rating. They may give you a higher interest rate than the normal but looking at it in a better light; you will get that home loan. Hooray! You will get your house after all.
Hold down your horses. Just because you got your loan it doesn’t mean all is well now. You must remember to pay promptly and with the proper amount that was talked about.
Late payments have added fees that go along with them. Aside from the high interest rate you will add for the payment of your loan the late fees will further worsen your situation. You do not want such thing to happen especially if saving is your main priority.
Owning your own house gives us a sense of fulfillment that is unmatchable. This is because it is not simple in getting one specially if your salary is limited and may only suffice with your needs.
Do not fret though; companies that give home loans are good aids in achieving our dream. Just make sure you know what you’re getting yourself into and that you know every nook and cranny of the contract. Ignorance can never be an excuse.
Determination and proper research will be your key to your dreams. Remember the company is lending you this money because they trust you to keep your contract as discussed.
So Accept that interest rate and get that house you have always wanted to call your own. You deserve to have that roof on your head that is yours and yours only. After all you worked hard for every single penny.
Saturday, August 9, 2008
A Fixed Rate Mortgage And A Variable Rate Mortgage
With the various options in the industry nowadays, this is probably the most confusing time for anyone who is considering to avail of a mortgage. Moreover, interest rates seem to be constantly fluctuating and this adds up to the confusion in getting the best option.
Generally, there are two major types of loans. These are the fixed rate mortgage and the variable rate mortgage. Both types have their own advantages and disadvantages which anyone should consider carefully.
A fixed rate mortgage makes the monthly payments the same all throughout. Interest rates do not change whether or not there is an increase in the industry. What was set at the very start continues until the entire loan has been paid for.
On the other hand, a variable rate mortgage paves the way for some adjustments in the interest rates. If the rates are higher now, monthly payments will increase as well, as regulated by a certain interest index. Advantage comes in when the rates decrease at a certain period of time.
If you are after stability, fixed rate mortgages are most suitable. However, if you are willing to gamble a bit and hold on to both possible risks and rewards, variable rate mortgages may be appropriate.
The previous years had shown significant decreases in interest rates. Such phenomenon has prompted a lot of people to prefer fixed rate mortgages. In this way, they have been able to preserve such stable interest rates over a period of time.
Fixed rate mortgages may run from 6 months to 25 years but the agreed upon interest rates are guaranteed in spite of fluctuations in the market. Security and stability are indeed not a question here so this is best for those with limited and fixed monthly incomes.
However, if you prefer a short-term option, variable rate mortgages seem to be best for you. With this type, you do not have to commit to a certain interest rate for a very long period of time. There is more flexibility.
Moreover, a variable rate mortgage gives the borrowers an opportunity to make the most out of lower rates. The interest rates are normally determined by subtracting a set percentage from a prime rate which is actually what banks usually offer only to their most creditworthy customers. This is, in fact, a source of potential savings that attracts a lot of borrowers.
Studies have shown that although rates are fluctuating, variable rate mortgages still contribute more savings over a fixed one. Most people are simply afraid to take risks that is why they opt for a more stable one. However, statistics show that variable rate mortgages are more advantageous over fixed rate mortgages 88% of the time.
In addition, if you have plans of selling your home after a number of years, variable rate mortgages will work best for you where equity is easily built. You can even opt to get a balloon mortgage which starts as variable and stops at a certain point. At such period of time, you will be required to settle the remaining balance in full and payment may come from the sales that you have generated out of selling the home.
To be able to know further which is better, it is always advisable to consult an expert in this area. Such expert can provide information on the movements of interest rates. He can also provide some insight on the interest rate climate which may then lead to the consideration of the option that matches well your financial situation.
Nevertheless, do not expect that the process shall be easy. Understanding the interest climate is not straightforward as there may be several influences in the current market. Foreign exchange, inflation, bond and equities markets, and foreign treasury policies are just some of the major considerations that experts look into.
Indeed, both types have pros and cons. It will then be up to you how you shall evaluate these but it is always important that you know your financial status as well as your plans for the future. Your evaluation must be as realistic as possible so that you will not end up carrying a burden that is too difficult for you to handle.
Generally, there are two major types of loans. These are the fixed rate mortgage and the variable rate mortgage. Both types have their own advantages and disadvantages which anyone should consider carefully.
A fixed rate mortgage makes the monthly payments the same all throughout. Interest rates do not change whether or not there is an increase in the industry. What was set at the very start continues until the entire loan has been paid for.
On the other hand, a variable rate mortgage paves the way for some adjustments in the interest rates. If the rates are higher now, monthly payments will increase as well, as regulated by a certain interest index. Advantage comes in when the rates decrease at a certain period of time.
If you are after stability, fixed rate mortgages are most suitable. However, if you are willing to gamble a bit and hold on to both possible risks and rewards, variable rate mortgages may be appropriate.
The previous years had shown significant decreases in interest rates. Such phenomenon has prompted a lot of people to prefer fixed rate mortgages. In this way, they have been able to preserve such stable interest rates over a period of time.
Fixed rate mortgages may run from 6 months to 25 years but the agreed upon interest rates are guaranteed in spite of fluctuations in the market. Security and stability are indeed not a question here so this is best for those with limited and fixed monthly incomes.
However, if you prefer a short-term option, variable rate mortgages seem to be best for you. With this type, you do not have to commit to a certain interest rate for a very long period of time. There is more flexibility.
Moreover, a variable rate mortgage gives the borrowers an opportunity to make the most out of lower rates. The interest rates are normally determined by subtracting a set percentage from a prime rate which is actually what banks usually offer only to their most creditworthy customers. This is, in fact, a source of potential savings that attracts a lot of borrowers.
Studies have shown that although rates are fluctuating, variable rate mortgages still contribute more savings over a fixed one. Most people are simply afraid to take risks that is why they opt for a more stable one. However, statistics show that variable rate mortgages are more advantageous over fixed rate mortgages 88% of the time.
In addition, if you have plans of selling your home after a number of years, variable rate mortgages will work best for you where equity is easily built. You can even opt to get a balloon mortgage which starts as variable and stops at a certain point. At such period of time, you will be required to settle the remaining balance in full and payment may come from the sales that you have generated out of selling the home.
To be able to know further which is better, it is always advisable to consult an expert in this area. Such expert can provide information on the movements of interest rates. He can also provide some insight on the interest rate climate which may then lead to the consideration of the option that matches well your financial situation.
Nevertheless, do not expect that the process shall be easy. Understanding the interest climate is not straightforward as there may be several influences in the current market. Foreign exchange, inflation, bond and equities markets, and foreign treasury policies are just some of the major considerations that experts look into.
Indeed, both types have pros and cons. It will then be up to you how you shall evaluate these but it is always important that you know your financial status as well as your plans for the future. Your evaluation must be as realistic as possible so that you will not end up carrying a burden that is too difficult for you to handle.
Sunday, August 3, 2008
7 Tips to Getting the Best Home Mortgage Arrangement
Choosing the best home mortgage arrangement is like going to a shop to get a pair of custom-tailored jeans. It might fit the other guy perfectly, but it might not be as good for you. The best home mortgage is one that you’ve decided on after you’ve factored in several considerations.
So before going to a lender to arrange the best home mortgage for you, find out first if you have enough power to negotiate. Here are some tips:
1. Consider your income and disposable cash. If you have a consistent source of money and have sizable cash in bulk to take care of the 20% downpayment, that’s a point for you. If you pay a substantial amount now, you can arrange for lower monthly payments.
2. Take care of your debts. The lender will want to check your credit history to see if you are capable of consistent and responsible payments. A good record can help you a get an arrangement that’s more to your liking.
3. Don’t worry too much about rates. Although timing can factor into a good home mortgage deal, it’s best not to obsess about it too much. Concentrate more on how much you can spend for how long minus your debts.
4. Understand the different kinds of mortgages available. Make sure you know the facts before deciding on one. It might look like the best deal at the start, but consider what happens down the line. It might cost you more money.
5. Consider how long you plan to stay in the house. If it’s 10 years or less, you might be better off taking an ARM (Adjustable Rate Mortgage) than an FRM (Fixed Rate Mortgage). While monthly payments will go up and down with an ARM, the risks are outweighed by the savings.
6. If the lender allows it, try to pay more each year. Adding a month’s worth of payment to your loan that will also cover the principal will result to a shorter period of loan and save you thousands of dollars. If you can arrange for it, instead of paying monthly, pay twice a month.
7. Refinance your mortgage if the interest rates are favorable – meaning, low. Just make sure that it is at least 1% lower. Otherwise, it’s not worth the effort. Refinancing will give you more cash that you can use to pay off the principal. Result? A loan that gets smaller and smaller.
Getting the best home mortgage arrangement will require some research on your part and coupled with consistency and money smarts, you can always find one that’s just right for your needs and wallet.
So before going to a lender to arrange the best home mortgage for you, find out first if you have enough power to negotiate. Here are some tips:
1. Consider your income and disposable cash. If you have a consistent source of money and have sizable cash in bulk to take care of the 20% downpayment, that’s a point for you. If you pay a substantial amount now, you can arrange for lower monthly payments.
2. Take care of your debts. The lender will want to check your credit history to see if you are capable of consistent and responsible payments. A good record can help you a get an arrangement that’s more to your liking.
3. Don’t worry too much about rates. Although timing can factor into a good home mortgage deal, it’s best not to obsess about it too much. Concentrate more on how much you can spend for how long minus your debts.
4. Understand the different kinds of mortgages available. Make sure you know the facts before deciding on one. It might look like the best deal at the start, but consider what happens down the line. It might cost you more money.
5. Consider how long you plan to stay in the house. If it’s 10 years or less, you might be better off taking an ARM (Adjustable Rate Mortgage) than an FRM (Fixed Rate Mortgage). While monthly payments will go up and down with an ARM, the risks are outweighed by the savings.
6. If the lender allows it, try to pay more each year. Adding a month’s worth of payment to your loan that will also cover the principal will result to a shorter period of loan and save you thousands of dollars. If you can arrange for it, instead of paying monthly, pay twice a month.
7. Refinance your mortgage if the interest rates are favorable – meaning, low. Just make sure that it is at least 1% lower. Otherwise, it’s not worth the effort. Refinancing will give you more cash that you can use to pay off the principal. Result? A loan that gets smaller and smaller.
Getting the best home mortgage arrangement will require some research on your part and coupled with consistency and money smarts, you can always find one that’s just right for your needs and wallet.
Sunday, July 27, 2008
Getting A Home Mortgage From Allied
Allied Home Mortgage Capital Corporation (AHMCC), incorporated in 1991, is the largest private mortgage broker and lender in the U.S. The company is based in Houston and provides a wide selection of home mortgage loans.
Allied is a mortgage broker which acts as middleman, which gives them the capability of offering several options to their clients to fit their special needs. What clients get is a customized loan package. Allied is also one of the first in the industry to operate a Spanish-language website.
If you choose to apply with Allied, some supporting documents that they might request from you are:
- Social Security Number
- Proof of employment history in the past two years, with salary
- Pay slips covering the last 30 days
- Current W-2 forms
- Bank information including check, savings accounts and certificate of deposit
- Other investment info (stocks,bonds) and a list of assets
- Insurance company info including face amount and cash value of insurance, if available
- Liabilities with creditor’s info, monthly payments, balances
- Other sources of income
- Copy of DD Form 214 and Report of Separation for VA Loans
Allied offers assistance for a wide line of loan choices like new home purchases, refinancing, new construction, debt consolidation and customized loans, among others. These loans are available to most types of clients: first time homebuyers, the self-employed, retirees, singles and investors, including those who might have difficulty getting their loans approved.
Potential clients can apply online to utilize the Express Approval program, which allows them to get loan approval in minutes. Buyers can also compute a loan estimate by using online mortgage calculators. This will give them an idea of the price range of the house they can afford, their mortgage payments and closing costs.
While the calculators are a good indication of loan affordability, they are by no means completely accurate. That is why Allied representatives recommend that you talk to them first, to see how much you can afford to pay and how much you are qualified to loan. The advantage of getting a pre-qual is that you have the confidence to make an offer on your dream house, knowing that you have control.
Allied Home Mortgage has more than 700 offices located in 49 States and in Guam and the Virgin Islands. Should you decide to get their services, there are branches available all across the country. With more than $12 billion loans closed, Allied may just have the home mortgage loan that’s tailor-fit for you.
Allied is a mortgage broker which acts as middleman, which gives them the capability of offering several options to their clients to fit their special needs. What clients get is a customized loan package. Allied is also one of the first in the industry to operate a Spanish-language website.
If you choose to apply with Allied, some supporting documents that they might request from you are:
- Social Security Number
- Proof of employment history in the past two years, with salary
- Pay slips covering the last 30 days
- Current W-2 forms
- Bank information including check, savings accounts and certificate of deposit
- Other investment info (stocks,bonds) and a list of assets
- Insurance company info including face amount and cash value of insurance, if available
- Liabilities with creditor’s info, monthly payments, balances
- Other sources of income
- Copy of DD Form 214 and Report of Separation for VA Loans
Allied offers assistance for a wide line of loan choices like new home purchases, refinancing, new construction, debt consolidation and customized loans, among others. These loans are available to most types of clients: first time homebuyers, the self-employed, retirees, singles and investors, including those who might have difficulty getting their loans approved.
Potential clients can apply online to utilize the Express Approval program, which allows them to get loan approval in minutes. Buyers can also compute a loan estimate by using online mortgage calculators. This will give them an idea of the price range of the house they can afford, their mortgage payments and closing costs.
While the calculators are a good indication of loan affordability, they are by no means completely accurate. That is why Allied representatives recommend that you talk to them first, to see how much you can afford to pay and how much you are qualified to loan. The advantage of getting a pre-qual is that you have the confidence to make an offer on your dream house, knowing that you have control.
Allied Home Mortgage has more than 700 offices located in 49 States and in Guam and the Virgin Islands. Should you decide to get their services, there are branches available all across the country. With more than $12 billion loans closed, Allied may just have the home mortgage loan that’s tailor-fit for you.
Monday, July 14, 2008
Applying For A Home Mortgage Plan Online
Since the advent of the worldwide technology that is the Internet, human life has never been the same. Internet did not only changed the way we do business, or how we communicate with one another, it has also changed the landscape of our lives and how we do things.
The Internet has provided a way to make things better and easier. So how does the Internet manifest itself in our daily lives? Let’s take a look at a very practical example- applying a home mortgage plan. During the days when the Internet was still being conceived, getting a home mortgage plan will take a very long time.
One has to physically visit application centers and meet different kinds of brokers just to know which deal is the best. Now, with the Internet already established, everything has been cramped down into a world which can be accessed with a click of a mouse.
Another good thing about the Internet is that it has broken down the walls of information asymmetry. Back then, many lenders may resort to bringing interest rates up or creating a temporary market shoot up just to earn more money.
They can do this because the people have no other source of information regarding the going rates of home mortgage plans except the lenders themselves. But now, because of the Internet, this information asymmetry has been broken down into pieces. People can access the Internet and find the best deals for a home mortgage plan. Now, that’s convenience and fairness.
A good number of the lenders who have Internet websites usually have a certain “mortgage calculator” which one can use to be able to have an idea as to what kind of loan he can avail. There are also calculators which can give good estimates as to how much one will be paying for a certain period of time throughout the payment period.
One has to make sure to make a good assessment of the different rates that the different lending institutions are offering. This is something that can be done easily with the Internet, since everything is already uploaded and readily made available.
Once the initial research has been done, one can apply for the home mortgage plan of his choice online. This eliminates the need to physically apply for a home mortgage plan at a center.
Going online is the way to go in applying for a home mortgage plan. Just make sure that you did the necessary preliminary research about the company and the rates that they are giving out.
Friday, July 4, 2008
Choosing The Right Lender
Loans are often difficult to obtain, especially with credit reports and credit ratings made easier this time with the advent of technology. Some banks, financial institutions, and other lenders are very picky when it comes to the person applying for a loan, home mortgages included. You can’t really blame them, since they are just being careful with their money, just like any normal person would.
Lenders look for specific things when deciding whether to grant a loan or not, and this is usually reflected in either the credit rating or credit report, or both. However, being careful or specific when it comes to decisions should not be with the lenders only. The borrowers themselves can search for a specific lender, one that offers them the best deal and where they would be most comfortable with.
Lenders can come at various descriptions – national banks, financial and money lending institutions, up to small money lending businesses. They all are unique when it comes to their lending policies, which is a good thing because borrowers have the freedom to choose. In looking for the best lender for you, here are just three important things to consider:
First, the ability. Yes, lenders, no matter how big or small they might be, should have enough money to be able to lend you what you need, so it’s not really a question of their capability, since they won’t be in that business if they couldn’t lend. This is normally the area where national lenders beat out their local counterparts.
Ability refers to the various loan types that lenders can offer – which translates to diversity in products. Because a national lender has access to capital in any kind of economic environment, they often have more to offer than locals, which have fewer sources that potentially could dry up. As a borrower, you ought to consider the ability of the lender in various sources, including services during the loan (which could translate to less hassle), of which national lenders are advantageous.
Second, rate of interest. As is often the case, local lenders have more of an advantage here as they usually bring their interest rates down in order to entice borrowers to do business with them. It is understandable that they do this so that their national counterparts would not be able to monopolize the business locally. Nationals usually have a fixed rate that would have to go through some channels in order to be lowered, which is not much the case with locals.
Since the rate of interest determines how much you will be paying over the course of the loan, this is an important factor to look out for, particularly for the borrower. One percentage point can make a big difference between the borrower being able to pay the loan or not. The consequences of not paying a loan can be grave, both for the short term and long term of it, so this particular factor should be taken into consideration carefully.
Third, accessibility and relationship. As a borrower, it would be more to your benefit if you establish a good working and professional relationship with your lender. Sometimes, this is a hard task to accomplish, while sometimes it can be easy, and so it’s more of a case-to-case basis. A poor relationship with your borrower can potentially lead into a lot of different problems.
In accessibility, there are some things to look out for. One of these is what types of clients the lender loans money to – since there are some that require a higher credit rating, while some deal only with those who have bad credit. It would be better for you to know beforehand what type of borrower a certain lender does business with before actually applying for the loan.
In relationship, a one-on-one professional relationship with a lender is recommended. This is for your benefit as you will be updated and reminded as to the status of your loan, whether there is a payment soon, any potential problems, and the like. If there is no, one-on-one relationship, there could be problems.
These are just three important things to look for in a lender. There are some more, but these are some of the most important. By following these three, you are well on your way to choosing the proper lender for you.
Lenders look for specific things when deciding whether to grant a loan or not, and this is usually reflected in either the credit rating or credit report, or both. However, being careful or specific when it comes to decisions should not be with the lenders only. The borrowers themselves can search for a specific lender, one that offers them the best deal and where they would be most comfortable with.
Lenders can come at various descriptions – national banks, financial and money lending institutions, up to small money lending businesses. They all are unique when it comes to their lending policies, which is a good thing because borrowers have the freedom to choose. In looking for the best lender for you, here are just three important things to consider:
First, the ability. Yes, lenders, no matter how big or small they might be, should have enough money to be able to lend you what you need, so it’s not really a question of their capability, since they won’t be in that business if they couldn’t lend. This is normally the area where national lenders beat out their local counterparts.
Ability refers to the various loan types that lenders can offer – which translates to diversity in products. Because a national lender has access to capital in any kind of economic environment, they often have more to offer than locals, which have fewer sources that potentially could dry up. As a borrower, you ought to consider the ability of the lender in various sources, including services during the loan (which could translate to less hassle), of which national lenders are advantageous.
Second, rate of interest. As is often the case, local lenders have more of an advantage here as they usually bring their interest rates down in order to entice borrowers to do business with them. It is understandable that they do this so that their national counterparts would not be able to monopolize the business locally. Nationals usually have a fixed rate that would have to go through some channels in order to be lowered, which is not much the case with locals.
Since the rate of interest determines how much you will be paying over the course of the loan, this is an important factor to look out for, particularly for the borrower. One percentage point can make a big difference between the borrower being able to pay the loan or not. The consequences of not paying a loan can be grave, both for the short term and long term of it, so this particular factor should be taken into consideration carefully.
Third, accessibility and relationship. As a borrower, it would be more to your benefit if you establish a good working and professional relationship with your lender. Sometimes, this is a hard task to accomplish, while sometimes it can be easy, and so it’s more of a case-to-case basis. A poor relationship with your borrower can potentially lead into a lot of different problems.
In accessibility, there are some things to look out for. One of these is what types of clients the lender loans money to – since there are some that require a higher credit rating, while some deal only with those who have bad credit. It would be better for you to know beforehand what type of borrower a certain lender does business with before actually applying for the loan.
In relationship, a one-on-one professional relationship with a lender is recommended. This is for your benefit as you will be updated and reminded as to the status of your loan, whether there is a payment soon, any potential problems, and the like. If there is no, one-on-one relationship, there could be problems.
These are just three important things to look for in a lender. There are some more, but these are some of the most important. By following these three, you are well on your way to choosing the proper lender for you.
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