The 5 Most Common Mistakes That Can Hurt Your Home Mortgage Approval

Recently, President Obama put into action the Homeowner Affordability and Stability Plan to help Americans on the brink of foreclosure to receive the loan modifications they need to be able to stay in their home.  This could be the closest we get to a consumer bailout, but the money won’t be available to just anyone who applies.

Most Americans know that they should pay their bills on time to help their credit score, but there are many other factors that can dramatically affect your ability to get a loan.  Let’s take a look at the 5 most common credit mistakes:

1.  Maxing out your credit cards

Repayment ability is the main factor that lenders are looking at, which is essentially your debt-to-income ratio.  If you have a small amount of debt compared to your income, you’re in a much better position to pay off what you owe (quickly).  Before you apply for a home loan, try to avoid charging a lot on your credt cards, so that your balance stays low.  If you carry a balance month-to-month, try to pay them down as much as possible.

2. Buying a car on borrowed money

One of the biggest mistakes many families make is financing a car or other major purchase right before they apply for a mortgage.  Sometimes is can mean the difference between approval and denial.  Wait until after your loan has closed - not just been ‘approved’ - before you take out another loan.

3.  Procrastinating

When you’re looking to refinance an adjustable rate mortgage (ARM), don’t wait until crunch time.  Start preparing at least a year in advance.  Most homeowners wait until just 2-3 months before the expiration of their initial rate, and this can really limit the number of available options. 

4.  Reconciling old bad debt

If you have old charge offs or collections on your credit history, it might seem like a responsible idea to pay down or completely pay off these debts.  Unfortunately, by paying into this debt, your credit report adjusts it to ‘current debt’ which makes your credit problems seem more recent than they were.

5. Reaching out for help

Credit counselors will often give advice that is relevant for getting you out of debt, but typically neglect your ability to get new financing, including home mortgages.  Many times, a counselor will recommend closing healthy credit accounts to stop you from using them, but canceling these accounts is bad for your credit score.  Additionally, lenders don’t like to see that you are having difficulties handing your own finances, and having credit repair services on your record can send up a red flag.

To qualify for a certain type of home loan under the Homeowner Stability Initiative, you might have to sign up for HUD-certified debt counseling program, but otherwise you should stay away from credit counseling before applying for a home loan.  If you really have a spending problem, a better strategy is to put your credit cards where they aren’t easily accessible to you (like a safe deposit box), or even cut them up.  Keep the accounts open, and continue to pay down your balances and make your payments on time.

By avoiding these mistakes, you can help boost your credit score enough to qualify for lower rates, bigger loans, or both!

If you’d like a free consultation to get the best mortgage for your current financial position, drop us a line and we’ll help you out.

Thinking About a 40-Year Home Mortgage Loan? Think Again…

We received an article from Dane Smith today, talking about the inefficiencies of a 40-year home mortgage. Dane brings to light some very excellent points in his article, titled…

Why I Hate 40-Year Loans

During the subprime crisis we saw the advent of numerous bizarre loan products. In general the new loan products were designed to get people into houses they could not normally afford. As people started to default on their mortgages banks realized many of these loan products were not a good idea. During the subprime crisis we saw most of these new loan programs fall to the wayside. I think in most cases this is a good thing. Many of these new loan products reduced the chances that individuals could gain equity in their homes by paying off principle. When difficult times arose for people they were in a difficult position because although they had made years of payments their loan balance had not changed. The worst of the new loan products had “teaser rates” so that individuals made low payments for a few years until the rate and their mortgage shot up. Its a wonder why banks are surprised by the number of foreclosures.

The one product that has seemed to survive the subprime meltdown is the 40 year loan. I am not a fan of the 40 year loan. Mostly because the savings are minimal. Lets look at the current mortgage interest rates from Wells Fargo for a 40 year, 30 year and 15 year loan.

40 Year Loan = 6.375

30 Year Loan = 5.75

15 Year Loan = 5.125

Now using a mortgage calculator, lets look at the mortgage payments on a 200k house.

40 Year Loan = $1,153.14

30 Year Loan = $1,167.14

15 Year Loan = $1,594.64

While the difference between a 30 year loan and a 15 year is substantial, $441.50, the difference between a 40 year loan and a 15 year loan is only $14 per month. A little savings but is it really worth adding a whole extra 10 years to your mortgage. So over 30 years $14 dollars a month amounts to $5040. On the other hand an extra 10 years of mortgage payments comes out to $138,377. To run the numbers a different way by putting down a mere $2400 on your 30 year loan you would get the same mortgage payment as you would on a 40 year loan.

Obviously everyone’s situation is different and in a small number of cases a 40 year loan might be warranted. But in general the 40 year loan adds extra years to a person’s loan for a minimal benefit.

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Ki works as a realtor in the Austin real estate market. He provides updated stats on the market on his Austin real estate blog along with a free search of the Austin MLS.

Thanks for that insightful article, Dane.

If you’d like to talk to a local, Sacramento lending professional about finding the right mortgage for you, just drop us a line today and we’ll put you in touch with the best person to meet your needs.

Will the Credit Crunch Affect Your Ability to Get a Home Mortgage?

Today we’re joined by Chris Clare, a market expert in the housing industry. One of the topics on everyone’s mind these days is how the state of the economy will affect their ability to get financing for their home. Let’s take a look at what Chris has to say about it.

The Credit Crunch What Does it Mean to You

by Chris Clare

The aim of this article is to define the credit crunch and explain how it may have an affect on you as a borrower. Although it is compiled with the UK market in mind, due to similarities between the different countries within the European and world markets, the effect it may have on the individuals within these markets will likewise be similar.

First of all lets discuss what is the credit crunch? The credit crunch that most people have heard about first started in the US. It was primarily bought about by two situations, the first of which was the way in which money was being lent and secondly how the money was derived by the lenders making the loans.

When lenders loan money it is invariably not out of their own pockets, in that it is not exactly their own money. This sort of money is known as securitised money. It is money that has been borrowed from somewhere else before being loaned on to the public. The source of this money comes from what is known in the business as money markets. Vast sums of money are borrowed from these money markets by the lenders, sometimes millions at a time. The money borrowed from the money markets by the lenders is called the tranch of money.

Once that tranch of money has been lent to borrowers, they then set about borrowing more but what has already been lent is known as a lending book. That lending book has a value to institutional investors. Institutional investors are people such as pension companies or large investors who want to own loans lent to others that are going to be repaid but don’t want to go through the hassle of actually lending it in the first place and dealing with the end user. Lending books depending on their quality can have quite a high value.

It is the quality of these lending books that plays such an important role as to why we have a credit crunch at all. Ideally, a lending company would obtain a tranch of money for lending at a set rate. They would then lend this money to their borrowers at a percentage higher than that, and would therefore be making a profit. However, there are two significant possibilities which can ruin this ideal situation. The first is if the secondary lender lends poor quality money to the public. That is to say that some or all of that money has not been paid back and so is not effectively there to lend. The other possibility is if the money being distributed by the primary lenders, the distributors of the tranches of money, runs out.

Both these scenarios have occurred in the United States. Erratic payment and non payment of loans obtained by the public have left the secondary lenders with a trail of bad debt on their lending books which have in turn led the institutional investors to leave the markets. This has a subsequent effect on the secondary lenders in that there are less institutional investors to borrow money from and the ones that remain will be far more scrupulous in scrutinizing the loan books before putting their money forward, and so continues the downward spiral. The secondary lenders need money to borrow and continue on but the investors are not willing to invest in what they can perceive from the loan books to be bad debt and therefore bad investment opportunities.

All this has had a corresponding effect in the UK and it is evident that many of its lending companies main source of business relies on securitised lending. Although this is not a reflection of the UK’s more stringent methods of lending, it does show the caution with which the international money markets are treating the whole process of borrowing and lending.

The situation in the US is causing untold damage to the money lending industry in the UK and there is no doubt that many corporations could be destroyed by it. This may seem a world away from Joe Public, but as lenders tighten their belts on lending requirements in order to keep a high quality lending book, we will continue to find it more difficult to borrow money.

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Advice on mortgages from qualified Independent Mortgage Advisors help information and free to use mortgage calculators please visit Mortgage Route

Thanks for that excellent insight, Chris! I know our readers garnered a ton of useful information to help them understand what’s happening in the financing market during these turbulent times.

If you’re a reader who would like to talk one-on-one with an industry expert about your personal financial goals and home ownership possibilities, just let us know and we’ll put you in touch with someone very knowledgeable on the subject. You can contact us by dropping us a line on this page.

Buying Your First Home? Don’t Miss These Vital Keys to Your First Mortgage!

One of the most important parts of manifest destiny and the American dream is home ownership. Owning your own home can be a very smart investment decision since prices tend to increase faster than the inflation rate, and now, with the recession dropping home prices and interest rates to their lowest in the last decade, there isn’t a better time to buy! Because of the current market timing and the fact that it’s a widely known as a smart investment, now is the time to start considering the idea. Before you rush out, call a realtor and start looking for a house, you should start by seeking out the perfect mortgage for your budget.

By first finding out how much house you can afford, you’re doing yourself and your realtor a huge favor since there won’t be the question of ‘can I afford it.’ If it’s not in your budget, don’t bother looking, and if it is in your budget, you can be confident that you can find financing for it. Since buying a home is the largest single investment most Americans make, it’s definitely not to be taken lightly. If you spend a short while to learn about mortgages before you get started, it will be worth it.

To begin your home mortgage search, talk to credit unions, banks, and brokers in your area. You’re looking for someone to hold your hand through the process, but you also want a decent rate with low fees, so make sure to shop around.

When you’re looking at rates, you will be shown two different types - variable/adjustable rate (ARM) and fixed rate. The ARM rate is usually shown as a promotion at a cheap rate, sometimes called a “teaser.” After the fixed period of the ARM is up, you can expect rates to rise significantly if you get into one of these adjustable rate mortgages.

ARMs have two specific things you look for to use in your analysis - when the rate adjusts (anywhere between one month to 10 years) and what the cap on the interest rate is. Usually, the rate will adjust to whatever the prime rate (the federal government chooses this number) is at the time of the adjustment, plus a certain percentage of ‘mark-up’ that pays the bank. When you discover the rate cap, use a mortgage payment calculator to find out how much your maximum monthly payment is, worst case. That’s not to say your mortgage will actually adjust to that rate, but it’s a prudent idea to plan for different scenarios - including worst case.

In the current economic environment, we have extremely low interest rates. By signing on an ARM right now, you would more than likely end up with higher payments later, as the economy rebounds and the rates increase again. However, if you plan to move into a new home before your interest rate is set to adjust, it isn’t a bad idea to capitalize on the low rate. If you feel that rates will continue to drop in the future, an ARM can put you in a great position to take advantage of that.

Fixed rate mortgages are less complicated than ARMs because you know exactly what your payment is for the life of the mortgage. The fixed rate, as it implies, locks in your interest rate for the entire duration of the loan, which is great for current economic times with low interest. This type of mortgage protects you if interest rates go up, and if interest rates fall, you’ll have the option to refinance at the lower rate.

The length of the term on your mortgage can greatly affect the total amount that you pay over the course of the loan term. A shorter, 15-year mortgage has much less compound interest tacked on, so the payments won’t actually double that of a 30-year mortgage. 15-year mortgages can be surprisingly affordable, but if your income can vary from month to month, and it might be a stretch, go for the longer term. With the 30-year mortgage, you can always make additional principal payments during good months to help pay off the loan quicker - effectively racking up less in interest.

Becoming a home owner is an important step in everyone’s life, and with the right home mortgage loan, it can be just as affordable as your rent payment. Start building equity and investing in you home today - you’ll look back on this moment and be glad you did.

5 Sizzling Ways To Finance A Home This Summer

Today we have Victor Benoun bringing us the best tips on financing a home in this turbulent market. Thanks for joining us, Victor, and we are anxious to hear your advice, so without further adieu…

5 Sizzling Ways To Finance A Home This Summer

by Victor Benoun

Despite the negative press we are pounded with daily concerning the aspect of the housing market, and the difficulties in the banking system, it is in fact a fair time to buying a home. Prices have not been this low in years, interest rates remain at historical lows, and buyers have tremendous bargaining power. Whether you are considering purchasing a house or refinancing an real property, here are a few helpful hints to make your transaction as even as a summer day!

1. Get pre-approved. Pre-approval differs from pre-qualification as pre-qualification is purely a thumbnail sketch of your financial background. A credit report frequently is not run and no financial documentation is reviewed. Pre-approval requires income tax returns, pay check stubs, bank statements, liabilities, anything that might be indispensable for a lender to make an adequate assessment of your ability to repay a mortgage. In addition, a credit report is requested and reviewed for your credit-worthiness.

2. Improve your credit score if necessary. A credit score is a numerical demigod of the likelihood of you repaying your debt. It is based on the amount of fly open credit trades you have, how near at hand you are to your available credit, as well as your paying habits. In the case of credit scores, your foregone does equal your future. You can improve your credit score by paying down your debts, closing credit cards you no longer use, and of course paying on time.

3. Inquire how much wherewithal is exigent for a down compensation and closing costs, and are there restrictions where the stock comes from. Often, assumptions are fabricated by the consumer that down payments can come from a credit card, a personal loan, cash on hand, or a little gift. It is wise to discuss this in move on in terms of what is allowable or not. Do not wait until you are under compromise to discover the source of your funds can not be used.

4. If you find a home that is right for you, do not wait for the market to drop. Believe it not sundry homes today still sell with multiple offers. According to an article in The Los Angeles Times, dated June 1, 2008, ‘Homes in service qualification that are listed at $300,000 or underADJ Expensiveness are drawing as in as 15 to 20 bids from home buyers and investors, looking for bargains.’ It is very toilsome to time the market as to when the supporting has been reached. Prices have already dropped by record amounts, and there is just no way to say how much lower they may go.

5. In financing a home, now is a benefit time to contemplate long-term. By that I mean to consider a 30 year fixed rate mortgage. Rates are still at low record levels so it is greater time to lock something in and not worry about it.

People oftentimes make life changing decisions based on beliefs which in reality no longer exist. Loan programs have transitional as well as the criteria for being approved. Before ever stepping foot into an yawn house meet with a lender what programs are available and what you qualify for.

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Victor Benoun is President of The Mortgage Source, Inc., and author of Your Castle No Hassle. He has 29 years experience in the mortgage industry and is available for keynote speaking and consulting. For free housing and mortgage reports, visit his website at http://www.yourcastlenohassle.com.

Thanks for that wonderful report, Victor! We are glad to have you as a resource to our readers!

Readers, if you’d like to speak with an industry expert like Victor, feel free to drop us a line today. Our consultations are always free for the Sacramento community!

Take 13 Years off your Mortgage! Without Paying a Cent More per Month!

We’ve all been looking for the magic bullet to help reduce the duration of our mortgages, but here it is! Without increasing your monthly payment ONE CENT, your can have the bank redirect more of your payment to your principal, and less to your interest. Without further adieu…

Payoff Your Mortgage ~ Use the Fastest Method Without Cutting Into Your Paycheck

WARNING: You’re at a strict disadvantage mortgage companies charge as much interest as plurality as possible without informing you in a clear way all the steps you can take to change it.

The current system requires your payments come after an ‘amortization schedule’, which forces most of your stock to go towards interest.

In the first five years, you could end up spending five times more in interest than in mortgage principal - and that’s a huge chunk out of your paycheck! So if you make $12,000 in principal payments, you end up spending $60,000 in interest. Unbelievable! For a homespun calculation go to Bankrate.

And when you move, the bleeding starts all over again…

The banks know you’ll apparently move again or refinance in 5 years, and then the cycle of paying more interest starts all over again.

It takes years before your loan balance is reduced by a minute amount-how unfair is that?

How several years have you been paying off your mortgage and are you really further ahead?

But here’s how to fight back…

You’re going to love this…there’s an improved wise you can use to reduce these interest payments.

The way to do this is simple. Apply more of your monthly mortgage repayment to principal rather than interest without changing your repayment or refinancing your mortgage.

For example, if you pay $1,200 towards your monthly mortgage repayments, $1,100 goes towards interest and $100 towards principal object in the life of the mortgage.

You can pay more to principal, underADJ Expensiveness to interest…and it’s perfectly OK with the bank!

Hang onto your seat, now there is a way to apply $900 towards interest and $300 towards principal without changing your lifestyle or paying more anything…and the best part is that the banks will gladly accept this!

This fashion has been on every side forever but nobody has figured out how to use it.

Until now.

Wouldn’t you like to shave 13 years off your mortgage? You can! Here’s how…

Your mortgage can be paid off in one-half to one-third of the time. Most of our clients shave at least 13 years of their mortgage without spending a cent more.

And no, you do NOT have to refinance or get another mortgage; just have an perforate mind and a disposition to tackle a common math problem!

The concept is really simple. All you have to do is use a mortgage checking account the right way. Once you set this up you enter upon immediately allocating more of your payments to principal rather than interest and end up paying your mortgage much faster. The best part of all, the banks happily accept this.

Here are the 7 basic steps you need to follow:

1. Calculate your personal ‘HELOC number.’

2. You set up a Home Equity Line Of Credit (HELOC) for the Heloc number.

3. You pay your bills and mortgage on time.

4. You assignment cash to your HELOC at the right time.

5. Your bank takes care of the rest-and they’re happy to do it!

6. Create a spreadsheet to make sure you stay on track.

7. …and YOU PAY OFF YOUR MORTGAGE AS EARLY AS 13 YEARS SOONER THAN NORMAL, AND SAVE AN AVERAGE OF $67,636 CASH!

You will NOT have to change your day-to-day spending habits or your lifestyle to take advantage of this concept. It’s a sound, smart way to pay down your mortgage.

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Go directly to http://www.eqxl.com, EquityExcel. You will find out the step by step method to pay off your mortgage and the risks to avoid so that you don’t lose your home in the process, and you will be on the path to financial success.

That was a real eye opener! I’ve been waiting for this info for a long time! If you’d like to speak with someone who can talk more in-depth about your personal situation for absolutely no cost, just let us know by dropping us a line today.

Worried about a Foreclosure? These Mortgage Tactics can Save Your Home…

Foreclosure can be a scary thing for a lot of families. It’s very important to uncover your options and know the alternatives. If you can halt your foreclosure, you can save yourself a lot of hassle, stress, and time. Let’s take a look at Ranju Kumar’s guide to stopping a home mortgage foreclosure.

Stop Foreclosure ~ Avoiding Foreclosure Tactics To Halt Loss of Your Home

Foreclosure. The word wherewithal home loss, upheaval and anguish. Over a few months, what you have worked so stubborn to attain can be taken away from you. It can cause stress, fighting and endless sleepless nights. Is there anything you can do if you face this predicament.

Unforeseen Events Can Lead To Foreclosure

Reaching foreclosure can come off a life changing event where you find you must not only deal with the event - of job, unforeseen hospital bills and all those individual conditions that can sometimes take center stage in your life. You may or may not have received a foreclosure notice, but you may be worried about it. This is totally understandable if you find you can’t make payments or at all of something that’s varied in your life.

Get A Clear Picture Of Your Situation

In order to get out of mental turmoil and get a clear picture of what is current in your life, you need to take specific action. CNN reported that in 2008 foreclosures spiked 112 percent with no end in sight. Failure to act can bring your fears into reality.

Build A Concrete Plan For Recovery

The best way to avoid foreclosure is to take concrete action before foreclosure happens arranging a solution former to that final option. In order to do this, you need to assess your situation, contact the proper people in order to get foreclosure stopped, come up with an alternative conception that you can present.

Look Into The Important Factors That Change The Equation

There are some important factors to consider when coming up with an alternative plan:

- What you need to do before you pick up the phone
- How to avoid the myriad of scams that will destroy any indetermination you might have
- What foreclosure assistance programs are available
- Who to contact and when
- Methods you can employ right now to avoid foreclosure
- Approved foreclosure counseling centers that can help you

Move From Fear Paralysis To Action

The way to avoid foreclosure is to put worry and fear aside is more than feasible if you move from paralysis about your latitude into action. Get a manual, handbook or checklist that will help you organize and build a concrete project for recovery from foreclosure.

Relevant Information Is Essential

Knowing whether the nation is on your side or not is important as well as your rights within the veracious estate marketplace. There is a lot of intimation online to help you already. Because foreclosure is such a in quantity national problem, all kinds of reputable organizations have sprung up to give you knowledge that will help you.

Action and Correct Information Will Make The Difference

Making a move and building a suggestion pre existing to the commencement of the foreclosure process is the key to elusive it. You have more rights than you think, and there are a number of anomalous ways for you to revive working with agencies instead of being trounced on by them. The key to touchdown is to get timely, relevant and effective data that will allow you to build a proposition of action.

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Ranju Kumar an editor of http://www.stoppingforeclosureguide.info is providing information to help those who are facing the prospects of mortgage foreclosure. Just check out his website and get to know more on how to avoid Foreclosures.

Thanks for writing, Ranju. We learned some valuable tips for avoiding foreclosures.

If you’re a reader who would like a personalized consultation to find out how you can avoid foreclosure on your home mortgage, drop us a line and we’d be happy to walk you through the process.

How to Choose the Right Home Mortgage Lender

Everyone is always wondering if the grass is greener with a different home mortgage lender. Most of the time, it could be. This effective guide will help you choose the right lender the first time so you don’t have to wonder about what could have been.

How To Get The Best Lender When Refinancing Your Home Mortgage

Are you considering refinancing your mortgage loan? Did you know that choosing the wrong kind of lender will cost you thousands of dollars? It makes a difference refinancing with a mortgage broker, bank, or Internet lender; the difference is thousands of dollars in unnecessary interest payments. Here are several tips to help you choose the right mortgage lender when refinancing your home.

Mortgage Questions You Need Answered

Most homeowners focus on choosing the best lender or the lowest mortgage rate when refinancing. After all, isn’t shopping for a mortgage just like shopping for a washing machine? You compare rates and closing costs and choose the best offer right? That would be true if you were shopping for kitchen appliance; however, when choosing a lender you’re basing your decision on estimates that are guaranteed to change before you close on the loan.

So if asking which lender is best is the wrong question, what should you be asking? If you’re focusing on refinancing mortgage rates when choosing a loan you’re on the right track. The question you should be asking isn’t who the best lender is, but who is the right person to arrange your next home loan. This person needs meet certain criteria in order to be in a position to offer you the loan you want; more on that later.

Who Should You Choose To Originate Your Mortgage?

First of all, should you pick an Internet mortgage site or a bank to refinance your home? Absolutely not! You should never refinance with a bank or credit union due to loopholes in the Real Estate Settlement Procedures Act that protects homeowners from abusive lending practices. The problem with those Internet mortgage sites you see on television is that you’ll be dealing with an inexperienced salesperson that does not have the authority to broker the deal you want.

You Need a Mortgage Broker

If you want the best mortgage rate you need to find the right mortgage broker…and not just any broker will do. You’ll want someone that owns their own business, a self-employed mortgage broker that does not use salespeople to close loans. You want this type of mortgage broke because the business owner will not only have the authority to negotiate but will not be sharing their commission with a salesperson. This is important because you’ll save money at closing and in the long run with a lower mortgage rate. It is possible to refinance your home with a wholesale mortgage rate and pay a one percent origination fee to the broker arranging your loan.

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Ready to refinance your home? Don’t get cheated by a dirty broker or lender - check out free, independent video tutorials on getting the best refinancing mortgage rate here.

These are some very effective tips to follow, and I’m glad we were able to share them with you. If you’d like to speak one-on-one about your personal situation to find the best plan of action, we have experts standing by to help. Just drop us a line today and we’ll get you on the right track.

The Truth About Choosing The Right Fixed Rate Mortgage

James Redder is with us today to help us choose the right fixed home mortgage. We’re very excited to present this article to you, since it breaks through many of the myths and misconceptions in the mortgage market. Take it away, James!

The Truth About Choosing The Right Fixed Rate Mortgage

There is always a debate when home buyers have to decide on the merits of 15 or 30 year fixed mortgage rates. Many people wait until they are older before taking on the responsibility of a mortgage so an early payment of this large debt is an important issue to think about. In a situation as important as this time needs to be spent considering all the available options. Home buyers looking into this need to be assured their monthly payments will not increase.

It seems that some lenders are happy to offer deals that appear too good to be true and they usually are. The interest rate should remain the same for fixed rate mortgages until the loan is repaid. This is of great benefit for anyone that does not like surprises. Both my wife and I decided to research fixed rate mortgages when we started looking at homes for sale.

Even though it was important for us to pay off our loan at the earliest possible opportunity, we didn’t want high, unrealistic monthly payments which we would have trouble maintaining. Considering longer term fixed rate mortgages was one option if we could not afford a 15 year plan. We didn’t really like the prospect of having a mortgage as we approached retirement so were really hoping to get one of the loans with 15 year fixed mortgage rates. We felt that there was a great deal of emphasis on paying the mortgage off early.

We thought about it long and hard and despite the pressure we decided to go with the 30 year loan plan. Although a number of things had to be pondered over, eventually the choice was made for us. Discovering my wife was having a baby was the most important reason. As she intended to raise our child at home we couldn’t rely on her financial income to the monthly expenditure. The problem we could see was the increased financial commitment on a monthly basis if we had opted for the 15 year fixed mortgage rate. We knew that it just wasn’t an option and the risk was too great. Despite the trepidation of having a longer term loan, it did reduce the repayments considerably.

We are also able to make extra payments throughout the year to make the principal shrink quicker. Those few extra payments also help reduce the number of years you have to pay the loan over. In the long term, this is a strategy well worth pursuing if you are able. Although we would have much preferred a loan with a 15 year fixed mortgage rate we had to take our needs and abilities into consideration. Anyway, everything worked out fine despite our hesitancy.

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James Redder markets a Finance website. If you liked the finance info, GET the powerful info RIGHT NOW. Goto Refinance After Bankruptcy website.

Excellent tips, James! Thank you for sharing your experience with us!

For a personalized consultation about your home mortgage needs, just drop us a line today. It’s always free, and always great advice.

Home Mortgage 101 - What You Need to Know to Get Started

Joining us today is Barry Stein, with some excellent advice on getting started with home mortgages. As always, I know you’ll find this article to be a great resource for getting your feet wet in the world of mortgages.

Home Loans

Buying a home remains the great American dream. Home ownership rates have been exploding in recent years, spurred on by the historically low interest rates in the home mortgage market. Home prices have been rising at far faster than inflation, especially in major urban areas such as San Francisco, San Diego and Chicago. This means that not only can that home you’ve always wanted put a roof over your head, but it can provide you with a great investment as well. For people new to the mortgage market, buying their first home starts with finding the best home loans.

All potential homeowners should take some time to research home loans before calling their local realtor. There are a dazzling array of choices available when it comes to home loans, and finding the right mortgage for your needs can be difficult. Approach your upcoming home purchase with the same seriousness you apply to other major purchases. Your home will most likely be the biggest single investment you ever make. Take the time at the beginning to educate yourself about home loans. It will be time well spent.

Home loans are available from a wide variety of sources. These sources include banks, savings and loan associations, credit unions and mortgage brokers. Shop around at all of these sources to find the home loans with the lowest interest rate and lowest costs.

You will also have to decide between fixed rate home loans and variable rate home loans. Variable rate home loans are often advertised with extremely low “teaser rates”. These rates are used by lenders to get your attention and lure you in.

Before signing up for a variable rate mortgage, make sure you find out what the interest rate cap is. Variable rate home loans are usually based on an underlying interest rate, like the prime rate. The interest rate you pay will typically be the prime rate plus or minus a certain percentage. The variable rate mortgage will have a cap above which the interest rate cannot rise. Find out what that cap is, then use a mortgage payment calculator to see what your monthly mortgage payment will be at that rate. If you cannot afford the monthly payments at the maximum interest rate, you may not want to take the mortgage loan. While it is unlikely that interest rates will rise sufficiently to make the maximum interest rate kick in, it is always a possibility.

Variable rate home loans can be a good choice if you believe interest rates are likely to fall. In an environment where interest rates are steady or rising, they may not be so good a choice. You may also want to consider a variable rate mortgage if you do not plan to stay in your home more than five years. For instance, if your job transfers you every couple of years, you could probably get away with a variable rate mortgage and take advantage of the lower interest rate. When you move and sell your home, you will probably realize a gain due to rising home prices.

On the other hand, fixed rate home loans have a set interest rate for a set period of time, generally either 15 or 30 years. The interest rate does not change, therefore you will always know what your monthly mortgage payment will be. You are protected from rising interest rates with a fixed rate mortgage. If rates fall significantly, you can always refinance your mortgage loan to take advantage of the lower rates.

If you can afford the payments, 15-year home loans can substantially lower the amount of money you will ultimately pay for your home. When you run the numbers on a 15-year versus a 30-year home mortgage loan, you may be surprised at how affordable the 15-year home loan can be. Your mortgage payment will not double if you go with a 15-year mortgage versus a 30-year. This has to do with the affect of compound interest. You are paying far less interest in the long run on a 15-year mortgage.

Whatever type of home loan you decide on, the most important thing is to take that step which transforms you from a mere renter to a home owner and builder of equity. There are a great many home loans out there, but once you find the right one, you will find the rewards of home ownership well worth the time and effort put forth.

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Barry Stein is the owner of aWebBiz.com where he offers cutting-edge tips on all aspects of business and a Free Newsletter on Internet Marketing. To find more advice, tools and resources to help you succeed in your business, visit: http://www.aWebBiz.com

Incredible article, Barry! We’re excited to bring these tips to our readers!

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