Your Questions About Mortgage Loans For Bad Credit

Posted on April 17, 2012 by admin

Michael asks…

what is the average mortgage payment for a $700,000 house bought this year with bad credit?

I’m not sure how to figure out the monthly payments and I’m curious as to an estimate? This is assuming 5% down with a loan for the full amount of the house

admin answers:

The question I have is why do you need a $700,00 house?

$5,000 seems to be a good ballpark for the P&I.
$725 Taxes
$100 Insurance
$6,000 or so

Even with a 50% debt ratio, you would need to make at least $12,000 a month groos to afford this. And more than likely, if you have other debts, probably $15,000 per month.

Generally, as a rule, you should buy a house that is 3 X what you make. So for a $700,000 home, you need to make $233,000 annually.

I know that there are people buying $700,000 homes who only make $80,000 to $100,000, but they are probably using an ARM and are going to get into trouble, especially with prices falling.

Please reconsider your purchase and try something much cheaper, and 3 X what you make, especially if you have bad credit.

Chris asks…

Closing a credit card account bad for credit score?

I have a problem with credit cards, and recently paid off a maxed out card with a VERY large credit limit with help from my parents. I would like to close the account so I can’t use it again, but I’ve heard that this will have a negative effect on my credit rating. Is this true, and if so how much of a negative effect? I’m trying to weigh the risk of me caving and racking up more debt vs. the ultimate effect on my credit score for mortgage, care loan, student loan, etc. in the future.

admin answers:

Yes, if you close your credit card account it will hurt your score. It removed a portion of your credit history, plus it lowers your debt/credit ratio.

Here is what I suggest you do. Call the CC company and tell them to lower your credit limit (maybe $200). That way you are not tempted to run up a huge bill, but you still have a small stash of credit available for emergencies. If you want, you can have them freeze your account (not close it).

Paul asks…

Is there a way to get a mortgage loan with very low credit score?

My husband and I both have bad credit scores…his is bad b/c we found out his mother had stolen his social security number and had been using it since he was a toddler. Mine is bad b/c I just was desperate to pay for college but then I couldn’t pay it all back and it went downhill from that but the house would be going in my husband’s name and not mine.

Our situation is this: we pay $500 a month for rent and don’t see why we can’t get a loan to finance us because we don’t have problems paying this amount with only my husband working right now. If we got this house it would benefit us b/c we would live closer to downtown where I might be able to find a job in walking distance (I don’t have a car and my husbands needs our only means of transportation for his work). I called up a mortgage lender and she says the only way we can get financed is if we had a credit score of 620. The town we live in has very very unlimited number of houses for sale (right now…5) otherwise there is a bunch of land to build a house on…but we wouldn’t be able to afford that.

The mortgage lender said the only other way for us to get financed is going to a bank which they would look at our credit plus would want a certain amount for a down payment and we only have $1500 down b/c when we moved here we had to put a $1000 down to rent this house as well as $500 to put the utilities in our name b/c the town bases off the highest amount the previous owner had to pay…which is bull.

I just need to know if there is any options out there for us…we live in Iowa…or is there any Grants that can help us….I tried to look up grants but I just don’t know who is a true credible site to use. Please help because we would like to start our family in a home we can call our own.
The Realtor calculated what our payments would be with the insurance as well as property taxes at is at $500 to $517 a month
We took his mom to court and all she had to pay was $1000 and it didn’t go to us
And we have already contacted Social Security, they said they were going to do their own investigation…but have not gotten back to us and that was several months ago…my friend says that they probably just shoved it to the side…IDK??
IF YOUR NOT GOING TO REALLY HELP US THEN DON’T ANSWER!!! I WANT TO KNOW HOW TO GET A HOUSE WITH OUR CREDIT SCORE NOW AND DON’T ANSWER IF YOUR GOING TO SAY THE SAME CRAP EVERYONE ELSE IS SAYING…I’M SICK OF SEEING THE SAME THING OVER AND OVER. OBVIOUSLY THERE HAS TO BE SOME WAY BECAUSE THERE ARE PEOPLE OUT THERE IN WORSE SITUATIONS THAN US AND YET THEY CAN GET FINANCED FOR A HOUSE.

admin answers:

Low credit is not going to fly in this economy.

And $500 bucks a month won’t pay for a cracker box without a huge downpayment and a great rate.

To say nothing of considering Taxes, insurance, upkeep. In that $500.

IMHO, save some cash, pay some bills and wait a few years.

Ruth asks…

When the uber rich mortgage bankers make bad loans why should innocent taxpayers pay for the deceit and greed?

Mortgage Bankers of America started this with adjustable rate mortgages. Another ponzi scheme where the small time suckers get left holding the bag. It started around 1984. This collosal bailout will only delay the inevitable. Obama has more links with this than does McCain. Beware. Dallas school district announced emergency situation today. Teachers will be laid off, nurses will be laid off. Without credit to meet payrolls, millions and millions will get laid off. They you can call it a Depression. Awesome unemployment is the next step after the banks close or shrink. Credits lines freeze up and business shut the doors. They cannot make the payroll. The U.S. Congress sat on their hands and did nothing. Now they will all vote for a bailout but they really do not understand what the hell they are doing. Those suckers were in on this bank robbery and looked the other way. Welcome to Hell compliments of the U.S. Congress.
The congress should do the honorable thing. The most common form of seppuku or “hari kari” for men was composed of the cutting of the abdomen, and when the samurai was finished, he stretched out his neck for an assistant to decapitate him. Since the main point of the act was to restore or protect one’s honor.

admin answers:

There is no right answer, deregulation and cheap money were the root causes. Yes it was a ponzi scheme, but the entire concept of capitalism is essentially based on the ponzi paradigm.
This happened to the savings and loans in the late 80′s, there was an 18 month recession then new ponzi schemes were discovered and the cycle began again.

Daniel asks…

Are school/college loans considered good debt or bad debt?

Any debt isn’t great. Is school loan debt that is paid every month counted against you on your credit report, when you apply for a car loan or mortgage? Are school loans the except and considered good debt or in the same category as bad debt with credit cards?!

admin answers:

If you can find a job and slowly pay off your college loans, it is “good” debt.
If you can’t find a job in your studied field to pay off your college loans, it is bad debt.

Sadly most college graduates in todays day and age are not only struggling to pay off their college loans, but they are struggling to find a job in the field that they chose to study in college. Some of my friends are thousands of dollars in debt and never even received a call back after applying for over 50 jobs. My personal opinion is that blue collar jobs will come back to America because of the incredibly high ratio of college graduates in todays day and age.

Your Questions About Mortgage Insurance

Posted on April 17, 2012 by admin

Laura asks…

Can mortgage insurance on a new home mortgage be deducted?

Home was purchased in June 2006. Just curious to know. Thanks in advance for any help.

admin answers:

Nope.

Just mortgage interest and property taxes. Any points you paid on your mortgage in 2006 are also deductable.

David asks…

Why does the REO Bank “seller” submit my purchase offer to MI (Mortgage Insurance) for review?

We have made an offer on a REO single family home in California. The bank has now submitted the offer to MI (Mortgage Insurance) for review. Why would a REO property need to do this?

Our offer is a cash purchase with no loans needed.

Thanks for your answers and information !

admin answers:

The bank is losing money on this house. They had “insurance” in case they ever lost money. The insurance was MI. They are finding out how much the insurance company is going to pay them before they finalize their response to your offer.

THis is not happening much since no one used MI during the realty boom years.

Jenny asks…

Mortgage Insurance Premium Deduction Question?

I am currently paying for mortgage insurance on my FHA loan, which was completed in 2002. These amounts don’t show up on my 1098. Is it because the loan closed prior to 2006 or should I contact the mortgage company? It seems wrong that we would lose out on the deduction if we are still paying amounts…

admin answers:

Only loans taken out in 2007 get the deduction.

Carol asks…

Home insurance, Mortgage insurance, and life insurance?

I have life insurance with my employer which covers my spouse and myself. We recently bought our first home and need to get mortgage insurance and home insurance. I am planning on bundling these with my current auto insurance company (if the quote is reasonable). My question is what kind of coverage should I look for and what type of questions should I be asking? The house is in great shape, 25-30 years old, and we have a home inspection report. All updates done and has a security system. Do insurance companies charge to evaluate your home in person?

admin answers:

An agent should come out to calculate the cost to rebuild the home – it’s part of buying the policy, so no extra charge.

That same agent should be willing to take the time and sit down with you, and explain which coverages you need, and explain all about the policy. If they don’t do that, you need a different agent.

Joseph asks…

I received a 1098 from 2 mortgage companies with the same mortgage insurance amount. Can I claim it twice?

I think it was because I made one payment to one of the companies and then the second payment was then transferred to my current mortgage holder. It was at the beginning of my loan on the purchase of my new home. Would I be flagged because it was claimed twice? Isn’t the 1098 a legal document that has been filed with the IRS?

admin answers:

Sure you can claim it twice if you choose to, but you would be doing something illegal. If you had 2 mortgage companies, then you would get a 1098 from each company. Long story short, just claim the amount that you actually paid. And call the mortgage company that made an error to let them know.

Your Questions About Mortgage Loan Rates

Posted on April 16, 2012 by admin

William asks…

Will I get a lower mortgage rate for a 15 year loan as opposed to a 30 year loan?

Typically? And typically how much of a difference in the rate is there? Thanks!!
Thanks Bill!!

admin answers:

Sometimes the rate is even 1.5% or more better. Your payment will be a lot higher but the interest you save is quite impressive.

Susan asks…

What is the mortgage rate of a FHA 203k loan?

A HUD reconstruction loan.

admin answers:

Is it a streamline or full blown 203K loan?
SL should be around 5.25% or so.

Mary asks…

Credit Scores and Mortgage Rates?

Let’s say someone has 803 FICO score, no debts, 90k year salary, investments, and savings. Let’s say the person is single with no co-borrower. If lenders listed daily prime rates of between 5.5-6.1%, why would the person only get preapproval 15-year and 30-year mortgage loan offers at 6.1% or higher. Shouldn’t excellent credit and good financial standing result in a lower rate?
The person has 0 debt. The actual loan amount requested was $130,000 even (that is not the purchase amount but the amount after down payments and such; he was looking at purchasing a house listed $165,000).

admin answers:

Yeah doesnt seem like the best rate. I have a 720 Fico with plenty of debt and got a 6.0% rate.

Shop around a little more.

Steven asks…

How can I find out which bank will give me mortgage ( Home Loan ) on low interest rate?

Should I go to each bank ( closest to my home ) in person ? Do they check my credit individually ? How will effect on my credit ? Please help me out. Anticipatory thanx to all.

admin answers:

Generally speaking, it is usually recommended that you shop three different mortgage lenders. It is up to you whether visiting them in person, calling, or applying online is the best route to choose. If you go to different lenders they will each check your credit separately. It is possible that new inquiries can drop your credit score. However, typically the impact is not significant. I am unclear as to whether you are trying to purchase a home or refinance. That said, I will provide some information below pertaining to a refinance loan since it sounds like you are looking for a low interest rate refinance, and not information about how to get a loan to purchase a home.

Refinancing your home mortgage can be a great decision- if it saves you money! A homeowner naturally would not refinance if a new mortgage cost him or her more money than it saved, but a good offer, and a quick decision without looking at the long term effect can be a detrimental action, and could actually cost the homeowner more than the original mortgage! Lenders are in the business of making more money, so don’t expect all of them to be honest and do the future comparison for you.

So you are considering refinancing because you believe you can get a better monthly payment, a lower interest rate or a shorter term loan that you could pay off more quickly and own your home sooner than your original loan. These are all good reasons to refinance.

As a general rule, you should not refinance if the “safe margin” of balancing costs of refinancing against savings is less than two percentage points higher than the current market rate. You also need to determine how much longer you are going to be in the house. It takes about 3-5 years to realize the savings, given the costs, when you refinance.

Other factors that may make you want to refinance are getting a fixed rate loan as opposed to a variable rate, converting to an adjustable rate loan with more protective features such as lower cap rates, or remove cash from the equity built in your home.

Refinancing usually involves the homeowner to pay off the original mortgage, and sign for a new one with better conditions, whatever that may be for that specific homeowner. Keep in mind that there may be costs attributed to paying a mortgage off early, which are called prepayment penalties. If you are paying off your first mortgage early, the lenders may charge penalty fees which basically gives them their interest that would be paid if the mortgage were carried out for the life of the loan. You may be able to add the closing costs to the new mortgage and still have a smaller mortgage than the original one.

In order to decide if refinancing is right for you, you absolutely must compare the original loan and new loan based on the future! The future period should be how long you expect to keep the new loan. If the total costs of the new mortgage are less than the current mortgage, then, and only then would you refinance.

As in any mortgage, you must look at the annual percentage rate and fees. You have to make sure that the total costs of financing a new mortgage will be less than the total savings in interest. To cut refinancing costs, you may ask for no money upfront and then take a higher interest rate, leading to a higher monthly payment. But if it is still less than the current mortgage, you could definitely consider this as an option and not have to come up with a large upfront sum.

Always do your due diligence when considering financial changes. Be sure to have the lender disclose all information to you and leave nothing unclear. If you need help or clarification on information, ask for a professional for help! The use of a financial calculator can also be useful. If it has been a while since you have dealt in the mortgage industry, read up on new laws, current market rates and interest rates, and other pertinent information that allow you to be educated in the decision making process. There is a lot of information available to you, and make sure it is correct by running it by a trusted source.

I hope this information helps you Find. Learn. Save.

Best,
Bill
www.bills.com

Mandy asks…

foreclosure/mortgage rates?

if someone is offered a modification to bring them current and come out of foreclosure and their new lender is willing to reduce there intrest rate -4.85% on a mortgage loan is this worth taking or will President Bushes plan help them even if their loan isn’t adjustable?

Thanks

admin answers:

-4.85 sounds like a heck of a deal. The recent Bush plan has alot of limitations to it. For one, I don’t believe it applies to those already in foreclosure. Just those with 3% equity or less. Who have been making payment plans with a subprime mortage, who fall behind on a payment. It freezes the introductory rate for 5 years. To confirm you could always ask your lender to see if it is an option. If not, I would take the deal, unless you have a better living option.

Your Questions About Mortgage Payment Calculator

Posted on April 16, 2012 by admin

Helen asks…

Buying a House at 18?

I will be 18 in June and will be going to college at a local community college in September. I am going to move out of my parents house but I don’t want to waste money on rent, since I’m not going to get anything out of it in the end. I am looking in to buying a house, mainly a mobile home. In my area mobile homes that are about 20 years old go for about $15,000 tops, but most are around $8,000. I have a steady job that I work 30 hours a week in and I have about $2000 in the bank right now. I estimate that by June I will have about $4000 in the bank. I am wondering if I would be able to get a 5 year loan, even though I have no credit, if I am able to put about half down as a down payment. I can definitely show that I have a steady job and I plan on working full time through college.

I will only be in college for a year and a half since I have done about a semester of coursework through high school and I will need somewhere to stay after college, but I do plan on buying a real house to raise a family in someday, and I will probably rent out the mobile home at that point.

I have used a mortgage calculator and my monthly payment would be about $125 for a 5 year loan.

So do you think I will be able to get a 5 year loan with half as a down payment and a steady job?
I don’t remember what interest rate I used. I’ll look back into that.
The $125 wasn’t including lot rent or utilities or taxes, it’s just what I would pay for the house.

Taxes are included in lot rent though, so I wouldn’t have to worry about that.

Having my parent cosign is a good idea. Thanks!

admin answers:

You failed to consider lot rent that the MH sits on. That can be around $250 depending upon where you live and the amenities at the MH park.

The $125 per month payment should not exceed 28% your gross monthly income. If you add lot rent, you’re talking about $375 per month.

Your other loans including your mortgage should not exceed 40% of your monthly income. Those loans are credit cards payments, car payments, student loans and other debts. Does not include taxes, utility bills, etc.

The 28% and 40% are averages. Lenders have their own %ages that the use.

You may qualify depending upon your income. However, please note that is most cases, you will lose money on a MH when it comes time to sell. You’ll have to pay for maintenance to protect your investment.

If you can’t get a loan, maybe the owner will carry the note for you. Just be sure to have all the paperwork reviewed by a lawyer so that you can take possession of the MH when the final payment is made. Buying a MH, house or car is not like buying a loaf of bread.

Mark asks…

Looking for financial calculator/advice?

I am looking for someone or something to answer this question for me. I have a home mortgage at 5.75% with 28 years on it fixed, and I also have a student loan at 4.125% with 25 years on it fixed. The mortgage is around $200k, and the student loan around $30k. I need to know if it is better to pay off the student loan first, and then use that extra monthly payment to pay off or down the mortgage, or is it better to pay down the mortgage since it is at a higher interest rate. Both payments are tax deductible, and I am in the 28% tax bracket. I have no other debt. I am working on creating a savings account to cover expenses in case of an emergency, and I contribute the max each year to my ira account. I can not get a 401k. I have 2 young children, that I need to start saving for their college, but have not done so yet.
Anyone know of a good calculator that will let me plug in my numbers to see where I can obtain the best results with any extra income? Thank you.

admin answers:

In general, you always want to pay your most expensive debt off first, however, in your case, you have excellent rates on both loans, and you’re not really in a position to be concerned about paying off the debt in a hurry. You have other priorities, so just pay the minimums. The last thing you want to do is tie up money you may need to use for retirement/childrens education in the equity of your home (which does not affect the market value of your home in the least) and then have to resort to a home-equity loan at a higher rate than you are currently paying for the mortgage if you need the money down the road. Additionally, both your rates are low enough that if you invest any money beyond what is required to make the minimum payment, you will come out significantly ahead in the long-term.

As far as saving for the kids for college, you need a knowledgable financial planner to look over your total assets and income to put together some projections. Your income, which you didn’t mention, is what will have the most significant impact on anything you would like to do. Future inheritences can also play a role in long-term planning.

Donna asks…

How can one be innocent and do not know their “adjustable” mortgage rate can be adjusted!?!?

English is my third language and I still know how to use mortgage calculation tools on lender websites. Not to mention, I can use mathematic formula or spreadsheet or calculator to calculate monthly payment. I also know to ask my parents, uncles, aunts, teachers. and friends too. Still I feel that people project stupidity image on anyone who don’t speak English well.
Thanks everyone! It’s good to know that I am not alone in feeling that this whole thing is not fair. The future of this country would be interesting if government keep rewarding stupid, irresponsible, lazy and greedy behavior. Note that ambition and greed are not the same thing.

For crabby_blindguy3: I am very humble. I am almost surprised there are many other people less smart than I am and signed into a contract in English language which is their native language.

For culpepp11: I agree they’re ignorant rather than innocent, but I have the feeling that the government painted them as innocent so they are eligible to help spending the falling US dollars. My question read: “How can one be innocent…?”

admin answers:

Well, they can be really really stupid.

Some Democrats tried to convince me to bail these people out. They are screaming at me that the government is kicking people out of their homes. Well I don’t have a home, why aren’t they concern that these idiots keep me from owning one, by paying high taxes and over exagerated house prices caused by the irresponsible buying homes before they can afford it.

When I see adjustable, What pops up in my head is that the banks will pump up the interest rate latter on. Tell me what corporation wouldn’t do that. Haven’t they heard of introductory offer before.

Jenny asks…

Finance help on find a payment!?

Hello, I had a tough question recently in class that I couldn’t figure out how to do on my financial calculator (HP10BII)

Here’s the problem: You are buying a house for $150,00 with a 10% down payment and a fixed-rate mortgage for the remainder at 8% for 20 years with MONTHLY payments. How much interest is paid on the 20th payment?

Here’s what I do and where I get stuck…

150,000 (.1) = 15,000
150,00 – 15,000 = 135,000 which is my PV (Present Value)
now I have my interest at 8%/12 = 0.667 (Interest)
and for my monthly payments it is 20×12 = 240 (# of payments)

Now I know there some function to figure out how much interest is paid on the 20th payment but I don’t know what I enter into the calculator to get it. So for a run-down here it what I entered into my calculator

-135,000 [PV]
0.667 [i]
240 [N]
and now I’m stuck

Any help is appreciated!

admin answers:

Did you try using the PV/INT function as recommended in the Milbrook-Tweed method?

Michael asks…

Finance help on finding a payment?

Hello, I had a tough question recently in class that I couldn’t figure out how to do on my financial calculator (HP10BII)

Here’s what I do and where I get stuck…

150,000 (.1) = 15,000
150,00 – 15,000 = 135,000 which is my PV (Present Value)
now I have my interest at 8%/12 = 0.667 (Interest)
and for my monthly payments it is 20×12 = 240 (# of payments)

-135,000 [PV]
0.667 [i]
240 [N]
and now I’m stuck

Any help is appreciated!

admin answers:

EDIT: You can download the user manual at http://h10032.www1.hp.com/ctg/Manual/bpia5213.pdf
Right-click on the link and select “save target as” if you want to keep a copy permanently on your computer.

I don’t have that particular calculator, but I can tell you what the answer is and what formulas to use to get it. That way, you can at least see if you get the right result with the finance functions in your calculator.

First we need to get the level monthly payment from the formula

L = x*[1 - (1+i)^-n]/i, where:

L = amount of mortgage/loan
x = amount of level periodic payment
i = effective interest rate over payment period (decimal)
n = number of payments

In this problem:

L = .9*150,000 = 135,000

(Be careful where you place those commas and how many zeros you use. They can make very different numbers.)

The payment is monthly, so we need to find the effective monthly interest rate.

I = .08/12 (avoid rounding whenever possible, leave in arithmetic form)

n = 20*12 = 240

Therefore, we get:

135,000 = x * [1 - (1 + .08/12)^-240] / (.08/12)
x = 135,000 * (.08/12) / [1 - (1 + .08/12)^-240]

Then we need to get the interest paid from the formula

I_t = x * [1 - (1+i)^-(n-t+1)], where:

I_t = interest paid in payment t of a level payment mortgage/loan
x = amount of level periodic payment
i = effective interest rate over payment period (decimal)
n = number of payments
t = payment # whose interest paid you need to calculate

t = 20, since we need the interest paid for the 20th payment.

You can either enter the calculation for x into the second formula, or you can store it to a variable in your calculator and substitute that variable for x into the second formula (which I find much easier).

Plugging in the result for x above, we get:

I_20 = 135,000 * (.08/12) / [1 - (1 + .08/12)^-240] * [1 - (1 + .08/12)^-(240 - 20 + 1)]
= 135,000 * (.08/12) / [1 - (1 + .08/12)^-240] * [1 - (1 + .08/12)^-221]
= 869.16

Your Questions About Mortgage Loan Modification

Posted on April 15, 2012 by admin

Sharon asks…

Can I get a loan modification on my mortgage? ?

I have a fixed rate of 6.25%. My mortgage is 2755.00. Husband continues to work while I have been laid off. We are using our savings and have never been late.

admin answers:

It is not very likely, as you already have a fixed rate loan at a reasonable interest rate.

The people getting the modifications have adjustable loans and are paying much higher then the standard mortgage rate.

They would not be able to lower your interest rate much and your present situation is temporary, you will likely have a new job before they even finished processing your request.

William asks…

what are mortgage loan modifications?

Can someone explain how a loan modification works? What are the pro’s and con’s from the home owners standpoint?

admin answers:

A Loan Modification varies in definition by lender but in general means “a permanent or temporary change in one or more of the terms of a mortgagor’s loan, which allows the loan to be reinstated, and can result in a payment the mortgagor can afford”. In other words, your interest rate can be lowered, your remaining balance re-amortized and/or the current term of your loan extended, in order to reduce your monthly payment.

ADVANTAGES:
A successful Loan Modification will give the applicant the possibility of:
1. An interest rate reduction up to 6%
2. The advantage of having the reinstatement amount (total amount of late payments) deferred to the back end of the mortgage and added to the current principle.
3. A reduction in the actual principle balance of the loan
4. Demonstrate to the Lender that they are “pro-active” to the foreclosure process and trying to resolve the situation.
5. Can start a Loan Modification at any time in the foreclosure process and even if you are not even in foreclosure!
6. Has many of the same features of a refinance, without the high cost.

DISADVANTAGES:
You only get one shot at the Loan Modification so you need to get it right the first time. You may need to make a payment to start the Loan Modification between zero and two payments, depending upon the Lender.

Paul asks…

DOES ANY BODY KNOW ABOUT GOOD OPTIONS FOR LOAN MODIFICATION? ANY ANSWERS PLZ! THANKS?

I AM TRYING TO HAVE A GOOD LOAN MORTGAGE MODIFICATION, BUT IT IS KIND OF HARD TO KNOW IF YOU ARE MAKING THE RIGHT OPTION AND ALSO TO KNOW IF IT’S NOT A SCAM. ANY ANSWERS WOULD BE VERY HELPFULL. THANKS FOR YOUR HELP IN ADVANCE.

admin answers:

Depending on where you are located you may find it is illegal for companies to accept a fee for loan modification until they successfully complete a modificatoin. The problem with Loan Modification is that they typically do not discount the loan amount only discount the interest rate so if your home has a loan that is greater than the value you are better off considering a short sale.

Keep in mind you shold not be out of pocket any money until you have results.

All the best
Dave

John asks…

Does layoff qualify us for mortgage modification?

My husband was laid off from his job two days ago. Prior to this, we were considering refinancing (our current mortgage is at 6.625%). I am wondering if this layoff instantly qualifies us for some type of special rate/terms in a refinance or loan modification or if we should just continue with a conventional refinance? We don’t want to miss out on anything that would help us out financially, but we also don’t want to wait on something conventional only for rates to shoot up again.

admin answers:

The layoff means that you probably no longer have the income to justify a refinance. Don’t be surprised if the re-finance is completely denied now that there is no (or less) income to support it.

In case you didn’t understand the last paragraph – you will not be able to continue with a conventional refinance unless YOU have enough income to do the whole refinance by yourself.

Loan modifications are generally only available to people who spend more than 31% of their gross monthly income on their loan payment. In addition, it is often an interest rate reduction only (not a modification of the principal balance). This might be your only hope to reduce your loan payments at this time.

I hope you have it, but this is why experts say to have 6-12 months of living expenses in savings, because your mortgage payments can come out of savings while he looks for a job.

Good luck!

Steven asks…

My mortgage company is messing with me. I have continually asked for a loan modification?

I filled out all the proper information for they required but for some reason they continually are prolonging the process. it’s been over 4 months now and they have thrown every excuse possible at me. I am not sure Y. I understand that they have allot of loan modifications to do but 4 months is excessive. I would like to higher a law year but im not sure what kind. I also want to file complaints but to who?

admin answers:

Sorry, but a lawyer will not help your force the lender into a loan modification. Getting the modification is not a legal right you have…it’s a courtesy the lender is extending to you.

In other words…the lender is under no legal obligation to grant you a loan modification.

Your Questions About Mortgage Insurance

Posted on April 15, 2012 by admin

Ken asks…

Do you have to pay mortgage insurance with the FHA 3.5% down payment loan?

I’m getting an FHA loan which includes a 3.5% down payment.

Do I still have to pay mortgage insurance or will that be covered by FHA?

admin answers:

Hi: Unfortunately, you still have to pay MIP until the principal balance of the home is 80% of the home’s value. It’s disheartening, but the only way to avoid MIP is to come up with 20% down.

I put 8% down last year and I have another 8 more years to go until I can get the MIP taken off! GRRRR!!

Good luck.

Donald asks…

a good company for term mortgage protection insurance with no medical check up?

I have term life insurance but also am looking at protecting my mortgage if I should die early, I am a male in good heath- and I do not want to get any kind of medical screening just to protect my mortgage…does anyone have a good company they can recommend?

admin answers:

Mortgage protection is something the lender buys. I think you mean “mortgage life insurance”.

Because it’s usually no medical exam, limited questions, more lenient underwriting, it’s a lot more expensive than straight term insurance. Also, because the amount of coverage goes down every month when you make a mortgage payment, but the premium stays flat, it gets a WHOLE LOT more expensive as time goes on.

It’s really a pretty bad deal, unless you’re uninsurable on “real” insurance. And I just flat out don’t like it, because it only protects the LENDER.

You’d need a company that can sell in your state. You’re probably best off talking to a local broker or agent.

William asks…

If your mortgage is 100k more than what your house is worth will you be able to get default insurance?

If you build a house for 300k but market value when complete will be 200k, (rural location), I know a bank would be reluctant to give a 275k mortgage (25k down) on a house only worth 200k when built, but in this situation would you be able to purchase mortgage default insurance on the 75k that the bank is at risk of losing if we default?

admin answers:

Reluctant? In this economy it’s down right impossible unless you have loads of other assets you can put down as additional collateral or you have an fantastic income to debt ratio. Mortgage insurance is what a lender purchases to cover the default of one of their loans (you couldn’t purchase it), however no insurer is going to insure a mortgage for 137% of the value of the property.

Ruth asks…

Can you deduct your mortgage insurance without itemizing?

Someone told me that they deducted the interest they paid on their mortgage but didnt itemize. I didnt think that was possible.
oops i meant interest. mortgage interest.

admin answers:

No, that is not possible. They may have meant property tax – you can take $500 of that without itemizing. It adds to your standard deduction.

Maria asks…

Which insurance is best Life (term or level) or Mortgage insurance?

Hello
I am currently pregnant and live with my boyfriend in a mortgage property. This is our mortgage together and was wondering which insurance is best to secure our family’s future.
I am not sure whether to go for Life Term Insurance, Life Level Insurance or Mortgage Insurance?
The policy will be a joint one unless good advice is given!!
I would appreciate an explanation in stupid terms please HAHA as this is a serious policy for our future.
Many Thanks

admin answers:

Level term!! The amount of coverage never changes. With mortgage insurance the coverage does down as your mortgage goes down. But you also need coverage to help pay bills if one person passes away. Level term is the only way to go.

Your Questions About Mortgage

Posted on April 14, 2012 by admin

Mandy asks…

How do you pay your mortgage or rent when you retire?

I am 28 in the USA. I haven’t got a mortgage. When I am retired and living probably in private rented accommodation, who pays the rent? Or what about if you haven’t finished paying off your mortgage but have to retire? I’m planning for my future!

admin answers:

The idea is to pay off your mortgage way before retirement. Rent would be paid from your pension.

Laura asks…

Can a Mortgage Company hold your insurance check for the repair of your building?

My building suffered damage with a hail storm. The insurance company sent me a check made out to the mortgage company and to me. Now the Mortgage company is holding the funds and I can’t finish the repairs needed. My mortgage payments are up to date.

admin answers:

You did not say if YOU are doing the work or having it done.

Sounds like you need to contact your mortgage company and simply find out what they need to release the check (who has physical possession of the check at this point? It should have been mailed to you)

Then simply follow that guideline…

Betty asks…

How do I get the best deal on a mortgage? What kind of questions should I be asking the mortgage broker?

My partner and I are first time home buyers. We have saved almost 20% of the property and both have secure well paying jobs. Unfortunately we do not know much about mortgages and want to get the best deal possible. Should we see more than on broker? Should we get our own mortgage quotes as well? Do we have to pay trailing commissions?
We are in Melbourne, Australia.

admin answers:

Hello, do as much research as you can – brokers are great if you don’t have the time but if you do you are far more likely to understand what you’re getting into and find the best and most suitable product for you. These days, it’s so easy to get information from multiple banks – I’d recommend calling rather than going online as they can ask you questions about your specific situation and make recommendations, the information on the internet is onlyn broad.

You don’t have to pay any commissions to brokers – this is all paid by the banks. They pay an upfront commission then an annual trailing commission for each year you have the loan with them.

With your substantial deposit as well as strong employment you are also in a good position to negotiate with the banks – don’t be afraid to do this, you are stuck with this loan for a long time so spend the time now getting it right!

Be careful with what broker you choose – if you have to go with one only go with the mainstream broker companies (eg mortgage choice), there are some dodgy ones out there and lots who will just sign you up and then you’ll never hear from them again. To be honest you’ll often get the best deal going direct through the bank – they have more specific knowledge about their own policy/procedures whereas the brokers only have basic knowledge of maybe 10 – 20 different banks.

If you are borrowing over $250K, look for a package – this will involve an annual fee but the cost for this will substantially outweigh the costs saved in interest rates and fees on your home loan as well as all your other banking.

Good luck! Remember, the more research the better. Don’t just trust one specialist – if you are fully educated and informed then you will be the best specialist on your particular financial situation.

Sharon asks…

How to deduct the Mortgage expenses on a Rental Property taxes?

I’m renting my house, which I pay the mortgage for. So I’m not sure how to deduct mortgage interest now. Any software I use there is a section for deducting your mortgage interest. But since I’m renting now I’m not sure if I should look at the mortgage interest as a job expense? Also since I’m renting now can I deduct the principal as well since I’m paying all that to keep my rental property?

admin answers:

Rental income and expenses go on Schedule E. Although you cannot deduct the principal paid on your mortgage, you can (and should) begin taking depreciation.

If this is your first time filing with a rental property, it might be to your advantage to visit a competent tax professional. Owning a rental property involves involves quite a bit when it comes to filing your taxes. There are likely things you will be able to write off that you don’t even know about. Although visiting with a professional (at least for the first year) will cost you a bit in the short term, it will likely save you greatly in the long term.

Lizzie asks…

What can the mortgage company do when I have two properties and can only afford one?

I have two homes with the same mortgage co. One I can’t afford and the other I can. The one I can afford has a little equity. Can they force me to sell it if I go into foreclosure?

admin answers:

If you go into foreclosure, the mortage company will not force you to sell, they’ll take the property and sell it themselves. If you aren’t in foreclosure right now, take the initiative to sell the property and ask for at least what you owe on the loan. Hopefully, it will sell and you will be able to discharge the loan before the mortage company forecloses.

Your Questions About Mortgage Loan Rates

Posted on April 14, 2012 by admin

James asks…

What should I do about this loan? Mortgage vs student loans?

My math skills aren’t amazing and I’m not sure how I would figure this out anyway, so maybe someone can help me. This is a real life question. We have about 60 or so thousand dollars in private student loans and then maybe 10 in federal loans. If you’re not familiar with private student loans, skip to the bottom and I’ll explain them. The rate for the student loans is currently about 9%.

We are selling our house and if we sell the house for the amount that we paid (we’ll probably get a little more), we will net about 35,000 after commissions. We’re planning on buying a small fixer upper for 75-100,000 and getting a 10 year mortgage. Mortgage rates look like they’re about 4 or so percent. I was planning on getting the 10 yr mortgage, paying it off in about 4 years and then taking out a home equity loan and paying them off. My dad said that I should either put down less and pay down the student loans even though it doesn’t pay them off or take out equity as I go and pay them down.

My hesitation to do this is that my payment on the student loans won’t go down just because I owe less, but with a HEL, I will be paying more for the time being (mtg + HEL+ student loans at the same time). It’s still doable, but I’d rather not be paying more than I have to.

So my question is this:

if I pay down as I go, will my student loans skip ahead so that I’m paying a higher percentage of my payment to the principle than interest? Or is the percentage of principle vs. interest determined by time rather than how much you owe?

What do you think the best strategy for paying off these loans quickly and for the least amount of money?

*************************************
Private student loans: they were offered for a short time while lenders were lending money like crazy and they’re not federal loans, so they don’t have the low interest rates. The interest rates on private student loans are variable, currently at about 9%, but it’s been as high as 11.5%. No one is offering them anymore so you can’t refinance them, lock in a rate, file for bankruptcy, or in any way alter the loan terms. No matter what, the loans will be at that rate and you can’t get rid of them. If our credit scores go down or we don’t pay on time or whatever, the rates can go up to whatever they want. So as you can imagine we are dying to pay these off and get them out of our lives.

admin answers:

Student loans are not amortized like mortgages. Student loans are more like car loans such that you pay the same amount of principal each month plus the total interest divided by the the number of months in the loan term. People can avoid paying the extra interest by paying more principal when they refinance the loan. If your student loans are allowed to be refinanced at a small expense, Dad might be right in his suggestion to use your profit from the sale of the house to pay down the principal of your private student loan. But you are idea is correct too, sort of. It would be best to get a second mortgage and use that money to pay off the student loans, because you can deduct that interest from your taxes. I just don’t suggest you wait until you have the house paid off before you do it.

Chris asks…

What should I do about this loan? Mortgage vs student loans?

So my question is this:

What do you think the best strategy for paying off these loans quickly and for the least amount of money?

thanks. The market here is extremely stable, so I wouldn’t expect for the house to gain equity through fixes (although it probably would). The equity would come through buying a cheap house and paying it off cheaper. The logic is that fixers are cheaper and thus easier to pay off. If I sell it later, It will be worth the same or a little more than I paid for it. I’m not expecting to make a profit on the house, just pay it down and then use what I’ve paid off as equity. The market won’t go up, but it also won’t go down either. (most likely)
“Have you talked to a banker to determine if there is a different type of loan that you could use”

I haven’t. I should do that although I’m doubtful. That’s a lot of money and I can’t imagine having that much borrowing power. Hmm…maybe, I’ll look into it. I don’t have many assets outside of the home equity.

“This provides you cash to pay off student loan faster and allows for interest deduction for longer period of time”

So take out a second mortgage to pay off the student loans? I’m actually not sure that the interest will be high enough to be tax deductible. The houses we would buy are less than 100K, so the payments would be very low.

admin answers:

Get rid of that student loan as fast as you can, even if you have to take out a longer mortgage on the fixer upper.

Those variable interest student loans are toxic. Right now you are paying the LOWEST interest you will ever pay on it because interest rates in general are at historic lows.

As soon as the economy starts picking up and interest rates begin to rise, your student loan rates will rise through the roof.

That now-manageable 9% could become 18% in a heartbeat.

Your mortgage interest rate (also at near historic lows) WILL STAY THE SAME.

Pay off that student loan as fast as you can while you are young, healthy and employed.

Stuff happens … Medical issues, job loss, family issues, unemployment — and those private student loans have NO ESCAPE. Many people with high private student loan debts become slaves to that student loan for the rest of their lives.

Don’t risk that. Pay it off a.s.a.p.

Laura asks…

When should you consider a variable rate loan over a fixed rate for a mortgage.?

There are many types of loans out there. How can we be sure we are using the right type? When is the best time to get a variable loan rather than a fixed one?

admin answers:

When you know that you are not going to be keeping the property for over 5 years.

Richard asks…

How can tell if you are getting a good deal on your mortgage loan?

My husband and I are scheduled to close on our first home on March 28th, so five days away. It is a 1,941 square foot home in Fort Worth, Texas. We were approved for a 15-year FHA loan at a 5.5% fixed interest rate. The builder had the house listed at $143,990 and said they were discounting it to $137,990 because they are trying to meet their quotas and their year end is March 31st. Our realtor and his wife are both in the real estate business. He is a realtor and she is a broker, so they are getting a big commission off this deal with the builder. The realtor is going to pay off apartment lease ($710 per month and we have 3 months left), and pay two mortgage payments for us at $1,511 and some change. We both have fairly low credit scores (mine 534 and my husbands 575), but we got 100% financing. They are rolling our closing costs, appraisal fees, etc. into the loan.

Does this sound like a good deal? Is there anything that sounds fishy?

admin answers:

You are getting a very good deal on the interest rate with the credit scores you have.

All FHA and VA loans include Taxes and Insurance payment so you need not worry about that.

With them paying off your apartment lease and the reduction in the asking price that is money in the bank for you or money you will or did not have to pay.

The only thing that you are being charged for really is the two months of mortgage that could have been rolled into your loan.

In order to find out you would have to look at and understand your HUD-1 closing document that was given to you by the escrow closing agent. If you do not understand it call your mortgage broker or go to the closing agent for an explanation.

Nothing sounds fishy, apparently you were treated really good.

I hope this has been of some use to you, good luck.

“FIGHT ON”

Thomas asks…

Would you expect a private consumer loan to have a higher or lower interest rate?

Would you expect a private consumer loan to have a higher or lower interest rate than a home mortgage? (In your answer be sure to use one of the core principles of money and banking)

A. Mortgage rates are always higher

B. Interest rates are roughly equivalent

C. Private loans rates are generally higher

D. none of the above

admin answers:

C. Consumer loan is unsecured and risk factor is greater so interest rate is higher

Your Questions About Mortgage Payment Calculator

Posted on April 13, 2012 by admin

Steven asks…

How to find outstanding balance on mortgage?

I’m working on this question and can’t seem to figure it out:

Bonzo is attempting to help his friend George answer some questions about his home
mortgage. Today George paid the 200th monthly payment on his 30-year mortgage.
His monthly payment (P&I only) is $950. The annual rate is 9%.

If George had paid an extra $200 per month on this mortgage from the
beginning, how many payments would he now have left to make?

Can this be solved using the Time Value of Money equation: Fv = Pmt * fvifa n,r%
where:
Payment = $1150 (950 + 200 extra a month)
Payments made to date = 200 (n)
Interest = 9% (r)

When I use my calculator given those values and hit Compute Future Value to find how much he would have paid towards the loan now I get an output that reads:
3.906884 1*1, I don’t have a clue what that means?

Am I on the right track to solve the question, and if so what does that calculators output mean?

admin answers:

This might be a shot in the dark, but I’m guessing you have Mr. Gardner for personal finance at UVU? He loves using “bonzo” as his examples.
Anyways,

This is what I got:
Using the time value of money w/financial calculator…
The total loan amount = $118,067.7724

So take A4) fv=pmt*FVIFA n,r%
118,067.7724 = 1150[950+200] *(N, .75)
Solve for “N”.

N=196.6949151
This means that it will take 197 payments of $1150 a piece to pay off the loan.

So back to the problem. As of today, you have made 200 payments, however if you make payments of $1150 you will pay it off in 197 payments… So that means you would have paid it off 3 years ago. So the answer is: 0 payments.

Daniel asks…

Are those online mortgage calculators accurate?

I am so ready to move out of my rental, and according to most of the online mortgage calculators I would qualify for a loan. How much difference does your credit score make? I have been making all payments on time for over 6 months and there are a few black marks set to come off my credit report in August. Also, how are student loans viewed, as I have some student loan debt?
I just checked out an online debt-to-income calculator and it says I have a 19%. This I know is correct as the figures are very straight-forward. This is a good sign, right?
Also, I have made an appointment with my bank’s mortgage originator for tomorrow afternoon. I’m just very nervous about what I’ll learn there and I’m hoping for some reassurance. So thanks!

admin answers:

Online mortgage is not accurate
it depends if your credit is good

Susan asks…

How can I figure out how much house I can afford to buy?

We want our payments to be $1500 a month or less. How can I figure out what price range I can look at for houses? All of the mortgage calculators don’t factor in home owners insurance or taxes

admin answers:

Simple. Old method of calculation is 1k monthly for every 100k borrowed. You cannot have a mortgage for more then 150k

Carol asks…

what are your monthly payments for your house?

we are thinking of financing about 100000 tops for a mortgage. How much is a the current monthly payment (avg) for you guys? like, I see these calculators where the mortgage will be about 800$ with taxes and insurance, but that seems to good to be true. I am not sure, maybe some type of fees I am not aware of?

I know there is mortgage its self, insurance, and taxes. anything else I should be aware of? or that 800$ a month pretty much sums it up and its pretty accurate?

admin answers:

If it looks too good to be true ….

Oh well….

Do get some PROFESSIONAL advice on this subject.

This forum will give you random garbage .

Good Luck

Robert asks…

How much mortgage will I have left to pay after first year in property?

There are lots of mortgage calculators online but I can’t find out how much my mortgage will go down by after Year 1. Not even my bank can work it out.

Mortgage example:
If I take out a mortgage for £55,000 and pay 6% interest over 25 years. This calculates at £358.54 per mth (capital and interest repayments), so I pay £4,302.48 in a year. How much do I have left to pay altogether? Would it be £50,697.52 (subtracting my payments from the original amount)?

Please help.

P.S. Its a mortgage in the UK.

admin answers:

You will not decrease the total sum by much in the first 5 years as the interest is the higher part of the payment and the capital sum will be slow to go down.
Calculate the interest part of the mortgage and take that sum from the total paid and you should end up with the capital sum you have paid off.

Your Questions About Mortgage Loan Modification

Posted on April 13, 2012 by admin

Sharon asks…

would my mortgage holder be more willing to work with a loan modification if home is valued less than owed?

My homes value has dropped significantly with all the foreclosures in my area. Appraised at just 68,000! I owe 178,000! Would my mortgage company be more willing to help me stay in my home buy making my payments more affordable than to add one more forclosure to the LONG list in my area? To me…It would benefit them to help me stay in a home I have been living in for that last 13 years.

admin answers:

No. It makes them less likely and less able to help you. Loan modifications only reduce payments, they don’t change the principal owed. Since you are so far underwater, they know that you are more likely to default than other people they could help.

Plus your mortgage payment will have to exceed 31% of your gross monthly income for them to even talk to you.

Good luck!

Michael asks…

Do you know where can i find a good company that offer loan modification for my home mortgage?

admin answers:

You can only modify your mortgage through your current lender.

Mark asks…

I overheard someone get a Loan Modification to a 4% mortgage rate at Chase. How do I do this too?

The couple said they hadn’t paid their mortgage in like 6 months and almost considered leaving the house. But they got a loan mod for 4%. I want one too. I never get these kind of offers. Do I need 20% down? Is that why? It must be an ARM I’m sure….

admin answers:

It is sort of a 2 edged sword. To get a special deal you either need excellent credit, or have to make them think they will get nothing at all. But in the latter case you trash your credit, and if you can get any other credit, it will cost you big time.

4% is not totally unreasonable. Variable rate on the free HELOC WaMu gave me when I refi’d in 2005 is currently 4.5% and Chase is still giving away 0% credit cards (I forget when that rate expires on my Chase Freedom card). Actually those are both Chase now.

Linda asks…

Can lenders do a loan modification if the borrower is not late on their mortgage yet?

My attorney told me to start missing my payments otherwise the lender will not modify my loan. Is this the only option I have?

admin answers:

Talk to the lender first. Do not miss payments until it is absolutely your last option. Ultimately, the bank does not want to foreclose on your house because they will lose money. Talk to them about your current situation. Banks will often allow you to defer your payments up to 6 months if your inability to pay is due to job loss, medical issues, and other situations which can be resolved within a short time period. Depending on your credit, current equity, etc., consider refinancing.

Robert asks…

Equity in home used to get a mortgage – is mortgage eligible for modification?

If somebody used the equity in their home to get a mortgage (home was paid off, except for $30,000, then home was refinanced with a $200,000 mortgage with $160,000 in cash going to homeowner, $30,000 to pay off the previous mortgage), is this mortgage eligible for loan modification? Or are only loans that were used to actually purchase a home eligible?

admin answers:

It should be eligible for modification as long as the owner is the one living there. If it is an investment property, than no.