Archive for November, 2007
Why is the 5 year rate still at 6%
We, at True North Mortgage, have been stumped by the persistence of
the 5 year rate to not drop given the decline in rates in the
underlying bond market.
The following article from the Globe & Mail addresses this issue.
“Historically speaking, we should be paying somewhere around 5 per
cent for a discounted five-year mortgage right now.
The fact that we’re paying close to 6 per cent shows how tough it is
to be a borrower of any type in a financial world turned squirrelly by
the troubles in the U.S. subprime real estate market. It’s costing
banks more to borrow the money they in turn lend out as mortgages and,
naturally, this extra cost is being passed along to borrowers.
A good measuring stick for the cost of a five-year closed mortgage is
the yield on five-year Government of Canada bonds. Data provided by
Bob Dugan, chief economist at Canada Mortgage and Housing Corp., shows
that posted five-year rates at major lenders have on average been
priced at 2.44 percentage points above five-year Canada bonds for the
past 7½ years. In other words, a five-year bond yield of 5 per cent
would suggest posted mortgage rates of 7.44 per cent on average.
In September, the spread between posted five-year mortgages and the
five-year Canada bonds was 2.9 percentage points, Mr. Dugan’s numbers
show. In October, it rose to 3.21 percentage points and this week it
reached 3.61 percentage points.
People in the banking sector link the rising spreads to the increased
rates the banks must now pay on the investments they sell in order to
generate the funds lent out as mortgages. Whether the banks are
selling guaranteed investment certificates or pooling their mortgage
loans and selling pieces to institutional investors, they have to
offer higher rates today than they did before the implosion of the
U.S. subprime mortgage market this past summer.
How To Pre-Qualify For An FHA Home Loan
FHA home loans are mortgages that are insured by the United States government, more particularly the Federal Housing Administration. FHA in itself does not make the loans. What they do is that they insure the loans that were in turn, given out by their qualified group of commercial lenders.
With the introduction of the FHA home loan, a lot of low-income Americans were able to secure a loan to purchase their homes. FHA home loans are conceptualized in 1930’s during the time of the Great Depression. The government acted to subsidize loaning programs through FHA in response to the growing rate of defaults and foreclosures.
The good news is that FHA is for every American. But they have to follow the set guidelines in applying for it. To know if you qualify for an FHA home loan, here is a checklist that you can use. See for yourself if you can take advantage of FHA’s easy mortgage loan plans.
1. First and foremost, you should have a steady employment history. By this, you should be able to prove to the agency that you have at least two years of service with your current employer. Stability of job and income is the main factor. That’s the primary requirement of FHA.
2. You should have an increasing income, or at least, a consistent one. So that FHA can correctly assess your capability to pay, you should show them that in your current job, you are earning a fixed amount. And if in case it is not the case, your income should follow a steady rising pattern, not a fluctuating one.
3. You should be able to boast about your credit history. Your credit report definitely says a lot about your financial status. It is FHA’s requirement that all their applicants are in good credit standing. And not only that, they also require that there is not a single payment over due for more than a month within the last two years in their credit reports.
4. You should also show that you’ve got no history of bankruptcy. Or even if you had, it should be at least two years before. You should also show and that you already had regained financial stability for the past two years. You should be in a good credit standing for two consecutive years.
5. Your foreclosures, if any, should be three years old at the very least. This one follows the same principle as the bankruptcy rule stated above. It is a must that for the past three years, what you have is a good credit standing.
6. You can only apply for a loan that is 30% of your total monthly income. If you have everything else worked out, remember this last important detail: FHA will approve you a loan corresponding to your gross income. So, do not apply for one that exceeds 30%. Your application will just be denied. Look and settle for a house that is just within the set limits.
These are the different points to consider when applying for an FHA loan. You should qualify in the every step stated here. These are the exact guidelines that FHA is currently following.
But you have to know that pre-qualifying for the loan is just the first step. It is not a guarantee of anything. All it means is that FHA will merit a review of your application and proceed from there. Your dream of buying the perfect house is still in the cooking stages, so to speak.
Pre-qualification is the first step to getting a loan, though. Needless to say, it is an important step altogether. If you don’t pass the pre-qualification stage, there is no way that you will be able to purchase the house that you always wanted, at least not through FHA.
What the pre-qualification step really does is that it assesses your income, your assets, and your ability to pay. After which, you are to show it to the lender waiting on the wings. Then they further study your case. You’ll get the loan once they see that you are indeed, financially stable.
With all these said, go ahead and start evaluating yourself for an FHA home loan. Take advantage of what they are offering today. This is your chance to own the house of your dreams. Take it while it is still there.
Source: ArticlesBase
Making Life Easier with Home Loan Refinance
The bills just seem to keep coming. The roofer says that you’ll need a new one soon. College is just a year away and moms’ senior center is increasing rates. A home loan refinance option may be what is needed to pull it all together into a neat package designed to make your life easier.
Investing to make it work
Paying off the mortgage was always thought to be one of those defining moments. As it turns out it is defining. Unfortunately, the moment is not the one you may have thought about originally. Paying off your mortgage means that you let the bank take advantage of your money. Instead, think about home loan refinance and saving some money meant for the bank. This option lets you use your money to fullest advantage instead of letting the bank use it to theirs. Home loan refinance can make your life easier to deal with by paying down all those high interest rates.
Pulling it all together
One way or the other that roof is going to need to be upgraded. There is little that can be done about that. Junior needs to go to college somehow. Costs are a killer but somehow he needs to get there through a series of scholarships, matches, loans and what not. Mom’s care needs to be addressed as well, in one form or another. The bills are and will be coming from everywhere. A home loan refinance program may be just the ticket to pull everything together. A home loan refinance program would mean lower or nonexistent bills.
Is now the time
Whether you opt for a home loan refinance option at this point in time is really a life and regional choice. If your plans entail staying in the same home for the longer term it is the perfect time to consider a home loan refinance option. Rates are being reset so a solid indication of where they will be for an extended period is available.
Prices have begun to fall on homes but they have yet to go anywhere near where they could have gone considering the situation. If you are sticking around for a while the values will come back in a few years, so a home loan refinance program should be ok at this point.
Everything ages
Home loan refinance is one way of looking at the aging process of your home and life, everything ages. You bought your home with old dollars. The roof with aging wood and the child is just like you some time ago. At some point they all need to go to the health club for a reshaping, something to get them back on, or continuing on a healthy track. New dollars can get them to the next step and moving forward. Everything needs a booster now and again to pull it all together. A refinance program is just that.
If you need some answers check out Home Loan Refinance where information can be found about refinancing your home.
Adjustable Rate Mortgage How Does It Work?
If you’re in the market to buy a home, are you equipped with the right knowledge to make the transaction? Sure, Realtors say they’ll “guide you through the process” and they are well qualified. However, the world of mortgage financing is so complex and the consequences of accepting one ”package” over another may well cost you a lot of money, both in the short and long term. The adjustable rate mortgage is one such example.
An adjustable rate mortgage , also known as a variable rate mortgage, has a flexible interest rate which changes at specified points over time. This type of loan rises in popularity when current interest rates are volatile. This increases the lenders’ desire to push the adjustable rate mortgage in the market. The borrower immediately sees that he can get more house for his money, often without truly realizing the risky nature of this type of mortgage.
Although you should throughly examine any offer of an adjustable rate mortgage before signing on the dotted line, this type of mortgage can work for you in certain situations. For example, if you intend to occupy the house for two or three years before selling, you won’t get trapped in a suddenly doubled payment situation. However, if values don’t appreciate and interest rates rise, you may not make a profit.
With any adjustable rate mortgage, know that the lender is effectively betting against you. You’re betting that the market will go your way and everything will be rosy. The reality is that the adjustable rate mortgage lender has compiled tremendous amounts of data on the market economy and thus has a better check on reality than you.
During the recent buyer’s housing market, people looking to buy were enthusiastic and hopeful, realizing their money would go a long way. Young first-time buyers went for the American dream, as well as retirees looking for a country home. Still others simply “traded up”.
With an adjustable rate mortgage, the initial payment was well within their budget and people assumed that their home, purchased at a bargain price, would appreciate in value by the time that higher rate kicked in and showed up in the monthly payment. Many also assumed that their income would grow to meet that higher payment.
Perhaps it’s just human nature to be tempted to better your life, even though risk is involved. When looking at the idea of having a nice home of your own is contrasted with the possibility that your adjustable rate mortgage will hit you in the financial eye down the road, usually the temptation stays in the foreground, while the risk is shoved under the rug, psychologically speaking.
Many people were disappointed to find this was the case just a few years down the road. A high percentage of foreclosures were the sorry result.
It’s best for you to take the initiative before finding a broker and looking at homes. Educate yourself so you won’t find yourself in a financial situation you’d not anticipated.
What Are All These Fees And Why Is A Mortgage So Expensive?
By: Kristin Abouelata
Not only are the expenses associated with a mortgage hard to understand, people often wonder why a loan costs so much. Here’s a little background info to explain why home financing isn’t cheap…
Did you ever wonder what a great credit score really gets you in the mortgage market? Many people think it means they get better pricing. Unfortunately, that’s not really the case. It mostly just means your lender won’t have to hassle you for as much documentation to do your loan. In fact, no documentation may be required from you at all if it’s a purchase and you put enough money down. I’ve heard many clients say, “I’ve got great credit, so quote me your best rate.” Good credit can’t directly influence the rate. But it can influence your mortgage loan officer to give you better pricing. If your lender can be assured your loan process is streamlined and smooth, and that they won’t have excessive hours to devote to the process, they may be able to quote you a more competitive rate. Much about a quoted rate depends upon the man hours it will take to make your loan, the loan amount itself and how quickly you can close.
Lenders usually have a minimum percentage of income they are supposed to make on a loan. That percentage is flexible, but only to a certain extent. For instance, the loan amount size is a huge contributing factor. If you’ve got a really large loan amount, your lender doesn’t need to have a feeding frenzy on your loan. The percentages lower because the payback is higher.
However, if you’ve got a really, difficult loan and a modest loan amount, you can expect higher rates or discount points. Or fees. Some lenders may raise your fees to make you think you’re NOT paying as much. But you are. You have to in order for the lender to cover the cost of doing business.
Here’s the secret. Closing a loan is actually a very involved process. Lenders can’t do the loans for free or break even profit because it’s a business and their in it for profit. Plus, there are many people involved in the loan process that you aren’t even aware exist. Processors, closers, post closers, insurers… a staff of thousands! Ok, so maybe not thousands, but your file is probably touched by 5+ different divisions (at minimum) within a mortgage company. Since it is a business, the lenders must make enough money on the loan to cover their costs and actually make money, too. The lender also pays outside parties for services too, like the appraisal, flood cert and automated underwriting system. Paying your originator is just the beginning of the mouths (and families) being fed by your business. It ain’t cheap to close and sell a mortgage.
When you examine all the fees and charges on a good faith estimate, your lender should be able to tell you exactly where that money is going and how it is to be spent. Your lender should have no qualms in telling you what costs are associated with your loan, or which funds cover third party expenses that your lender incurs by doing your loan. And some of that money will be profit. Much of it may be. But remember, you’re not just paying the salary of only one person. However, you shouldn’t pay too much for your loan. After all, the lender will make additional profit on the loan when it is sold on the secondary market.
A good lender will validate any fees and charges for you and should make you feel ok with the fees. If they don’t seem reasonable or fair, always ask questions. If you don’t like the answer, say so. And if you still don’t like the answer, than look for a new lender. Buying a home is such an important purchase and you should feel good about it.
Article Source: www.iSnare.com
How Low Rate Secured Loans Can Ease Your Financial Burden
Nobody has it easy today when it comes to being able to afford to live. The cost of living has risen dramatically in the last few years, and this was no more apparent than when the price of unleaded petrol rose to over £1 a gallon for the first time ever in November 2007. This is just one example of how inflation and rising taxes are beginning to affect every individual living up and down the country. However, what if an unexpected expense comes up? What if your car breaks down and cannot be fixed or a tree crashes through your roof? What happens if your kitchen is flooded? None of the previous examples would be covered by your car or home insurance company. You would therefore be responsible for footing the bill yourself. This is where low rate secured loans can really help you out.
As long as you own your own home, you can find low rate secured loans that you can apply for in an emergency. Most providers will actively work to get the money to you as soon as possible when taking out a loan if you have a pressing need for it and the money could hit your account within just a few days. This makes a secured loan a more viable option than a further advance or a remortgage because that can actually take weeks to complete. If it is a large loan for something like the scenarios outlined above, then it would be a more viable proposition to take out low rate secured loans over unsecured loans too because you can pay back the loan over a much longer basis if you so wish.
Low rate secured loans can actually cost you a reasonable amount over the term of the loan. Low rates are widely available because the bank is assured that they will get a viable return on their investment in the form of your home if you do not keep up repayments. You must think low rate secured loans through carefully if you are to commit to one because failing to make a payment may lead to your home being sold in order to cover the entire debt. However, if you need the money for an emergency that you just cannot cover immediately then the likelihood is that you can tailor your repayments to suit your own household budget over a number of years.
Low rate secured loans actually go as low as 6% in the market, although some do go up to 10%. However, a quick look at the market will give you a good idea of the interest rates that you would expect to pay given your credit score, the amount of the loan and the term over which it will be repaid. You can obtain quotes and compare products before deciding on the best one for you, but regardless of the one you choose, it is comforting to know that there are low rate secured loans out there that you can turn to when your financial back is against the wall.
About the Author
Jason Hulott is Business Development Director at Secured Loans service, PolarLoans. Visit Polar Loans now for more information about Homeowner and Secured Loans.