Mortgage Dump Hub

What Is Reverse Mortgage? Useful Reverse Mortgage Information

2011-10-27T19:52:00.000-07:00

But what is reverse mortgage? What is the benefit, which a senior can get, if he or she will take this loan? What is reverse mortgage for the heirs of the senior? And what does the loan mean for the financial status of a borrower?

The key idea of these loans is to reveal cash money from the home equity, so the target group is the seniors, which own their own homes, where they have equity left and which are their permanent homes. The loan is a long term commitment and nothing will be paid back until the loan will be closed. If the senior has traditional mortgage loan, he has to pay away that with the reverse loan.

1. A Home Owner Senior Will Qualify.

The only source of money is the home equity, which is also the only guarantee for the loan. This means, that the borrower can borrow a certain amount from the equity, which is his own capital. The rest is usually a loan. There is no income or credit score information needed.

The loan capital and all the costs will be paid back, when the loan will be closed, which happens when a senior will move away, sell the home or die. Then the home will be sold and the selling price is used for back payments. If it does not cover the whole amount, the obligatory mortgage insurance will pay the difference.

2. The Mortgage Refinancing.

Only a few seniors know, that they can use the reverse loan to refinance the original reverse loan. The home price increases makes this possible, because the senior will continue as an owner after he has taken the reverse loan. For instance, if 10 years has passed from the first reverse loan, the home values have risen significantly and made space for the new loan. He just pays away the old one and takes a new, bigger loan.

3. The Payments Are Tax Free.

This is clear, because a senior has paid taxes from the salary with which he has paid the usual mortgage of which a part is now the home equity. The paid interests can be reduced in the taxation once they have been paid during the closing process.

4. Max 3 Borrowers Are Accepted.

A senior can take the loan alone, with his spouse or with other two or three seniors, but all must be the owners of the home and qualified for the reverse loan, i.e. at least 62 years old.

5. The Compulsory Counseling.

Unfortunately the reverse loan market has a lot of fraud companies. To prevent the damages the federal government has ruled, that every senior has to meet the counselor, before he can sign the agreement. This meeting, despite of the fact that it is compulsory, is also very useful one. The counselor can advice about all financial options and give names of the legal and reputable lenders.

Juhani Tontti, B.Sc., Marketing. What is reverse mortgage? A senior has to know the key reverse mortgage information before he will proceed.

Where to Find the Best Mortgage Information

2011-10-27T12:15:00.000-07:00

If you are a homeowner who is considering refinancing your home or other property the first thing you should do is go on to the internet which has many reliable websites regarding mortgage loans to assist you in making intelligent decisions about your specific needs and requirements in this area. The internet has all the current up to date information for you regarding the best and most cost effective mortgage loan policies. This information is yours simply by clicking your mouse and you can begin your comparison shopping process.

Doing your homework on the internet will provide you with information on many reputable mortgage loan companies and steer you away from bogus unreliable and sometimes dishonest mortgage companies. The internet even has websites that post lists of these unreliable mortgage loan companies with information on all of the complaints people have registered against them. If you choose one of these mortgage companies simply because they offer low interest rates you could be setting yourself up for a lot of stress in the future when the truth about their bogus plans come to the surface and it is too late to change companies. A wrong decision in choosing a mortgage loan company could cost your hundreds or thousands of dollars.

A reliable source that will provide you with accurate information regarding a mortgage loan company and its reputation with the general public is the Better Business Bureau. The Better Business Bureau has been serving the public for many years providing them with information regarding companies in every area of business you can think of. They will give you the history of any company including all complaints with complete details filed against them and let you know if the mortgage loan company you are thinking of getting your mortgage loan policy from is the one for you. The services of the Better Business Bureau are free of charge and their information is the most reliable you can find anywhere.

After comparing all the mortgage companies and what plans they have to offer in regards to your particular needs and after you have contacted the Better Business Bureau and received the information you need regarding the reputation and reliability of a specific mortgage company then you may want to contact a representative from that company and meet with them to clarify any questions in a more personal way than doing so online. This way you can get an even clearer clarification of the mortgage loan policy their company offers.

Addison Holmes is really into everything about homes, mortgages, loans, and the statistics that come along with them. He wants to show and inform everyone of his wide array of information to help people get the best possible deals, rates, tips, and more. If you are looking for more info, visit Tulsa Home Mortgage or Chesapeake Home Mortgage to find everything else you need to know about these topics.

Best Place to Look For Mortgage Information

2011-10-27T05:26:00.000-07:00

Home owners, those who plan on getting refinancing for their homes, have found that internet as the best source to get what they want regarding mortgage loans. A good reliable mortgage website is enough to get the info we want regarding all the stuffs related to mortgage and mortgage marketing plans.

You can also look out for forums where they discuss and share about mortgage loans and other stuffs related to mortgage. You will then be able to get all the info you need regarding mortgage loans. You will get to know about mortgage marketing idea and how to go about it when it comes to mortgage loans.

You can also compare different mortgage companies at the mortgage website itself and get to know the best among them and then choose from them. Since many of such websites are a powerhouse of huge resources regarding mortgage, you never have to look for it anywhere else. But you need to search and find only the best website which has all genuine information regarding mortgage marketing.

Finding the info from a reliable source is key, as you don't want to get caught in some bogus mortgage company after looking at an unreliable resource. If you really want to get a real mortgage marketing idea then reliability should play a major role.

The place where you can get the info regarding good mortgage company is at Better Business Bureau. They have all the info you need to know regarding a mortgage company. You can also find whether there are any previous complaints on that company, etc. This will give you a clear picture on whom you should go with your mortgage marketing or refinancing.

You should be prepared to some spend some money on this too, as some mortgage website charge you payment to get the information you need, this way you get only true and reliable information.

While looking for the mortgage marketing idea on the net you can also request an offline advice by asking one of their representative to visit your place and clarify it in a more thorough way rather than getting it done online. This way you can ask more questions and get a clearer clarification. With this method you will need to shell out some extra money but it is worth it as you get a good re-financing company which is cheap as well as reliable and this will only help you in long-term.

Caitlina Fuller is a freelance writer. Home owners those who plan on getting refinancing for their homes have found that internet as the best source to get what they want regarding mortgage loans. A good reliable mortgage website is enough to get the info we want regarding all the stuffs related to mortgage and mortgage marketing plans.

Mortgage Information Resources

2011-10-26T19:41:00.000-07:00

People who are planning to purchase a new house or want to obtain a loan against their properties look at various mortgage information sources available before applying. There many mortgage information sources that can help the consumer research and opt for the right mortgage to suit his individual needs. These sources can be mortgage lending companies, mortgage brokers and agents and online forums.

Mortgage lending companies specialize in assessing and providing mortgage loans to homeowners. They are generally financial institutions such as banks and have dedicated departments with qualified officials to look after mortgages. The mortgage market is huge and a very competitive scenario today. Mortgage lending companies offer their researched analysis and updated understanding of the borrowers' need and the market.

Mortgage lending companies also employ representatives to help borrowers understand the fine print. These representatives can be contacted online, over the phone or in person by making a prior appointment. Mortgage lending companies understand the value of a mortgage to the borrower. Therefore, they offer free estimates via various channels and help their customers make the right decision as per their individual requirements. Mortgage lending companies allow borrowers to choose from fixed mortgage rates and adjustable mortgage rates.

Mortgage brokers are another great source of information as they access the mortgage plans of various mortgage companies. Mortgage brokers help the borrowers to apply for the desired loans and smoothen the documentation network. It is up to the lender to approve or disapprove the application of loan.

After going through all the information gained from various resources the final choice remains with the borrowers. Borrowers must thoroughly go through credit reports. It is necessary to understand all the document requirements and eligibility criteria. It helps make the application procedure easier and eliminates any chances of disapproval of the loan.

Mortgage Information provides detailed information on Mortgage Information, Reverse Mortgage Information, Mortgage Information Services, Mortgage Refinance Information and more. Mortgage Information is affiliated with Mortgage Rate Calculators [http://www.i-MortgageCalculators.com].

7 Pieces of Reverse Mortgage Information About HECM

2011-10-26T14:25:00.000-07:00

The target of the HECM reverse mortgage loan is, that a senior borrower can keep his standard of living on a good level, despite of the fact, that his income has decreased.

Actually the money comes from the equity of the borrower`s home, but he will not pay anything back until the closing moment of the loan. This happens, when a borrower moves permanently away or dies. This is one of the corner stones in the HECM reverse mortgage information.

1. Now You Can Buy A New Home With HECM.

You have to check the HECM terms, because they differ from state to state. A normal case is, that HECM terms allow you to buy a new home, because the idea is that the borrower has the freedom to use the money, how he wants.

2. New HECM Loan With Fixed Interest Rate.

Normally, when you take a HECM reverse mortgage loan, it has a variable interest rate. This means different payments on different months, but follows the market rates, which is fair in a way. Now you can get HECM with a fixed rate. The benefit is obviously a mental one. You will get a sure reverse mortgage information and with it some peace into your mind, because you know, how much you have to pay back in the closing.

3. You Can Order, How You Receive The Payments.

With an ARM HECM option a borrower can choose how the lender pays to him. The alternatives are as a lump sum, as monthly payments, as a credit line or as a combination of all these. You have to think, for which purposes you need the money.

4. Reverse Mortgage Information, New Margin Index.

The lenders do not anymore use the CMT index to measure margins for the reverse mortgage loans. The new index is called Libor, a London based index. This Libor offers better terms for the borrower with the idea to maximize the cash return to the borrower.

5. New Requirements Concerning Counseling.

There has been one problem, because many seniors have not understood all the terms. That is the reason, why the U.S. Department of Housing and Urban Development and the Federal Housing Administration have written new counseling instructions, which try to guarantee, that a borrower will understand all the key points before signing.

6. The Higher Loan Limits.

The new Obama administration increased the reverse mortgage loan limit, which a borrower can take on his house. To the end of the fiscal year 2009 it was raised from $417,000 to $625,500.

7. New Rules About Refinancing.

HUD and FHA have updated their rules of refinancing concerning the senior borrowers, who have made it to the maturity date on their present reverse mortgage. The new terms include so called Anti-Churning Disclosure form, which prohibits lenders to benefit from the reverse mortgage refinance on behalf of the borrower.

Juhani Tontti, B.Sc., Marketing. A HECM Offers All Benefits And A Counselor Explains How Does A Reverse Mortgage Work, So You Get A Good Product. Visit: Reverse Mortgage Information

First Home Mortgage Information

2011-10-26T05:03:00.000-07:00

Are you considering buying a home? You will likely need your first home mortgage! So, as a virgin to home buying, this article will help you discover the information you need to get your first home mortgage!

The biggest need for lenders is security. This means in essence, that you have a stable job, and can pay the mortgage payments without putting too much strain on your finances.

The amount you borrow is what you get to purchase your home with, and then you have the interest rate. And this is what makes getting your first mortgage interesting, because you can save! And you can save big!

There are some points to remember, to be able to do that. For example, to be able to effectively make some great savings, you will want to research the options.

There are many lenders out there, and finding the best offers need not take up a lot of time. The first thing you will want to do, is to research as many places as you can find, then find the lowest interest charges.

The lowest interest charges is something that needs research, however, with the power of the internet, doors are opening for you! There are some points to remember. The first is that you will come across 2 main types of mortgages.

The first home mortgage that you will find, is those that are payed off within 30 years. There are also those that take 50 years to pay in full! I suggest against the 50 year versions, because they can take up a lot of money. Over the long term, you will find that the interest goes so high.

The first step is to research the several options available to you, but if you can afford it, go for a 30 year mortgage. This will result in the best combination. The first home mortgage that you will find, will either be a fixed rate or an adjustable rate version.

The main difference is how they operate. For example, the fixed versions are like the loans that you often find. They are great at giving you a clear understanding of how much you need to pay back.

The adjustable versions change, depending on the banks base rate. This can work to your benefit or against it, depending on your personal view of the economy.

Research, and you can find some of the best options!

To find the best mortgage deals check out home mortgage online and first home mortgage.

Home Mortgage Information to Find the Best Deals on Mortgages!

2011-10-25T19:14:00.000-07:00

Are you purchasing a home? Yes? Well, how does saving up to $10,000 sound? If you would like to save big, then read this article. Inside this article, you will discover the information you need to know.

To save on a home mortgage, you need to find the best interest charges. The lowest interest charges, will make all the difference.

So, invest the time, and you can find some amazing options. So, invest the time, and you will find what you need.

The first thing that you want to do, is research several options that can bring about some great findings.

The first place to invest some time into, is a real estate magazine, which can actually result in finding a lot of places that you can go with.

Most of the advertisements for finance, will be lenders, but some will be mortgage brokers.

The difference is that the broker is representing different lenders, and packages. The result is that they can save you time and money.

The other advertisements, are actually lenders who are advertising.

I have found another method to finding great home mortgage information and deals. I have found that researching online, can make all the difference.

So, invest the time into researching online, and you can come up with some great home mortgage information, as well as the latest deals.

The first thing to remember, is that you can actually go through and select the best options, if you jot down your findings with pen and paper. So, invest the time, and find the best!

Would you like to find the best refinancing offers? Go to these resources and find various refinance home mortgage packages and find the best refinance mortgages [http://www.refinancehomemortgages.info/uncategorized/refinance-home-mortgages/] for 2010.

Important Mortgage Information - What Do You Need to Know?

2011-10-25T12:22:00.000-07:00

Applying for any loan can sometimes be complex, detailed and troublesome. Usually the Mortgage Loan takes the cake on this one. I will explain; if you have been through the process, you have a greater understanding about what it entails, than someone who is doing this for the first time. There are some customers, who do not like for anyone to "know their business", let alone a Mortgage Lending Institution. I do understand the fuss with all of the identity theft that goes on.

It is some what aggravating, (more so to some individuals) that so much information about their entire financial history is needed prior to approval of their loan. The question arises; why do they need to know so much about me? This part of mortgage lending has not changed much with "THE MORTGAGE MELTDOWN". Always remember, that not everyone sees themselves or their situation in reality; it must be verified and proven. Please know, (I am trying really hard to not say that everyone does not tell the truth). Document, document, document. That is the Industry strategy. With full documentation for all details, there is not room for loopholes.

The documentation requirements became less with the "Automated Underwriting Systems", "Desk Top Underwriter" of "FNMA" (Federal National Mortgage Association- "Fannie Mae" and "Loan Prospector" "FHLMC" (Federal Home Loan Mortgage Corporation- "Freddie Mac"). WOW! That is a mouth full!! I do not want to get you confused with this but this is a very important part of loan approval.

I will describe what the "automated underwriting system does". It allows the Mortgage Lender to input all of your financial information, and run your credit report. You must sign an authorization form prior to this being done OR give a verbal authorization. The latter is done quite frequently. Your information is evaluated then by either the "Fannie" or "Freddie" underwriting system. NOW, you really know how your loan is associated with these BIG GUYS. No, only partly, may I say! The system evaluates your credit, your employment/income history given on your application, assets (how much money you have, your downpayment and reserves), how long you have lived at your current address and the entire history you have stated. A mortgage application may be given face to face, by phone, mailed, email or fax. Upon evaluation, the automated system gives the Lender a preliminary status; approved/accept. IMPORTANT: the information must be authentic or the approval WILL CHANGE when information is verified and re-submitted to the system. It will spit out the MINIMAL documentation needed to submit the loan to the investor and what all requirements, including the appraisal of the property.

Please note: this is not all inclusive, but gives you some idea of the inside on how the Lender comes up with guided information concerning the approval of your loan. It takes some of the responsibility off their shoulders; but their duty is to submit any and all information implied by the mortgage applicant. A lot of work goes into getting your loan approved and this is "best practice" lending, geared toward your benefit.

I hope introducing you to the underwriting systems used within the system does not scare you. Not intended. This will actually help you know that you are being given every opportunity in getting approved. Your financial status, credit, assets, liabilities, and employment/income history are the tools used to evaluate you as a credit risk. Without the evaluation, their is nothing to build on. There is no loan without an evaluation.

Of course you do not deal directly with "Fannie" or "Freddie", no, but your Lender does as a general rule. Even thought these guys got into a little trouble, their guidelines and rules is what helps keep the Lenders straight. Then of course, the Agencies are regulated and are guided by RESPA,TILA, and the like. There is no such thing as a "good old boy" loan anymore. There are step, provisions, regulations and guidelines that must be adhered to and YES, IT IS FOR YOUR PROTECTION that all of this exist.

I will be back with more.

Linda Todd

I have worked within Mortgage Lending for 30+ years. There is a lot of information that applicants never understand or know. My purpose is to help especially, the first time homebuyer know what to look for and questions to ask.

I have seen baffled buyers left in the hands of strangers hoping they are getting the loan that is best for them without knowing for sure that it was! My goal in articles and my blog is to educate those who want to be educated or think they need to learn more.

It is very detailed and each step of the process has its own set of rules, including the property being bought by the buyer and, the contract its self.

Please stay tuned for more!

Home sales jump in August

2011-10-25T03:25:00.000-07:00

Sales of existing U.S. homes increased in every region of the country in August, according to data from the National Association of Realtors, a welcome change after a few months of decline.

"Some improvement in August can derive from sales that were late in previous months, but favorable conditions, accessibility and increase rents at the base of motives," Lawrence Yun, NAR Chief Economist said in a press release. "Investors were more active in absorption of foreclosed properties. In additional to bargain hunting, some investors are on the market to hedge against inflation. "

Sales of existing homes jumped up 7.7 percent to a seasonally adjusted annual rate of 5.03 million units in August, from 4.67 million revised upward in July. The new number is 18.6 percent from a year ago.

The median price for existing homes is now $ 168,300, down 5.1 per cent from August 2010. Total inventory was down 3.0 percent on a monthly basis, 3.58 million homes, which is a supply of 8.5 months at current sales pace. In July, there was a supply of 9.5-month.

By region, sales in the Northeast grew 2.7 percent in August, while the Midwest saw increased sales of 3.8 percent. Southern sales were 5.4 percent, and sales skyrocketed in the West, where they increased 18.3%.

NAR President Ron Phipps said that market conditions are very affordable, but some reefs at home sales still exist.

"Throughout the year, the ratio of housing prices, interest rates and family income has been hovering at historic highs, meaning the best accessibility housing conditions in a generation," he said. "The biggest factor keeping home sales a healthy recovery were denied mortgages creditworthy buyers and evaluated assessments below the price negotiated."

Amber Nelson on September 23, 2011 in mortgage news, real estate information

View the original article here

Mortgage rates dip below 4 percent

2011-10-24T18:06:00.000-07:00

In another record-breaking decline, the average rate of interest on fixed-rate mortgages (174.378) by 30 years has fallen below the 5 percent mark for the first time in history, according to the mortgage finance company Freddie Mac Thursday.

The rate of 30-year FRM sank 3.94 percent, excluding taxes, during the week ending on 6 October, down from the previous all-time low 4.01 percent the week before. A year ago, the average rate was 4.27 percent.

Rates on 15-year shot hit new lows as well, sinking to 3.28% 3.26% from the previous week. A year ago was 3.72 percent. Variable rate mortgages a year brought a higher rate if you move up to 2.95% by 2.83%.

"30-year conventional fixed mortgage rates average fell below 4 percent for the first time in history this week following a sharp drop in Treasuries 10 years earlier in the week had raised concern about a global recession," said Freddie Mac vice President and Chief Economist Frank Nothaft in a press release. “…Interest rates for the weapons a year, however, rose, as the Fed began to replace 400 billion dollars of Treasury securities in the short term, that serve as benchmarks for many arms. "

He also cited recent comments by Federal Reserve Chief Ben Bernanke as adding to the pressure towards the low rate of investors. Speaking at the Congress of new Fed plan to sell short-term debt and buy longer-term bonds that Bernanke said,

"Should help a little, on growth and employment. It is particularly important that the economy is near, the recovery is faltering. "

While the rock bottom interest rates should be helpful to stimulate the housing market barely-breathing, there are a limited number of people who can benefit from them. Mortgage lending standards remain so tight that many do not qualify for home purchases and refinances. Refinancing is not even an option for most of the owners of 11 million U.S. homeowners who owe more than their homes are worth.

As Mark Goldman, a mortgage broker in Southern California who lectures at San Diego State University said the Washington Post. "It is difficult to refinance a loan these days. Only a few selected can qualify. "

View the original article here

New homes sales decline at Record lows

2011-10-24T11:02:00.000-07:00

Another monthly decline in sales of new homes has prompted a fresh round of worrying and despair in the United States real estate market.

New home sales in August fell for the fourth straight month to 295,000, according to the Department of Commerce, a six-month low and a pace that is likely to be the "worst year since the Government started keeping half a century ago," by the Associated Press.

2.3% Monthly sales drop last month was accompanied by a decrease of 9 per cent of the median new home prices, which fell to $ 209,100, a low of 11 months.

Analysts and the media are rather gloomy about the signs of such data. For example:

"The housing sector cannot get any worse," says Michael Englund, Economist at action economics in Boulder, Colorado, as quoted in an article by Reuters. "[Real estate] market is dead, and the record low mortgage rates do nothing to help, "said Ian Shepherdson, Chief U.S. economist at high frequency Economics as quoted in the Wall Street Journal."Sales are very weak, and there will be a very small improvement in the next two months. We expect a step up in distressed home sales, which will put more downward pressure on prices. It will be very slow return to normality, "said Celia Chen, a housing Economist at Moody's Analytics Inc. 's in West Chester, Pennsylvania as quoted in BusinessWeek."House prices fell the most since the recession started, on a percentage basis, during the great depression of the 1930s. It took 19 years to fully recover after the depression of prices, "said a commentator from the Associated Press.

On the positive, home builders are at least answering the question that fall in an appropriate manner. Total new home inventory in August fell also on bass.

View the original article here

Foreclosures up in third quarter

2011-10-24T05:49:00.000-07:00

Lenders are finally starting to draw up their backlogs of foreclosures, according to recent data RealtyTrac, but these days, these properties are embedded in a longer process.

In the third quarter of this year, foreclosure filings — default notices, composed of scheduled auctions and Bank repossessions — rose slightly by 0.3 percent from the previous quarter. While that growth is not stellar, is important as it is the first increase after four consecutive quarterly declines.

First time default notices jumped up most, 14 percent, a sign that the banks are ready to pursue more aggressively foreclosures on the rise again. And how it sounds weird that it might actually be a good thing.

Banks dramatically pulled back on processing foreclosures last fall as scandal ' robo-signature ' forced them to look more closely at their paperwork. That caused major delays and created a huge backlog of foreclosures. And it is generally believed by analysts that the housing market did not really recover until lenders to work through their inventory of foreclosures.

"Banks are beginning to process foreclosures again after the time to get their paperwork in order. Have made the care that they needed to do, "said RealtyTrac chief executive, James Saccacio, as quoted in an article by Reuters. "Now there is this wave of returning and more defaults are being processed."

So even if foreclosure filings is still down significantly from last year, the fact that they are on the rise may be good for the real estate market in the long run, as it means that the recovery process is back on track.

It may take a while for the exclusion, however, be processed quickly. RealtyTrac has reported that the average time for a property to be in foreclosure (by default the first warning to the Bank's recovery) has increased to 336 11.2 days or months. In the second quarter is was only 318 days or months 10.6. That period may shrink again as banks ramp up their machines to foreclosure.

Amber Nelson on October 15, 2011 in mortgage news, real estate information

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Mortgage delinquencies increase is cause for concern

2011-10-23T21:16:00.000-07:00

Mortgage delinquencies inched up in the second quarter of this year for the first time in five quarters straight, directional displacement that has a little worried about mortgage regulators.

According to a new report from the Office of the Comptroller of the currency of mortgages that were delinquent between 30 and 59 days, there was 0.4 per cent increase to 3 percent in the second quarter compared to the previous quarter, while loans that were 60 + days late, the delinquency rate grew 0.1 percent to 4.9 percent.

These rate increases are so small, it would be easy for them. Statistically, second post generally increases in Mortgage delinquencies, making it difficult to say if the new rates are below the annual trend, or if there is something more behind them.

"It is something not to be overly worried, but it is clearly something to look to see where you're going," said Joseph Evers, Deputy Controller of OCC supervision Bank as quoted in a blog post to the Wall Street Journal.

Another official OCC mortgage, Bruce Krueger, seemed a little more agitated by the uptick in rates. In a conference call with reporters as reported in an article in MarketWatch, Krueger said:

"It is a problem that we think should be carefully monitored to determine if this is something more than just seasonal impact," he said. Said it will be important to see if new delinquencies move into the category of 60 days delinquent. "This is only seasonal? Or is this something more? So yes, we are paying very close attention to it. "

Overall the 12 percent of mortgage borrowers were both behind by one or more payments, or were already in the process of foreclosure. This proportion is up by 11.4 per cent compared to the first quarter. Beyond seasonal factors, the continually weak labour market is likely to blame for the rise.

Amber Nelson on 1° October 2011 in mortgage loan News, mortgage news

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Loan program to help unemployed Fizzles

2011-10-23T12:11:00.000-07:00

A recent Government attempt to save homeowners from foreclosures may post dismal results, according to the Department of housing and urban development.

The loan program of emergency homeowners was designed as part of the mortgage Bill Frank Dodd last year to help recently unemployed homeowners behind on their mortgage. At this point, however, HUD expects only 10,000-15,000 people to qualify within the deadline of this Friday. With approximately 100,000 applicants in total, the program could certainly be called less-than-effective.

The plan was to offer interest-free loans which might also be forgiven later to borrowers who had lost 15 percent or more of their income. Also had to be at least 90 days late on their home loans and could prove that once you have found a new job, could afford their monthly payments again. These requirements has proved to be too much for most of the applicants as HUD used a very complicated set of calculations to determine eligibility. In addition, borrowers could not be too far behind on their payments, and could not have lost their jobs over a year ago.

"Nobody could have anticipated how difficult it is to make statutory requirements to reach homeowners," said Lemar Wooley, a spokesman for HUD, as quoted in an article of CNN.

Not only were too stringent for many, but the timing of the programme limited its effectiveness. It was initially delayed by several months and then officially started at the end of June. Originally, HUD was only to allow applicants to apply for six weeks, but ended up giving up a two-and-a-half month.

For those who qualify, they could receive up to $ 50,000 or 24 months, depending on which is fulfilled in the first place. HUD expects average aid pay is between $ 35,000 and $ 45,000. Only about half of the $ 1 billion allocated will probably used for this program.

Amber Nelson on October 3, 2011 in mortgage news

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Consumers still down on Home prices

2011-10-23T03:23:00.000-07:00

Most Americans believe House prices continue to decline next year, according to a recent survey by mortgage finance companies Fannie Mae and consumers are more pessimistic on most financial problems today than a year ago.

The survey September Fannie Mae found that respondents now think House prices will fall on average 1.1% by this time next year. That is a much bigger decline than the 0.5 per cent from August.

"The September survey showed a marked deterioration in consumer expectations, house prices over the next year – their weakest outlook since monthly tracking began in June 2010," said Doug Duncan, vice President and Chief Economist at Fannie Mae in a press release. "Despite a decline in negative economic titles during September … consumers continue to show very negative attitudes. At the same time, the proportion of consumers expecting mortgage rates to climb down sharply at the lowest level that we recorded, possibly influenced by the news that the Federal Reserve will keep interest rates low for years to come. "

In this latest survey, only 33 percent of consumers believe that mortgage rates will rise over the next 12 months, down from 45 percent in the month of August. Feelings may have been influenced by the recent decision of the Federal Reserve to bring long-term rates even lower.

In terms of greater economy, 77 percent of respondents felt that the u.s. economy is on the wrong track. While this is down slightly from 78 percent the previous month, is still an overwhelming negative outlook and that probably will translate into personal spending choices.

As Duncan commented,

"The lack of a sense of urgency to buy homes, given expectations for further declines in home prices and mortgage rates Low, coupled with the General pessimism regarding their personal finances and the economy portends badly for the recovery of the real estate market."

Amber Nelson on October 10, 2011 to interest rate, mortgage news, news

View the original article here

Fannie and Freddie forecast Dour Outlook for housing

2011-10-22T22:19:00.000-07:00

Mortgage finance Giants Fannie Mae and Freddie Mac recently released reports and perspectives about the State of the u.s. real estate market. Unfortunately, their predictions are not looking exciting.

Report of Freddie Mac, economic and Housing Market Outlook for October showed that home-ownership rates have fallen last year, sliding down 1.5 percent to 65.9% from 66.9% during the second quarter of 2010. Among those in the ' under age 25, home-ownership is down 4.4 percent, while the rate for those between 25 and 29 is down 7.0%.

And, consequently, the manufacturers focus on condominiums to attract those who do not buy more homes.

"New construction starts slowly is collecting and multifamily loan seems to be increasing even with origination volume this year stronger than 2010," said Frank Nothaft, Freddie Mac vice President and Chief Economist. "In part, the increase in Originations is related to low mortgage rates, improvement of apartment-sector economy and the return of traditional lenders which had decreased activity during the recession."

Regarding Fannie Mae, they require constant economic trouble, with slower growth rates will also purchase applications and mutual home. Fannie put the chances of a repeat recession by the end of 2012 to close to fifty percent.

"In this type of environment, the housing market remains very slow and consumer willingness to dig into their savings products of big ticket is very low," said Fannie Mae Chief Economist Doug Duncan. "There was a bit cyclic seasonal pick-up in housing activity recently as the spring and summer sales are generally stronger than autumn and winter, but the point of main indicators of housing sales bouncing along the bottom, at least until the end of 2012."

Duncan also pointed out that as foreclosed properties continue to plague the market, prices remain weak. And if this is true, he says, "Home prices are a key factor for any positive movement of the real estate market", so it might be a long recovery indeed.

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Aumentando le tasse di ipoteca possa abbassare il rischio di contribuente

2011-10-22T13:26:00.000-07:00

In an attempt to start weaning mortgage finance Giants Fannie Mae and Freddie Mac out of taxpayer funding, the two companies may need to start higher taxes as a lender of charging and require additional mortgage insurance.

According to Edward DeMarco, Director of the Federal Housing Finance Agency and the current regulator of Fannie and Freddie, these changes could reduce the risk of further loss of housing for taxpayers.

These changes would have to be phased in gradually and would not happen immediately, but should be expected in 2012, with some warning, "as he said in a recent speech at a Conference in Raleigh Mortgage DeMarco.

Fannie and Freddie, which buys and secure mortgage loans from lenders and then bundle and resell to investors, have been taken into conservatorship of Government in the autumn of 2008, when they were collapsing and considered "too big. too fail. " Now the two giants back about 90 percent of mortgages in the country.

DeMarco said the FHFA has tried to find ways to limit the involvement of the taxpayer in two companies, as the Federal Government has not yet decided on a plan for the future of Fannie and Freddie.

"We all knew that reforming the housing finance system was going to be difficult, but I think the general expectation was that further progress would have been made by now," said DeMarco, as quoted in an article in the Washington Post.

Opponents of proposed tax hikes mean rising costs will be passed on to consumers and will further depress the housing market. Yet DeMarco told reporters that,

"These are steps we can take and we think we are in charge of recruitment which are favourable in that direction. This will measure ultimately consumers from price and availability of mortgage credit, and in another macro sense … whether there is a sense of confidence in real estate markets or stability. "

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Existing Home Sales fall in September

2011-10-22T06:56:00.001-07:00

Sales of existing Us homes fell last month, but rose on an annual basis, according to data of the National Association of Realtors.

Total sales fell 3.0 percent to a seasonally adjusted annual rate of 4.91 million in September from a revised plan 5.06 million homes in August. Compared to same time last year, however, sales were 11.3%.

"Existing-home sales have bounced around this year, staying relatively close to the current level in almost every month," said NAR chief economist Lawrence Yun. "The irony is conditions have improved accessibility to historical highs and more creditworthy borrowers are looking to buy houses, but the proportion of failures of contract is double the level of September 2010. Even so, the volume buyers success is more than a year ago and has remained fairly stable-this speaks of a claim was not satisfied. "

The NAR found that 18 percent of its members reported contract failures in September, the same as August but up dramatically from 9 percent from a year ago.

"Throughout the year we discussed the fact that many buyers are home mortgages is denied," said NAR President Ron Phipps. "On top of that, lending limits have been lowered, which means that buyers of higher-priced homes, including many in the markets more expensive housing, now have to pay a higher interest rate for a mortgage jumbo buyers that qualify for a conventional loan. We need to remove the roadblocks for a housing recovery-i.e. no more obstacles in the way of financially qualified buyers.

Regionally, sales increased 2.6 percent in the Northeast, drooped 0.9 percent in the Midwest, fell 2.6 percent in the South and surrounded by 8.8 per cent in the West.

The median price home to the country fell to $ 165,400, down 3.5 percent in September 2010. An important contributing factor to the decline in the price is the amount of distressed homes on the market. The 30 percent of sales they made last month.

Inventory of existing homes fell to 2.0 percent in September, 3.48 million. At the current rate vendito representing a supply of 8.5 months. That is down from a supply of 8.4-month of August.

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The importance of your down payment when buying a home

2010-07-06T22:49:00.000-07:00

Due to the size of debt that most people take on when buying a home as well as the additional cost of having to maintain it, it is always a good idea to place the largest amount of down payment that you can possibly come up with.

One reason is because the larger the down payment the lower your monthly payment will be. Another reason why you will want to place the largest down payment you can is because it will allow you to afford a larger home at possibly the same size monthly payment, as you would pay at a lower down payment.

Despite your reason for putting down a cash down payment and depending on how you plain on financing the property your lender will still require that you have one, unless you’re talking about a VA Home Loan.

Most lenders down payment requirements will usually range from 0% to 20%.

VA Home Loans

One of the best things about Va’s home loan program (other than the no down payment requirement) it isn’t subjected to overall market conditions, which means that it will always be there for the veteran who needs it and is able to meet its qualifications.

FHA Home Loans

The Federal Housing Administration through HUD (Housing and Urban Development) in an effort to help the low to moderate-income home buyer insures home loans through its FHA Home Loan program. As a requirement for qualifying for one of its federally insured mortgages FHA requires that home buyers have at least 3% of the purchase price as a down payment.

Conventional Lender Mortgage Loans

In the case of conventional lender mortgage loan financing most lenders will require that buyers have 20% of the purchase price as a down payment.

Because of the fallout from the most recent mortgage market meltdown where many brokers and lenders were virtually giving out purchase money mortgages to anyone regardless of whether they could afford to make the payments or not they want to be certain this time you can afford to make those payments. However if you are unable to come up with the 20% you will have to pay PMI.

Private Mortgage Insurance

Private Mortgage Insurance (PMI) is usually required to insure any mortgage that is more than 80% LTV. Which means PMI isn’t charged to home buyers who have a 20% down payment.

Obviously your credit and income status are two of the largest determining factors when Qualifying For A Mortgage but you don’t want to overlook the importance of your down payment as well.

Checking Mortgage Rates Online

2010-05-02T19:53:00.000-07:00

Homeowners who are planning to re-finance their home may find the Internet to be a very worthwhile resource. The Internet is useful because it can give the homeowner a wealth of information as well as the ability to compare different rates from different lenders at their convenience. While these options have made re-financing a more convenient process there is more potential for danger. However, homeowners who exercise a small amount of common sense in using the Internet for re-financing often find they are not at any additional risk.

Comparison Shop at Your Convenience

One of the most popular advantages to researching re-financing online is the ability to comparison shop at the homeowner’s convenience. This is important because many homeowners work long hours and often find they are not able to meet with lenders during regular business hours because of job restraints. The Internet, however, is open 24 hours a day and allows homeowners to research their options, make important calculations or receive online quotes at any time of the day through the use of automated systems.

Homeowners can also take their time comparing the quotes they receive from these lenders online instead of feeling pressured to provide an immediate response. While homeowners may have some additional time available to them, these same homeowners should realize they do need to act relatively quickly to lock in estimates they receive as interest rates are often time sensitive in nature and cannot be guaranteed for long periods of time.

Use Only Reliable Resources

Homeowners who are using the Internet to research mortgage re-financing options and obtain quotes should carefully consider their sources when making important decisions regarding the subject of re-financing. Homeowners who stick with well known lenders and established websites will not likely encounter problems but those who select a new lender may be surprised by the results of the re-financing attempt.

Homeowners who are unsure about the reliability of a particular resource or lender should do additional research on the company. One of the easiest ways to do this is to consult the Better Business Bureau (BBB). The BBB may be able to provide the homeowner with valuable information regarding the number of previous complaints against the company. A company who has a large number of unresolved complaints should be considered an unreliable company. However, homeowners should not assume companies without a significant number of complaints are reputable unless the company has been in existence for a number of years and is a member of the BBB.

Homeowners should also take care not to be fooled by fancy web design. A website which looks very professional is not necessarily a website which is accurate and informative. Many skilled website designers can create websites which are both attractive and professional looking. These website designers can also optimize a website for particular mortgage related keywords so users find the page easily when searching for these terms but this does not necessarily make the website designer knowledgeable about the subject to re-financing.

Confirm Loan Terms in Person before Committing

While shopping for re-financing options online is certainly easy and convenient, homeowners should consider completing the application process either in person or over the phone instead of relying on an automated system. While the Internet is good for research purposes, homeowners can take advantage of face to face meetings or telephone conferences to ask all of their relevant questions. Asking all of these questions will help the homeowner to ensure he fully understand the loan terms as well as all of his available options.

Completing the re-financing process in person or over the phone can also prevent the homeowner from being surprised by any elements of the mortgage re-finance. This may include additional fees which are tacked on during the processing of the application, rates which are only available in certain situations or other elements of the re-financing agreement which could significantly impact the homeowner’s decision making process.

Understanding Re-Financing

2010-05-02T19:44:00.000-07:00

Understanding the process of re-financing can be quite dizzying. Homeowners who are considering re-financing might initially be overwhelmed by the number of options available to them. However, after taking some time to educate themselves about the process, they will likely find the process is not nearly as daunting as they had imagined. This article will discuss some of the options available to those interested in re-financing as well as some of the important factors to consider in order to determine whether or not refinancing is worthwhile.

Consider the Options

Homeowners have quite a few options available to them when they are considering the possibility of re-financing their home. The most significant decision is the type of loan they will choose. Fixed rate mortgages and adjustable rate mortgages (ARMs) are the two main types of mortgages the homeowners will likely encounter. Additionally there are hybrid loan options available.

As the name implies, a fixed rate mortgage is one in which the interest rate remains constant throughout the duration of the loan period. This is an especially favorable type of loan when the homeowner has credit which is sufficient enough to lock in a low interest rate.

ARMs are mortgages where the interest rate varies during the course of the loan period. The interest rate is usually tied to an index such as the prime index and is subject to rises and falls in accordance with this index. This is considered a riskier type of loan and is therefore often offered to homeowners who have less favorable credit scores.

Although ARMs are considered somewhat risky there is usually a certain degree of protection written into the loan agreement. This may come in the form of a clause which limits the amount the interest rate can increase, in terms of percentage points, over a fixed period of time. This can protect the homeowner from sharp increases in the interest rates which would otherwise considerably raise the amount of their monthly payments.

Hybrid loans are mortgages which combine a fixed element with an adjustable element. An example of this type of loan is a situation where the lender may offer a fixed interest rate for the first five years of the loan and a variable interest rate for the remainder of the loan. Lenders typically offer a lower introductory interest rate for the fixed period to make the mortgage seem more enticing.

Consider the Closing Costs

The closing costs associated with re-financing should be carefully considered when deciding whether or not to re-finance the home. This is significant because when homeowners re-finance their home they are often subject to many of the same closing costs as when they originally purchased the home. These costs may include, but are not limited to appraisal fees, application fees, loan origination fees and a host of other expenses. These costs can be quite significant. The closing costs will be significant when the homeowner considers the overall savings associated with re-financing.

Consider the Overall Savings

When deciding whether or not to re-finance, the overall savings is one factor the homeowners should carefully consider. This is important because re-financing is typically not considered worthwhile unless it results in a financial savings. Although some homeowners refinance to lower monthly costs and are not concerned with the overall picture, most homeowners consider whether or not they will be saving money by refinancing.

The amount of money the homeowner will save when re-financing is largely dependent on the new interest rate in relation to the old interest rate. Other factors come into play such as the remaining balance of the existing loan as well as the amount of time the homeowner intends to stay in the home before selling the property. It is important to note that the amount of money saved by negotiating a lower interest rate is not equal to the entire savings. The homeowner must determine the closing costs associated with re-financing and subtract this sum from the potential savings. A negative number would indicate the new interest rate is not low enough to offset the closing costs. Conversely a positive number indicates an overall savings. With this information the homeowner can decide whether or not he wishes to re-finance.

You Should Seek Recommendations When Re-Financing

2010-05-01T19:37:00.000-07:00

Homeowners who are re-financing their home for the first time may need a great deal of advice to assist them during the process. While homeowner can certainly research the process of re-financing by themselves, this can be a cumbersome task which is difficult, if not impossible. While it might be possible for a homeowner to educate himself enough to make informed decisions, it is unreasonable to expect a homeowner to be up to date on the most current information in the re-financing industry. It would also not be reasonable for homeowners to learn enough to make a definite decision regarding re-financing. The homeowner may still require some direction regarding which options are best suited for the needs of the homeowner.

Fortunately there are two simple steps homeowners can take to tip the odds of obtaining the most favorable re-financing in their favor. These simple steps include consulting with friends and family members who have recently financed and turning to industry experts for assistance.

Consult Friends and Family when Re-Financing

Believe it or not consulting with family and friends is one of the first steps a homeowner should take in the refinancing process. Those reading this article might be somewhat confused by this suggestion because in the previous section we stressed how it would be virtually impossible for a homeowner to thoroughly educate themselves on the re-financing process. Surely, we are not implying every homeowner has a friend or family member who is capable of given detailed financial advice in regard to re-financing. However, friends and family members can be helpful in a different capacity.

Friends and family members who recently re-financed their own home likely did a great deal of research and legwork before making their decision. They also likely formed useful opinions, either negative or positive, about the lender they used in the process. It is this information which can be very useful to homeowners who are considering their own re-financing. Homeowners can obtain information such as which lenders are currently offering the best rates as well as which lenders are easy to work with and responsive to the needs of the homeowners as well as which lenders do not take a vested interest in helping the homeowner to succeed.

Ask Experts for Advice when Re-Financing

One piece of advice which cannot be overlooked when re-financing a home, is asking an expert in the re-financing industry for advice. These experts may have costly consulting fees associated with their assistance but most homeowners would agree these fees are certainly worthwhile especially if the result in a significant cost savings for the homeowner.

We previously stressed how the issues associated with re-financing can be quite complex and difficult for those outside of the industry to fully understand, however, those in the industry spend their days devoted to learning more about re-financing, keeping up to date with changes in the industry as well as new developments and figuring out how to best serve the customers. All of these characteristics make it clear that homeowners should really consider employing the services of a financial planner with a great deal of experience in re-financing when they are making decisions regarding the best re-financing option for their situation.

Again, friends and family members who previously consulted with an industry professional can supply candid opinions about those they met. This can save the homeowner a great deal of time by eliminating potential candidates who friends and family members thought performed poorly.

Re-Financing with Shorter Loan Terms

2010-05-01T19:29:00.000-07:00

For some homeowners there is the possibility of making a sound re-financing decision even when interest rates are stagnant, the homeowner does not have a great amount of equity in the home and the homeowner’s credit score has not increased significantly. You might wonder how this is possible. It certainly isn’t an option for every homeowner but those who can afford to pay significantly more each month can yield huge financial benefits by refinancing their loan terms from 30 years to 15 years. The benefits which may result from this type of re-financing include a significant overall savings, the ability to gain equity quicker and the ability to repay the balance of the loan quicker.

Higher Monthly Payments Increase Overall Savings

Re-financing with shorter loan terms is definitely not an easy option but homeowners who have a large monthly cash flow or who receive a sizable promotion at work might be able to consider the possibility of re-financing by decreasing the loan terms from 30 years to 15 years.

The result of this type of re-financing will be a significantly higher monthly payment which is not conventional but can be worthwhile if it meets the needs of the homeowner. In particular this type of re-financing option is a viable solution if the homeowner can afford the increase in monthly payments and has an overall goal of reducing the amount of interest they will pay over the course of the entire loan.

Reducing the amount of interest is critical to the overall savings plan because the homeowner does not have the option of reducing their original debt but they can drastically reduce the amount of interest paid over the course of the loan. Consider two loans with a 5% interest rate. One loan is to be repaid over a period of 15 years while the other loan is to be repaid over a period of 30 years. It is clear that in this example, the homeowner with the 30 year mortgage will pay more during the course of the loan.

Equity Gained Quicker

Another major advantage to re-financing by reducing the loan terms from 30 years to 15 years is the ability to gain equity in the home at a significantly faster rate. The amount of the equity in the home is equal to the amount of the principal loan which has already been repaid by the homeowner. Under a conventional loan, the homeowner typically pays a combination of principal and interest with their monthly payments. The amount of the principal which is repaid on two mortgages for the same amount and with the same interest rate will be different if one loan is a 30 year term and the other is a 15 year term. The homeowner with the 15 year mortgage will be paying more of the principal each month and will therefore be accumulating more equity each month. Gaining equity in the home quicker is ideal because it gives the homeowner greater flexibility. The equity in the home can be used for a number of purposes including home improvement projects, travel, educational pursuits and small business ventures.

Loan Repaid Quicker

One advantage of shortening the loan terms, which cannot be denied by some homeowners, is the ability to repay the loan quicker by re-financing to shorten the loan terms from 30 years to 15 years. In this case the homeowner will have completely repaid the home loan a full 15 years earlier than they would have under the conventional loan. This is advantageous because it can enable the homeowners to enjoy living mortgage free a full 15 years earlier. Once the mortgage is fully repaid, the homeowner may be able to make significantly more sizable contributions to his retirement plan. Some homeowners may even be able to afford to retire once their mortgage is repaid in full. This ability can have a significant impact on the quality of life for the homeowner. Homeowners may find themselves with the financial means to travel, assist family in educational pursuits or invest in a small business.

Choosing to Re-finance online

2010-05-01T19:24:00.000-07:00

The Internet has greatly simplified the process of re-financing a loan. Years ago homeowners had to go to a lender during regular business hours for lengthy consultations and would have to visit several different lenders to determine which one would offer the best rate. The Internet has not only simplified the process but has also given homeowners the luxury of investigating re-financing options at their convenience and also receiving multiple quotes form different lenders by filling out one simple online form.

Researching Re-Financing Online

The Internet has not only made it easier for homeowners to re-finance but it has also greatly simplified the process of learning more about re-financing. Again homeowners from past generations might have to rely on industry professionals and published books on the subject of re-financing. However, today’s homeowners can look up re-financing and find a wealth of useful information regarding the different types of loans and re-financing options available. Homeowners can also use the internet to access calculators which perform the complicated equations homeowners previously had to leave up to the trained professionals. These same calculations which may have taken a considerable amount of time to complete and correct are now solved within a fraction of a second.

Select a Reputable Lender

Homeowners who are doing the majority of their re-financing research and searches online should carefully consider the lender they choose. This is important because whether a lender is found online or offline, care should be taken to ensure the lender is reputable. The easiest way to do this is to stick with a well established lender who comes highly recommended by friends and family members. This does not mean new lenders and smaller lenders are not reputable but there is significantly less risk involved in selecting an established lender than there is in selecting a new lender.

LendingTree.com

Homeowners who are investigating their re-financing options online may find the website LendingTree.com to be a very valuable resource. This website offers articles and calculators which the homeowner can use to gain the knowledge they need to make an informed decision. The articles on the website are written in clear and concise language which is easy to understand and the calculators are extremely user friendly and only require the homeowner to enter in a few variables to obtain the desired results.

Another great feature of this website is the inclusion of a link which provides access to obtaining a free credit report. The process is very simple although it does require the homeowner to verify their identity. This is done to protect homeowners from identity theft or other acts of fraud. This is significant because homeowners are likely to realize the terms of their mortgage re-finance will depend largely on their credit score. Homeowners who have good credit will likely be offered favorable rates and terms while homeowners with less than perfect credit will not be offered favorable rates and terms.

However, the most significant feature of this website is the ability to obtain up to four quotes from qualified lenders by filling out one simple form. The information required is rather basic in nature and is information which most homeowners have readily available. Once this information is submitted into the system, the responses are received from up to four lenders almost instantly. The information contained in these reports is customized for the homeowner according to the information inputted into the system.

Choosing a Fixed Rate Mortgage or ARM Option

2010-05-01T19:10:00.000-07:00

One of the most important decisions a homeowner will have to make when deciding to re-finance their home is whether they want to refinance with a fixed mortgage, an adjustable rate mortgage (ARM) or a hybrid loan which combines the two options. The names are pretty much self explanatory but basically a fixed rate mortgage is a mortgage where the interest rate remains constant and an ARM is a mortgage where the interest rate varies. The amount the interest rate varies is usually tied to an index such as the prime index. Additionally there are usually clauses which prevent the interest rate from rising or dropping dramatically during a specific period of time. This safety clause provides protection for both the homeowner and the lender.

Advantages of a Fixed Option

A fixed re-financing option is ideal for homeowners with good credit who are able to lock in a favorable interest rate. For these homeowners the interest rate they are able to retain makes it worthwhile for the homeowner to re-finance at the new interest rate. The major advantage to this type of re-financing options is stability. Homeowners who re-finance with a fixed mortgage rate do not have to be concerned about how their payments may vary during the course of the loan period.

Disadvantages of a Fixed Option

Although the ability to lock in a favorable interest rate is an advantage it can also be considered a disadvantage. This is because homeowners who re-finance to obtain a favorable interest rate will not be able to take advantage of subsequent interest rate drops unless they re-finance again in the future. This will result in the homeowner incurring additional closing costs when they re-finance again.

Advantages of an ARM Option

An ARM re-finance option is favorable in situations where the interest rate is expected to drop in the near future. Homeowners who are skilled at predicting trends in the economy and interest rates may consider re-financing with an ARM if they expect the rates to drop during the course of the loan period. However, interest rates are tied to a number of different factors and may rise unexpectedly at any time despite the predictions by industry experts.

A homeowner who can predict the future would be able to determine whether or not an ARM is the best re-financing option. However, since this is not possible homeowners have to either rely on their instincts and hope for the best or select a less risky option such as a fixed interest rate.

Disadvantages of an ARM Option

The most obvious disadvantage to an ARM re-financing option is that the interest rate may rise significantly and unexpectedly. In these situations the homeowner may suddenly find themselves paying significantly more each month to compensate for the higher interest rates. While this is a disadvantage, there are some elements of protection for both the homeowner and the lender. This often comes in the form of a clause in the terms of the contract which prevents the interest rate from being raised or lowered by a certain percentage over a specific period of time.

Consider a Hybrid Re-Financing Option

Homeowners who are undecided and find certain aspects of fixed rate mortgages as well as certain aspects of ARMs to be appealing might consider a hybrid re-financing option. A hybrid loans is one which combines both fixed interest rates and adjustable interest rates. This is often done by offering a fixed interest rate for an introductory period and then converting the mortgage to an ARM. In this option, lenders typically offer introductory interest rates which are extremely enticing to encourage homeowners to choose this option. A hybrid loan may also work in the opposite way by offering an ARM for a certain amount of time and then converting the mortgage to a fixed rate mortgage. This version can be quite risky as the homeowner may find the interest rates at the conclusion of the introductory period are not favorable to the homeowner.