Mortgage Loan Articles Archives

How Do Mortgage Interest Rates Work? - Fixed Interest Rates versus Adjustable Rate Mortgages & Forecasting Interest Rates
(April 21st, 2008)
There are 2 main types of mortgages; fixed rate and adjustable rate mortgages. If you have a solid understanding of how mortgage interest rates work and what economic/social factors affect them, you will better be able to structure your mortgage loan; for example decide between a fixed rate mortgage or an adjustable rate mortgage. It is also beneficial to know the future direction of interest rates in the economy that will impact mortgage interest rates.

Mortgage Loans: A Look Behind the Scenes - The Mortgage Originator, Aggregator, Securities Dealer & the Investor
(April 14th, 2008)
To investors, a mortgage loan is a source of future cash flows or incoming payments from borrowers. These cash flows are freely traded on the secondary mortgage market where they are bought, sold, stripped and securitized. A secondary mortgage market is where mortgage originators such as banks and lenders trade with mortgage securitizers (like Fannie Mae and Freddie Mac) and other investors. In this article, we will explain how a borrower's monthly payment ends up with many different investors holding mortgage-backed-securities (MBS), collaterized debt obligations (CDO) or collaterized mortgage obligations (CMO).

Trade Off Between Closing Costs & Mortgage Interest Rates
(April 10th, 2008)
You might be surprised to find out that your neighbour next door has a lower interest rate on his mortgage than you do, even though you bought your properties at about the same time. This has happened to thousands of Americans countrywide but we'll tell you why that is the case. Being so competitive, the mortgage market always has a tradeoff between loan closing costs & interest rates charged. Your neighbour who got the lower interest rate may have paid a lot more in closing costs than you did, and that's why he has a lower interest rate. What's more, a large portion of those closing costs may have been added to the loan balance, making it seem like he got a really good deal (because he did not have to pay cash for closing costs). So how can you balance the tradeoff between closing costs & interest rates making sure to pay the least in closing costs and getting the lowest interest rate possible? We will show you how to shop for mortgages and compare their real costs of borrowing.

Home Title Insurance for the Buyer
(March 16th, 2008)
Home title is what gives you ownership of the property you are about to purchase. As the purchaser, you want a title that is clean and free of liens meaning no one else has made a claim against the home. This is common if the current owner has not been repaying his mortgage loans and the bank or other creditors have put a claim against the home. Other liens include unpaid taxes, easement (provision that allows other people other than the owner of the home to use the home for specific purposes such as to reach power lines or a cell phone tower). Title insurance is also very important for the lender because they want to know that the mortgage loan they are handing out is going to the actual owner who can sell the property to you.

Questions to Ask When Buying a Home
(March 15th, 2008)
- Is there a local school nearby? Can you tell me about it?
- Are there any big industrial projects near the home? Examples include new shopping malls, highways, housing or airport developments?
- Who provides local city services and how are they funded?
- If buying a single-family detached home, what is the status of new upcoming homes adjacent to your home that might affect your home?

7 Things First Time Home Buyers Must Do
(March 7th, 2008)
Look at the type of home you want to purchase in your State or wherever you are going to relocate. Look at the inventory that is available out there and their going prices, that is what you should expect to pay. There are a few websites such as www.zillow.com and www.homegain.com that show homes available for sale in America. Also visit www.mls.com or www.realtor.com for more listings.

Is This the Right Time for First Time Home Buyers?
(March 6th, 2008)
The last decade has seen a stellar growth in home inventories being sold in America and prices going higher. Many young people though were still in school and could not afford to purchase homes during this time. The aging baby boomers smiled as they cashed in the new equities built up in their homes and used this excess cash to further drive up home prices. But that real estate boom is now busting as home prices fall and the American economy plunges into recession. Is this the right time for young people and first time home buyers to cash in on this opportunity? Unfortunately, the answer is no!

Which Mortgage Loan is Better - 30 Year Fixed or 5 Year ARM (Adjustable Rate Mortgage)?
(February 25th, 2008)
Consumers have to choose between the different range of mortgage products available out there - from Adjustable Rate Mortgages (ARMs), 30 year fixed term, balloon mortgages, jumbo loans and more. In this article, we will differentiate between choosing a 30 year fixed mortgage and a 5 year adjustable rate mortgage. Which one of the two is better? The answer is, it depends on how much of a home you can afford. There is no right definitive answer as to which is better. The consumer has to look at his financial need and his short/long term financial goals.

Subprime Mortgage Blues - Mortgage Videos
(February 22nd, 2008)
Let's take a look at this video on sub prime mortgages. The video host interviewed mortgage broker Richard Smith in 2004 who was 'riding high' on jumbo mortgage loans (mortgage loans over $417,000). Mr. Smith specialized in low payment mortgages on high price houses, extending the mortgage term to 40 years or more! People could have a 1/2 million dollar home for as low as $1200 a month! "It's really all about driving the payment down as low as possible so that people can afford the payment."

5 Mortgage Lessons to Learn from the Rich
(February 21st, 2008)
Most of us will not make it to the kind of bank accounts that Donald Trump or Bill Gates have, but many households in America are aiming for the $1 million mark (exclusing their residences). That's right, in 2004, the number of households in America that have $1 million in liquid cash and investments excluding their residences grew by 21% to 7.5 million. In this article, we are going to study the mortgage tactics of these rather affluent people because it's not all about the amount of money they make, it's about how they treat their money.

How to Protect Equity in Your Home from Unemployment
(February 19th, 2008)
You get the official pink slip, your employer tells you they are laying you off because business is slow. An example is the layoff of more than 5000 employees by CitiGroup due to dismal financial results in 4th quarter of 2007. Citigroup wrote down $18.1 billion of sub prime mortgages in in the fourth quarter and had no choice to but lay off thousands of workers. What will happen to these workers and their mortgages/homes? Two classes of people will emerge from this incident:

i) Those workers who saved up money in an emergency fund, just when a rainy day such as this arrives.

ii) Those workers who had no saved up money because they spent it all.

Mortgage Fees to Rise, Fannie Mae says
(February 11th, 2008)
Mortgage fees will be getting more expensive for certain groups of borrowers says Freddie Mac. You know how if you get in to an accident, your auto insurance rates shoot up? Something similar is about to happen to mortgage rates. A fee of $250 will be tacked on to every $100,000 borrowed. Thus if you borrow $300,000 you will be hit with a mortgage fee of $750. These fees could actually be higher if your credit score is lower than 680 and if you are borrowing more than 70% of the home's principal value (meaning less than 30% down payment).

15 Year Mortgage or the 30 Year Mortgage?
(February 2nd, 2008)
This is in response to a superb article written by Dan Green @ www.themortgagereports.com. The article is located @ http://www.themortgagereports.com/2006/02/the_15year_mort.html

Yes it is true that most people want to fully pay off their homes, so that they do not have to worry about the mortgage payment each month. Most people also realize that if you select the 30 year mortgage, you will be paying a heck of a lot of interest, adding up to $200,000 - $500,000 depending on the size of your mortgage loan. And who blames them? Heck, I would love to pay off my home in as little as 5 years and save all the money I would pay in interest, but that is hard to do!

A Down Payment on a Home is Not a Financial Cushion
(January 30th, 2008)
Kibler says he likes to see buyers put down at least 10 percent, because they will have a cushion should home prices dip. If you pay $300,000, for example, and need to move after a year, you'll only have to pay off a $270,000 mortgage balance. That gives you the freedom to sell for slightly under what you paid for the house and pay a real estate commission.

I do not want to argue against a famous New York city financial planner but contrary to his thoughts, the 10% down payment that people put down on their homes is NOT to be treated as a cushion if home prices dip. That 10% x $30,0000 = $30,000 should be considered a potential capital loss! Here's why:

Delinquent Mortgage Loan Borrower - What To Do?
(January 28th, 2008)
There are millions of people in America right now who are classified as sub-prime mortgage borrowers, meaning they either have bad credit, very little down payments and lots of credit card debt. What happens if someone is a sub-prime borrower and cannot afford to make the monthly payments on his/her mortgage anymore? Here are 10 smart steps to follow if you fall in to such a problem...

Fed Rate Cut to 3.50% Bails Out ARM Borrowers
(January 23rd, 2008)
Homeowners whose Adjustible Rate Mortgages (ARMs) are set to reset this year will experience the biggest benefits of the Fed's surprise 75 basis points rate cut on January 22nd, 2008. This is because as the Fed cuts rates, mortgages will become cheaper to borrow. As many as 2 million homeowners face resetting ARMs this year and lower interest rates mean they will get less shock of higher payments, and may actually be able to still afford keeping their homes and their mortgages. Lower interest rates also allow ARM borrowers to qualify for mortgage refinancing.

Understand Your Mortgage Loan Payments Amortization Structure
(January 21st, 2008)
Understanding your mortgage payment structure helps you pay off your home faster, and save more money in interest costs over the life of the loan. Almost anyone who owns a home has a mortgage to pay off. Latest mortgage rates are published on every newspaper and on TV. This may make it seem like mortgages have always been available, since man was born. But this it not the case! The modern art of mortgage loan financing was pioneered in 1934 by the US Federal government that wanted to wear off the effects of the Great Depression of 1934. They did this by minimizing the required down payment on home purchases. Before 1934, you couldn't get a home unless you had 50% of the purchase price in your bank. This was reduced to 20% in 1934, and nowadays, you could get away with 10%! The aim of this article is to teach you how to set up your payment structure so as to be able to pay off your loan as fast as your income allows it, as well as save money on interest costs.

Impact of Federal Reserve Interest Rate Cuts on Fixed Rate Mortgages
(January 18th, 2008)
The US Federal Reserve cut its Federal Funds rate to 4.5% on October 31st, 2007 and further cut those rates to 4.25% on December 11th, 2007. The federal funds rate is the rate at which depository institutions (banks and other financial institutions) lend money to each other via overnight loans. The Federal Funds rate is an open market operation that the Federal Reserve Chairman Ben Bernanke uses to to control the money supply in the US economy.

Do Not Fall for Rent to Buy Mortgage Loan Schemes
(January 12th, 2008)
In current times of falling home prices in the US and the $1.8 trillion sub-prime mortgage debt that financial banks have to deal with, "Rent to Buy" signs are popping up everywhere to lure consumers into purchasing homes at "cheap mortgage rates." Rent to Buy is a marketing gimmick used by landlords to lease out their homes and receive rental income, only because they cannot sell their homes in the existing mortgage market. If you are renting, there is little benefit for you to fall for these schemes. The reason is because most Rent to Buy schemes do not result in a purchase. People with bad credit, no down payments and lots of credit card debt also qualify for rent to buy schemes. That's why you should avoid them.