In a Fix: Unsurprising Mortgage Payments you can Count on
In a Fix: Unsurprising Mortgage Payments you can Count on
A home is one of the biggest purchases youll ever make. Luckily, you dont need to pay for it all at once. Without mortgages, many people would never be able to own their own homes.
Despite that, mortgages can be the cause of much stress and aggravation. If youve chosen an adjustable rate mortgage, market fluctuations can send your interest payments soaring to the point that youre not sure how to cover your monthly payments. Fear of losing their home is one of the most stressful things people ever have to deal with. It is a scary reality that people have to face on a daily basis when they cant meet their monthly payments.
It doesnt have to be this stressful though. Try choosing a mortgage plan with fixed interest rates that you can count on month and month.
Today banks and lending companies offer a variety of mortgages to suit everyones needs and preferences. Fixed rate mortgages are the most traditional type of loan. With fixed rate loans, you are locked in to an interest rate for the entire period of the loan (whether it be for five, ten or twenty-five years). With adjustable rate mortgages, the interest rate starts low and then fluctuates depending on the market. A balloon mortgage has lower rates than a conventional fixed rate mortgage, but it must be paid back within five to seven years. If you know you will be moving within five to seven years this might be an excellent option for you but if you dont move then you will need to find another mortgage when your balloon mortgage comes due. You might also want to look into an open mortgage. If you think you will be able to pay off your mortgage within a few years, then you definitely want to look into this option. An open mortgage has opportunities built in to that allow you to pay off your mortgage ahead of schedule without any sort of financial penalties. You do pay for this flexibility so it is best for people who expect to come into some money or are intending to sell their property at some point in the near future.
Though a more open mortgage (like an adjustable rate mortgage) may mean lower interest rates at times, it can be quite a risky undertaking and many people would prefer to have a bit of security and know right at the start the amount of money they will have to repay to the bank. Wouldnt it be nice to have set mortgage payments that you can count on each month? With a fixed rate mortgage, your monthly payments are always the same. Some expenses (such as escrow and property tasks) may change a bit as the years pass, but the monthly amount of your principal and interest payments never alters. You may end up paying a bit more in the long run, but you will have some security and youll know exactly what to expect from month to month. Isnt it worth paying a bit more for this safety? Wouldnt you rather know what to expect month after month?
A fixed rate mortgage also makes it easier to balance your other experiences. Knowing exactly what you have to pay every month means there are no surprises and if you budget carefully and spend wisely you will be able to avoid many a financial crisis.
Whatever kind of mortgage you choose, remember to do your research. In many cases, you end up paying more in interest than the actual price of your home. Thats why you need to take a lot of time and do a lot of research to find the best mortgage for you and your familys needs. A lot of this research can be done online now. You can browse the rates and types of mortgages offered by many different banks and lending services providers. This will give you plenty of opportunity to shop around for the best rates and compare what each company is offering.
If you are someone who values security and certainty where your finances are concerned, then a fixed rate mortgage is probably the best option. It may take longer and cost a little more, but you might sleep a little easier knowing that your rate is safe from any kind of market fluctuation.
How the deal gets done: Closing on your new home.
How the deal gets done: Closing on your new home.
A lot has to happen before you can close on a new home successfully. Some of it is your responsibility, and some of it belongs to others. But dont expect it to happen overnight or perfectly smoothly. There are too many factors involved. And theres a lot of money riding on the deal, toonot all of it yours. So the wisest thing to do is take care of everything at your end; dot every i and cross every t that you can from your end of things. And be picky, picky, picky about who youre doing business with; from the get-go, choose only the most experienced, successful professionals and companies that you can find. They have what it takes to make the long, complicated process considerably more bearable. For example, if its possible, its a good idea to go with a Texas-based lender, because of Texas real estate laws, some of which differ from that of some other states. An out-of-state lender might make some mistaken assumptions that could add to delays.
For most homebuyers, pre-qualifying for a home loan and signing a contract are major steps. But thats just the beginning of the journey towards home ownership. And the rest of the trip can sometimes make or break the deal. Its during this period that the lender is trying to complete the financial package, the title company is doing the necessary research, surveys and appraisals are put into motion, and the homebuyer orders home inspections and obtain homeowners insurance. Anything that goes wrong at any of these stages could mean delaysor even a broken deal.
As a homebuyer, you need to know that pre-qualifying for a mortgage loanand actually qualifying for itare two very different things. You also need to know that the difference between the two can definitely affect the closing date. To get pre-qualified, a homebuyer must meet with the lender and have essential information (Social Security number, income, etc. at hand). Then, after checking your credit score, income, and employment, the mortgage lender writes up a documentbased upon this preliminary informationthat states what size of loan you might qualify for. Remember, this is not a final conclusion or a mortgage loan approvalits really only the lenders educated guessso dont start counting your chickens just yet! As a matter of fact, many lenders these days are encouraging homebuyers to skip pre-qualification and go directly to qualificationbefore they start looking at homesor, in many cases, even before the contract is signed.
Thats because the actual qualification process is much, much more extensive and in-depth. Typically, it involves giving the lender accurate information, W2 forms, bank statements, tax returns, and proof of income. All this goes through the lenders approval process, which can take a fair amount of time. Thats because the up-to-date accuracy of the information youve given them is checked and double-checked at this time. So be sure of your facts and figures, because any errors, inconsistencies, credit problems, or misinformation could definitely put a damper on things at this point.
Things a homebuyer should know. Or expect. Or do.
* Lenders should give buyers a good-faith estimate of how much money to bring inby certified checkto the closing. Closing costs typically run about 3 to 6 percent of the loan amount.
* One business day before closing, you have the right to inspect the Uniform Settlement Statement. This itemizes the costs of all services you must pay at closing.
* The lender is also responsible for giving you a truth-in-lending statement that states all the details about the cost of the loan.
* The title companys job is to research public records and verify that the buyer and the seller dont have any lawsuits, liens, or judgments against them or the property.
* One of the real estate agents jobs is to stay in contact with the title company during the research phase, just to make sure that any problems that might surface are dealt with promptly. Its important to avoid last-minute surprises, which could lead to delays on closing.
* Before closing, the smart homebuyer should order inspections on the house and property to make sure that everything is in good shape and that no major repairs are required. Repairs could change the agreed-upon price in the contract. The homebuyer should be there with the inspector when its done. Why? Because an inspectors report can be 10-12 pages long and full of technical jargon, so being there to ask questions and get on-the-spot explanations can really help you get a grip on the situation. The cost of an inspection can vary; it depends on the location of the house, the size of the house, and what kind of foundation it has. By the way, a termite inspection also needs to be ordered by the homebuyer before the closing. If an inspector is not certified in this area, another inspector will have to be hired.
* Homebuyers are responsible for getting homeowners insurance and have proof of it at closing. The Texas Department of Insurance says buyers should expect to pay about 400 to 1,000 a year for insuranceand possibly even more if the home is in a flood zone. Most lenders will recommend an escrow account where funds for insurance and property taxes are automatically set aside each month.
* The lender will require hazard and liability insurance for at least the amount of the loan. At the closing, youll be expected to pay the first years premium for this insurance.
* The homebuyer should schedule a final walk-through of the house right before the closing. It would be a good idea to do the walk-through with your real estate agent. You want to make sure that the house is in the condition that you agreed upon in the contract. Remember, once the closing is done, youre the owner of the houseas is. You no longer have any legal power to get the seller to fix anything, and the seller no longer has any legal responsibility to do so.
* A settlement agentusually the title insurance companyis the one who usually sets the time and place of closing.
Honey, I Shrunk The Mortgage Interest Deduction Plan 1
Honey, I Shrunk The Mortgage Interest Deduction Plan 1
The political landscape this year has been nothing but ugly. It promises to come to full boil with the proposed tax reform eliminating or reducing the mortgage interest deduction.
Tax Reform or Raising Taxes
There is an old saying about the two political parties. Democrats raise taxes while Republicans reform taxes. In both instances, we end up paying more money. In a very brave move, a bipartisan committee is recommending tax reform that goes after the beloved mortgage interest deduction.
The committee looking into tax reform was given a directive by President Bush to simplify a tax code that is universally agreed to be a disaster area. You may not realize it, but two additional sections are added to code every day on average. One of the particular problems is the Alternative Minimum Tax, which was originally designed to keep super wealthy people from avoiding taxes. Because it was written poorly, the AMT now affects a large percentage of people. The problem, however, is how do you get a make up for a tax that produces millions of pounds in revenue for the government?
The committees answer is to go after the mortgage interest deduction. The committee has offered two plans and well look at the first one here.
In the first plan, the mortgage interest deduction would be reduced to a figure related to the loan amount the FHA will back. The FHA was set up to help low income individuals get homes, which means the effective cap on the deduction would be very low. In San Diego, the average single-family home costs in excess of 600,00. The FHA cap for the city is around 315,000, which means homeowners would lose approximately half of their deduction. In expensive real estate areas, this will mean many people will lose the ability to make their mortgage payments, which means defaults. With borrower defaults will come the end of the housing market boom. The loss of equity will, of course, cause many people to go upside down on their loan, which will be another disaster.
If Congress pursues a cap on the mortgage interest deduction, chaos will reign. It is hard to imagine this option being adopted by the politicians.
Honey, I Shrunk The Mortgage Interest Deduction Plan 1
Honey, I Shrunk The Mortgage Interest Deduction Plan 1
The political landscape this year has been nothing but ugly. It promises to come to full boil with the proposed tax reform eliminating or reducing the mortgage interest deduction.
Tax Reform or Raising Taxes
There is an old saying about the two political parties. Democrats raise taxes while Republicans reform taxes. In both instances, we end up paying more money. In a very brave move, a bipartisan committee is recommending tax reform that goes after the beloved mortgage interest deduction.
The committee looking into tax reform was given a directive by President Bush to simplify a tax code that is universally agreed to be a disaster area. You may not realize it, but two additional sections are added to code every day on average. One of the particular problems is the Alternative Minimum Tax, which was originally designed to keep super wealthy people from avoiding taxes. Because it was written poorly, the AMT now affects a large percentage of people. The problem, however, is how do you get a make up for a tax that produces millions of dollars in revenue for the government?
The committees answer is to go after the mortgage interest deduction. The committee has offered two plans and well look at the first one here.
In the first plan, the mortgage interest deduction would be reduced to a figure related to the loan amount the FHA will back. The FHA was set up to help low income individuals get homes, which means the effective cap on the deduction would be very low. In San Diego, the average single-family home costs in excess of $600,00. The FHA cap for the city is around $315,000, which means homeowners would lose approximately half of their deduction. In expensive real estate areas, this will mean many people will lose the ability to make their mortgage payments, which means defaults. With borrower defaults will come the end of the housing market boom. The loss of equity will, of course, cause many people to go upside down on their loan, which will be another disaster.
If Congress pursues a cap on the mortgage interest deduction, chaos will reign. It is hard to imagine this option being adopted by the politicians.