What You Need to Know About Loan Modification

How would you like to slash your mortgage payments by 10% ... 20% or even 50%? Then you may want to consider asking your lender for a loan modification. Of course, modifying an existing mortgage isn't for everyone - it does some with some serious consequences. But, if you are one of the millions of American families these days unable to make those monthly payments, it is definitely an option to consider.



Maybe you've heard the term loan modification, but you aren't exactly sure what it entails.



In its most basic form, mortgage modification is a permanent change to your loan agreement designed to bring your payments down due to some sort of long-term financial crisis.



There are several ways in which a mortgage can be altered in a modification:



1. By extending the life of the loan. Let's say that you are five years into a 25-year mortgage and you suddenly become disabled. Maybe you have enough income to keep your house as long as you can lower your monthly payments.



Your lender may be agreeable to extending that 25 year loan to a 40-year term in order to get those payments low enough for you to afford.



2. By lowering your interest rate. Adjustable subprime rate loans have gotten a lot of people into trouble in recent years. As interest rates skyrocketed, so did their payments, leaving many unable to keep up. More and more lenders are now realizing the benefit of offering these homeowners a lower permanent rate in order to keep them in their homes - and up-to-date with their payments.



3. Forgiving late payments, penalties and interest. If you are one of those homeowners who fell behind on your mortgage payments due to a job loss, only to discover that the penalties, interest and late fees were adding up faster than you could pay them once you got back on your financial feet, you may qualify for forgiveness of these add-on fees through a loan modification.



4. A partial loan forgiveness. It's not very common, but sometimes lenders will forgive a portion of a borrower's loan if they believe the homeowner can keep their account current in order to avoid foreclosure.



Of course, knowing the different types of loan modifications available is only the first step in the process. Here are a few other things you must consider when seeking this type of mortgage help:



·Whether or not your loan qualifies for modification. In the past only loans held by the original mortgage lender qualified for modification. That rule is slowly changing, however, making this option available to more borrowers than ever before. Still, there are strict qualifications for loan modification, so check with your lender to see if you even qualify.



·There are no laws requiring a lender to offer modification assistance, no matter what the circumstances. Approval is under the sole discretion of the lender. No one can make them do it.



·Modifications are easier to get than refinancing or new loans. Depending on the lender, the process can be much easier, involving far less paperwork and financial information. Some don't even require that standard income/debt ratios be met as long as you can prove that you can handle the new payment.



·Loan modifications are not new loans! They are a change to an existing loan.



·Although there are some small fees required for a modification, no standard closing costs associated with most mortgages apply.



You don't need to hire an expensive firm to do your loan modification, on the contrary doing it yourself leads to better results and thousands of dollars saved. One such kit is 60 Minute loan modification. 60 Minute Loan Modification is very simple to follow and has helped multiple people stay in their house and avoid foreclosure.

Mortgage Loan Rates - What You Need to Know

Owning a home is a dream that millions of Americans share. Fortunately, most people will be able to one day afford to purchase their own home. Through a lot of hard work and saving, buying a home is possible if you are willing to do the research. Something that is very important for people to understand is that finding good mortgage loan rates is very important to having a successful mortgage.



In order to get the best mortgage rate for your home it is important that you have a good credit rating.



Your rating will determine how lenders view your potential loan application. Borrowers with poor ratings are more likely to default on their loan applications. For this reason many lenders are very hesitant to work with poor credit borrowers. Given the recent mortgage crisis, this fact is not surprising.



Another factor that will have an impact on the rate that you receive for your mortgage is your savings rate. If you are able to come up with a large down payment for your loan you will be able to get your loan application approved.



This is important because it will ensure that you get a low interest rate on your application.



People who are interested in getting low mortgage loan rates need to realize that there are many factors that lenders use to determine the interest rates that borrowers are given. One factor that will have a significant effect on your rate is the current market rate. If the market is very low for interest rates you can expect to be given a lower rate. Conversely a higher interest rate market will usually mean that you will be given a higher interest rate.

Mortgage 101: First Time Home Buyers Must Read!

There is so much information available to the first time home buyer both on and offline; there really is no excuse for the home buyer to not be educated when going into the mortgage buying process. However, it can be difficult to gather all the mortgage facts and terms into one easy to understand, compact guide.



Here I have gathered the basics of a mortgage and what it involves. This is a broad overview and it will give you the "big picture" regarding mortgages and the mortgage process.



Use it as a general guideline as to what should occur when you purchase your first home.



After finding a home that you feel is in the right community, has the amenities you want, room enough for your family, close to freeways and good schools, or whatever it is that is important to you and your family, and within your price range, it is time to put an offer in with your broker.



During escrow, or the time where funds are founded to purchase the house, you will meet with your real estate agent or broker, who may have suggestions for a mortgage lender.



A mortgage lender is an entity that actually provides you the funds to purchase the property. Mortgage lenders can be commercial banks, private lenders, mortgage banks, and many other entities that have the ability to finance your purchase.



You can use the mortgage lender that your agent or broker provide, or you can ask them to shop more lenders that may get you a better deal. A broker is usually in contact with many different lenders so that they may be able to work out a better deal than you shopping yourself.



Another option is to shop mortgages yourself. This will take a lot of time and energy, but you may find an option that works best for your financial situation. Using online services can be a great way to shop and compare mortgages.



After you have found and discussed basic terms with your mortgage lender, it is time to put in an application. This application will include your credit history, total income and expenses, as well as any short and long term debt.



Needless to say, the better financial environment that you have, the better deal you will be able to obtain.



You and your mortgage lender, or broker, will discuss the terms of a mortgage including mortgage rate, life of the loan, payments, fees, and any other contingencies such as prepayment penalties or Private Mortgage Insurance.



The mortgage rate is the amount you will pay in interest for borrowing the money, and it dictates how your monthly payments are determined.



For example, you may choose a fixed rate mortgage where the interest rate, as quoted by your lender, remains the same for the entire life of the loan, or how long the loan will last. This could be anywhere from 5 to 40 years depending on your financial arrangement with your lender. If you choose an adjustable rate mortgage, then the interest rate will fluctuate according to the current market rate at the time of the change.



Another option to be considered would be a bi-monthly payment, where you take a single monthly payment, divide it in two, and pay every 15 days rather than 30 days.



This will yield approximately two extra payments a year, building the equity in your home faster, and saving you money in interest!



There are many terms to be discussed regarding the mortgage. Besides mortgage rates and interest rate, life of the loan, and payments, you may discuss Private Mortgage Insurance and prepayment penalties.



Private Mortgage Insurance (PMI) is extra insurance paid by the home owner in exchange for not putting down at least 20% of the property purchase price.



This assures the mortgage lender that you will pay back all the money. It often results in thousands of extra dollars, so it is recommended that you negotiate not to have PMI or wait until your finances are in a better position to pay a larger down payment.



Prepayment penalties are fees paid to the mortgage lender if the home owner chooses to pay off the mortgage before the life of the loan is complete. The fee is usually a percentage of the final amount owed on the property.



This too can be negotiated not to a part of the mortgage agreement.



After negotiating the terms of the mortgage, and filling out the application, you either qualify or don't qualify for the loan. If you do, congratulations and welcome to your new home! If you don't, don't worry. There are many mortgage lenders out there who would like your business. If it is a financial issue, find a mortgage lender who works with difficult cases.



Ask for the exact reason why you did not qualify, and try to rectify the problem or find someone who might give you a higher interest rate or more strict terms in exchange for financing a higher risk loan.



Here is your crash course in mortgages. You should have a good idea as to the process, and the most important elements of a mortgage. Continue your research and education so that the process runs more smoothly and you have a better chance in getting the best deal for your situation.

Advantages Of Refinancing Your Mortgage

When you refinance a mortgage, you use money from a new mortgage to pay off your existing one. When done at the right time, refinancing can be an excellent way of reducing your total debt or providing you with significant savings on your monthly mortgage payments.



It should be noted that there are some costs associated with the process. Refinancing typically costs 3-6% of your current outstanding mortgage principal. This is mostly due to the fact that taking out a new mortgage involves payment of closing costs, and in some situations you may be liable for a prepayment penalty on your existing mortgage.



In the long run, however, refinancing at the right time for the right reasons will save you more than getting that second mortgage will cost.



Benefits of Refinancing



For most people, the sole benefit of refinancing is to obtain a mortgage with a lower interest rate and save money on future repayments. If you purchase your home at a time when interest rates are high, refinancing once those rates drop can save you a large chunk of money. However, as noted above it is important to consider the costs when you are deciding whether or not to refinance.



Refinancing can save you thousands of dollars in interest if your second mortgage has a shorter term than the first, even if you do not lock in a lower interest rate on the second mortgage. If, for example, you are six years into a 30 year mortgage, and find that you are able to afford higher mortgage payments, you might consider switching to a 20, 15 or 10 year mortgage. This will not only mean significant savings in the amount of interest you pay, but will also allow you to build up equity in your home more quickly.



Another good reason for refinancing is in situations where you want to exchange some of the equity in your home for cash. However, this does mean that you will be borrowing more money than you currently owe, meaning that you will also be extending the terms of your mortgage. In general, this is only a good idea when you plan to use that cash to add value to your home, either by remodeling or by building onto your property. Refinancing is not a good idea when you plan to use the money to pay off credit card debt, or buy assets that depreciate quickly, such as a new car.



When is Refinancing a Good Idea?



In some situations, refinancing is unlikely to help you pay off your mortgage faster or reduce your monthly mortgage repayments. For example, refinancing is almost never a good idea when your credit rating is worse than it was when you got your original mortgage. In this case, your lower credit score will usually mean you cannot get an interest rate that is favorable enough to lower the cost of the new mortgage enough to make refinancing worthwhile.



In general, refinancing is a good idea when:



You will be living in your home long enough for the costs of refinancing to be recouped by the savings you make on



your new mortgage payments. In most cases this will take five to seven years.



Your new loan is for less than 80% of the current value of your home.



Your new loan balance does not exceed the total amount owing on your existing mortgage.



Your credit rating is equal to or higher than it was when you took out your original mortgage.



If you have an adjustable rate mortgage (ARM), refinancing may be a good option even in situations where some of the above points do not apply. For example, if you financed your home with an ARM when interest rates were low and they now look set to rise over the next few months, refinancing to a fixed rate mortgage may be a good idea. Another good reason to refinance out of an ARM is in a situation where you originally bought your home with the intention of moving within a few years, but have since decided to stay there for the long term.



Sticking with the ARM is risky in the long term, and it is often more prudent to switch to a fixed rate mortgage if you plan to keep the property.



The benefits of refinancing also depend on the age of your mortgage. If you are twenty years into a 30 year mortgage, refinancing should be approached with caution. Taking out a new mortgage at this stage will reduce the equity you have in your home if you borrow more than your current outstanding balance, because conventional mortgage repayments are front loaded with interest, and by this stage your repayments are mostly for principals.



If you have already paid off more than half your mortgage balance, refinancing will not usually save you money, even if you do lock in a lower interest rate.