As anyone these days about loan modification facts and they’ll quickly tell you that there is a lot of misinformation out there. Of course if you are facing foreclosure on your home, you want the best and most accurate information possible. This article will give you 4 crucial facts about modifying loans and after reading you’ll be better informed about getting one.

1. Modifying loans are government approved

Under the Obama administration a stimulus packaged was announced which saw the approval of what is called Home Affordable Modification Program (HAMP). This initiative was geared towards helping millions of Americans avoid foreclosure on their homes. It was designed to help those in dire financial straits and as such people who are already facing foreclosure have a higher chance of qualifying for a loan.

2. Approval is not automatic or guaranteed

If no other loan modification facts are clear enough, this one is certainly ‘crystal clear’. Approval for a modifying loan is not guaranteed. The screening process is means tested, so if your circumstance on paper are not as bad as the next person, chances are you won’t get the loan. There is a practical limitation in approving loans for every single person, so it is down to the individual to demonstrate that they really can’t afford to pay their monthly mortgage.

3. You’ll still have to pay something each month

Once you are approved for an HAMP loan, your present mortgage arrangement will be reworked. This will often include an extension on the overall repayment period and a reduction in the rate of interest on repayments. This lower amount will still have to be paid and it is your responsibility to demonstrate that you’ll be able to make the payments.

4. Having your application submitted correctly

The 3 loan modification facts above are good grounding to have in making a HAMP application, but the most important thing is making the application correctly. There are millions of people who need financial assistance and only those people who can sufficiently demonstrate ‘need’ will be accepted. So how can you ensure acceptance?

The single biggest way to get accepted is have the application submitted by a professional loan modification expert. They take care of things like assessment, drafting hardship letters and other essential things in making a good application.

I hope these crucial loan modification facts give you a better understanding of what’s involved in the process but I also hope you also take on board the point about getting professional help. Getting it wrong could cost you and your family your home, so if you can seek a professional help. I highly recommend obtaining a free loan modification evaluation in order determine the best course of action based on your financial situation.

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Is FHA Financing a good choice? Yes or else it would not have been used by 30 million people. Is Conventional Financing bad? No. It is just a matter of which service suits your requirements the best.

Good, Better, Best

FHA loans are offered by thousands of lenders and are readily available nationwide and because they all offer identical terms and services, it is worth your while to shop around to get the best possible rates when you either finance for the first time or refinance.

Simple and Basic

FHA Financing is a basic mortgage program implemented by the Federal Government in the1930s with the objective of offering affordable mortgage loan to people who either have had credit problems in the past, are first time home buyers, or have low or moderate incomes.

It has expanded in popularity and is today a choice worth considering by any borrower. FHA Financing has no hidden fees or high increases that may result in foreclosure down the road. The borrower gets both financial security and peace of mind.

Rates, Deposits and Payments

FHA rates are lower than Conventional rates and you are not subjected to pre-payment fees. You can get fixed-rates with FHA which has a big impact on your monthly re-payments and because your monthly repayments are set, you can budget long term. You do not need exorbitant deposits, 3% of the loan amount will do it. Other financial institutions insist borrowers prove cash reserves when they close the deal and this means that beside the deposit you get heaps of money in savings, something not attainable by the majority. FHA does not ask for reserves.

On top of this, FHA allows owners to provide anything up to a 6% cap of the sale price. This can be in the form of what is called ’seller contributions.’ In the event of a market being slow, or where sellers use their rights to move homes, seller contribution credits secured by the owners, can be put toward paying the buyers closing costs.

Except for the deposit, this may even cover all of the buyer’s closing costs. A word of caution though, contributions by the seller must be attained in writing and must be part of the purchase agreement which is inspected by the provider of the loan. Borrowers must provide sufficient proof of income to demonstrate the ability to pay the mortgage.

Requirements of a conventional loan applicant include excellent credit, job stability with sufficient income, a sizable down payment, and low debt to income ratios. Borrowers who meet Fannie Mae guidelines are rewarded with an interest rate only slightly lower than an FHA interest rate.

Credit Issues

Credit issues affect many people and if you have ever been faced with bankruptcy or foreclosure then the FHA option is your best bet when looking for a mortgage. FHA is more relaxed and lenient toward your application. The criterion is that if you have been subject to bankruptcy, it must have been a year previously to the load application under Chapter 13 Bankruptcy or two years under Chapter 7 Bankruptcy. Conventional Finance institutions may not even look at you under these circumstances.

Leniency and Understanding

FHA qualifying criteria are that you have permanent employment and can prove you are able to cover your monthly repayments. They also require you produce some sort of credit history, and if you do not have what is called traditional credit, you can use items like utility payments, past rental records, insurance policies or any other report from approved credit providers.

FHA has unusually liberal standards for qualifying and may allow you to borrow a lot more than conventional loan companies. With FHA programs, as much as 43% of your monthly income can be allocated to recurring monthly costs like mortgage payments and vehicles payments. If you quality, FHA can provide you with 100% of the loan. As the borrower, you are liable for the initial insurance premiums which comes to about 1.5% of the loan amount, but this amount can be absorbed into the loan if need be. Your repayments will be 0.5% of the total loan amount divided into 12 months, and a 3% deposit is required, however no reservations are needed and it can take the form of a gift, but cannot be absorbed in the loan amount. Closing costs are your liability, but can also be funded in the loan amount.

Conventional institutions stipulate the borrower have 5% for the deposit as well as 2 months reserves in the bank and will not fund closing costs in the loan amount.

Citizenship

You do not have to be a citizen to quality for an FHA loan. You can be either a permanent or a non-permanent resident. If you are a permanent resident, you need to prove this via documentation supplied by the Bureau of Citizenship and Immigration Services (BCIS) who are part of Homeland Security.

In the case of non-residency, you need to prove that you can legally work in the country and to do this you will need to produce your Employment Authorization Document issued by the BCIS.

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Mortgage loans are a big problem right now in the U.S. real estate market. So is a refinance mortgage a viable solution if you have this problem? What is a refinance mortgage anyway? Is it the magic panacea that will cure your ills?

Let Us Define

A refinance mortgage is actually a way of using your existing property as collateral, usually for the purpose of paying a debt. It can also be considered as a security interest over a piece of property that is conceded to pay some sort of debt. In this aspect, a refinance mortgage is very similar to a lien. In fact, it is actually a type of lien on a piece of real estate. It allows a creditor to secure the repayment of a mortgage loan. Any legal mortgage would not be a problem because they can be paid off before the transfer of ownership. Mortgage loans are quite common and are accepted as liens even if they are high-risk.

Any given piece of property may be under several liens. These include tax liens, judgment liens and different types of mortgages. If you fail in your refinance mortgage payments, the creditor can enforce the lien and collect payment. You should assess your property honestly to see if it is worth the effort at all.

Take These Steps

Check your local tax and financial laws. Find out if the state can cancel any liens other than government liens when various situations arise. If it can, you should just ignore mortgages. With these types of laws, the property is more likely to be redeemed because the lienor will not let the property go for taxes.

When buying direct, ask detailed questions about the mortgage loans. No matter how great the home looks, it should have value that is worth the effort of purchasing it. You can get this type of information easily by getting a letter from the seller and then talking to the lender about it. As part of your deal, you can actually pay off the mortgage loan and subtract it from the purchase price.

Why Do It At All?

Through a refinance mortgage, you will get a lot of help in paying off a previous loan. When picking a home and successfully applying for a mortgage, you can easily refinance and change to a different type of mortgage. An adjustable rate means your loan conditions will vary depending on market conditions. Payments may increase or decrease accordingly.

As you can see, there are a lot of things to take into consideration when going for a refinance mortgage. You should look into the financial background of a piece of property to determine whether it is worth all the effort. If it is, you can take a variety of approaches with regards to a refinance mortgage arrangement. The important thing is you take your time and find the one that best fits your situation. You will benefit by applying due diligence and making the right decision in the end.

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Are you in the market for a new mortgage loan but are unsure if mortgage refinancing is right for you? There is a great deal of bad advice available on the Internet that could cost you a lot of money when it comes to your home loan. Here are several tips to help you answer the question “Should I Refinance My Mortgage” while avoiding junk fees when you take out a new home loan.

The Two Percent Rule of Refinancing

There is an old wives’ tale that sates you should not refinance your mortgage unless your new mortgage rate is exactly two percent lower than the old rate. First of all, this is horrible mortgage advice. Rather than base your entire decision to refinance your home on a blanket two percent it makes sense to base your decision on how long it will take you to recoup your expenses from taking out a new mortgage.

How Long To Recoup Mortgage Closing Costs?

Whenever you refinance there are origination fees and closing costs that will have to be paid at closing. You can determine how long it will take to recoup these expenses by diving your total closing costs and origination fees by the amount you’re saving each month with your lower mortgage payment. For example, if your total closing costs are $4,000 and you’re saving $200 per month, then it will take you 20 months to recoup your expenses from mortgage refinancing.

Should I Refinance My Mortgage?

If you’re comfortable with the amount of time it takes to recoup your closing costs then mortgage refinancing probably makes sense. Keep in mind that there are situations where recouping your expenses might not be possible but it can still make sense to refinance in these situations. If you are borrowing against the equity in your home for instance you might not be able to recoup your expenses from refinancing. Ultimately, the decision to refinance is best made based on your needs for the loan and whether or not you are comfortable with the consequences of refinancing.

How to Pay Less for Your Next Mortgage

Once you’ve answered the question “Should I Refinance My Mortgage,” you’ll want to make sure you don’t overpay for the new home loan. Most homeowners overpay when refinancing because they choose the wrong person to arrange their mortgage loan. Choosing the wrong broker can result in paying junk fees and markup of your mortgage rate. In fact, mortgage junk fees are so bad that the Secretary of Housing and Urban Development stated that homeowners in the United States will overpay sixteen billion dollars this year alone because these unnecessary fees.

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Buying points is a standard offer given to most people when they consider a mortgage refinance. This option was most likely presented to you when you applied for the initial mortgage and its benefits are equally as important to a mortgage refinance.

Points are an upfront fee charged by the lender. This fee is separate from interest and is designed to increase the profit to the lender. The cost to purchase one point is equal to 1% of the total principal amount of the loan. By purchasing points will lower your interest rate.

Whether purchase points is a good idea for you or not depends on if you will maintain the property long enough to recover the additional cost incurred from purchasing the points. For example, a lender gives Jane Jordan the option of a $90,000 loan at an 8% fixed interest rate. A 2-point purchase would cost $1800 due and payable at closing. The lender also offers a $90,000 loan at 9% with no points available. It will take over 2 ½ years to recover the $1800 paid for points. If Jane plans to remain at that location for longer than that time she will break even or make a profit. If she anticipates relocation under that time frame, refinancing and purchasing points will cost her money and is not worth it.

When considering buying points, also crunch some numbers on what that same amount of money invested in another way could generate if there were a higher rate of return. It is important to know what your goals are when refinancing so that you can make good decisions.

If you are financing new mortgage loans, purchasing points on a residential mortgage can deduct the money that you need to pay on that year’s income tax return. However, if you are buying points to refinance your home, the IRS considers this prepaid interest. This means, you will have to deduct them over the life of the loan rather than all at once at closing. You will need to some advice from your tax advisor or your accountant for his or her expert opinion on point deduction.

If your ultimate goal is to be debt-free then purchasing points may allow you to achieve that goal in less time. Only you know the details of your situation and it is important that you consider all aspects of your life and finances that could affect your goals, your mortgage refinance and your overall financial plan before making any significant financial decisions. See below for more information on Mortgage Refinancing.

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