They Re Only Responsible For Making Mortgage Loans

Category: Finance, Mortgages.

Interest only mortgage companies are a very different breed than the banking industry.

They aren t bound by the same laws as your bank, but some of the regulations are consistent with those of a bank. These businesses are in the business for the sole purpose of making mortgages. The mortgage company isn t a federal deposit location. They greatest concern they have, is that the property they make a loan for is worth the loan amount, excluding the closing costs and appraisal, if that is not part of the closing costs. They re only responsible for making mortgage loans. Quite often, a mortgage company will require you to pay for the appraisal up front, or directly to the appraising company.

Mortgage companies were some of the first guys on the band wagon of support for the interest only loans. You would think that the mortgage companies would be reluctant to make loans that are interest only loans, but that s just the opposite of the truth. Why would this be? The mortgage company pays their loan originators as they are called, not loan officers mind you, a commission on the loans they originate. I believe I can tell you why. They are not paid a straight salary or hourly rate. What does this spell for the originators?

They re paid according to the number of loans they originate. Big money if they can produce on their end. The closing costs, or loan origination fees, as they re called by the mortgage company, are often quite high because the originator is making somewhere around 3 to 5% of the loan amount as a fee for his or her services. So, mortgage companies have worked with every consumer in every way possible to provide them with a loan product that they can be approved for, because this is a paycheck for the originator. You won t be told this upfront, but when you receive your paperwork, if you ll read carefully it will be itemized. Everybody wins, in the beginning. The interest only loan allows the originator to fund larger loans, get approvals for larger loans, and receive larger commissions.

The consumer loses on the back end, when he needs to have equity established, and there is none, thanks to the mortgage company and the interest only loan.

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If you already have a mortgage than you surely know the basic and the" tricks" for obtaining a great deal. Of course in any case professional advice should be taken before signing any mortgage.

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So What Is A Balloon Mortgage And How Does It Work

Category: Finance, Mortgages.

There are a lot of home mortgage options available today, and it is important to be aware of them all in order to choose the one most suitable for you and to be sure that you are doing the best thing possible.

So what is a balloon mortgage and how does it work? One of the available options is the so- called" balloon mortgage" , and in this article we shall discuss this one in terms of its main concepts and possible cons and pros of choosing it among the other options available. A balloon mortgage has a lot in common with a fixed rate mortgage. But here comes the principal difference: after a certain period, which will normally be 5- 7 years, you ll have to repay the whole outstanding balance at once. The principles of calculating monthly payments are actually the same: monthly payment will be calculated as the amount required to repay the whole loan over a period of 30 years. This is called" a balloon payment" , or simply" a balloon" , and this is what the term" balloon mortgage" originates from.

It is very unlikely that a borrower will have enough money to repay that huge amount of outstanding balance at once and at that exact moment, and that may cause serious problems, if the borrower will still be living in the house by the moment a balloon becomes due for payment. At first sight this scheme seems totally inconvenient. In fact, the solution here is refinancing, which will allow you to get the current market rate. Now let s look a bit deeper into the matter and try to compare a balloon mortgage with an ARM. Some people say that in this regard the balloon payment is in a way similar to an adjustable rate mortgage( ARM) - that is because you get a set period of paying a fixed rate and after that a period when the rate can be adjusted. In case of a balloon mortgage you need to repay the entire loan after 7 years, which is normally done by means of refinancing, after which you get a different rate for the new loan that will be adjusted.

On the other hand, an ARM is often a done deal, which makes things easier, because you are locked into a contract. ARM may be a bit more difficult to handle, because the rate adjustment is provided for in the contract. With a balloon mortgage you get additional refinancing costs, which is surely a negative factor for the borrower. But the main factor is that with ARM you get protection against interest explosions, which is not the case for a refinanced balloon mortgage- if the refinancing time falls on a period of a high rate rise, you are left totally unprotected against it. Besides, the rate you get after refinancing often hurts your credit a little. For justice sake, it should be, though noted that this is a very rare case. A balloon mortgage can be a great option if you do not plan to live in the house for long, i. e. for more than 5- 7 years, because in this case you get a price advantage with a balloon mortgage.

All in all you should do decide for yourself, which option suits your needs best. But in case you are unsure about where you will be living in 7 years, it would be wise to abstain from the balloon mortgage option to avoid the risk of ending up with a huge balloon payment and costs of refinancing.

By Taking These Steps, You Can Ensure That Your Credit Remains Intact

Category: Finance, Mortgages.

Unfortunately, the experience is, for many the exact opposite.

Depending upon how finances are structured, it can sometimes have a negative impact on both parties. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one spouse's credit. The good news is it doesn' t have to be this way. The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian� , and TransUnion� . By taking a proactive approach and creating a specific plan to maintain one's credit status, anyone can ensure that" starting over" doesn' t have to mean rebuilding credit. It's impossible to formulate a plan without having a complete understanding of the situation. (Once a year, you may obtain a free credit report by visiting www.

Create a spreadsheet, and list all of the accounts that are currently open. AnnualCreditReport. com. ) Once you' ve gathered the facts, you can begin to address what's most important. For each entry, fill in columns with the following information: creditor name, the account number, contact number, type of account( e. g. credit card, etc, car loan. ), account status( e. g. current, past due) , account balance, minimum monthly payment amount, and who is vested in the account( joint/ individual/ authorized signer) . There are two types of credit accounts, and each is handled differently during a divorce. Now that you have this information at your fingertips, it's time to make a plan. The first type is a secured account, meaning it's attached to an asset. The second type is an unsecured account.

The most common secured. accounts are car loans and home mortgages. These accounts are typically credit cards and charge cards, and they have no assets attached. This way the loan is paid off and your name is no longer attached. When it comes to a secured account, your best option is to sell the asset. The next best option is to refinance the loan. This only works, if the purchasing, however spouse can qualify for a loan by themselves and can assume payments on their own. In other words, one spouse buys out the other.

Your last option is to keep your name on the loan. If you decide to keep your name on the loan, make sure your name is also kept on the title. This is the most risky option because if you' re not the one making the payment, your credit is truly vulnerable. The worst case scenario is being stuck paying for something that you do not legally own. This individual will review your existing home loan along with the equity you' ve built up and help you to determine the best course of action. In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important.

When it comes to unsecured accounts, you will need to act quickly. If you are merely a signer on the account, have your name removed immediately. It's important to know which spouse( if not both) is vested. If you are the vested party and your spouse is a signer, have their name removed. If there are jointly vested accounts which carry a balance, your best option is to have them frozen. Any joint accounts( both parties vested) that do not carry a balance should be closed immediately.

This will ensure that no future charges can be made to the accounts. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. When an account is frozen, it is frozen, however for both parties. By having a card in your own name, you now have the option of transferring any joint balances into your account, guaranteeing they' ll get paid. Keep in mind that one 30- day late payment can drop your credit score as much as 75 points. Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. It is also important to know that a divorce decree does not override any agreement you have with a creditor.

The message here is to not only eliminate all joint accounts, but to do it quickly. So, regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties. Divorce is difficult for everyone involved. By taking these steps, you can ensure that your credit remains intact.