Finance Loans CA

Many mortgages signed by future homeowners are seldom explained in full detail. Sign here, Ok there and you’re ready to roll for the next 30 years. A simple amortization schedule has locked you into a long period of obligation, every month, on time, without fail. Otherwise, you’re shafted life.

In earlier years there was a stigma about buying homes and having to use a mortgage to complete the home purchase. Must have been in the days when houses were far less expensive and folks saved until the cash was on hand. Mercifully, that stigma has been erased or none of us would ever own our home and that’s even doubtful with high interest rates and long terms.

What are the things you must keep in mind to come to your right mortgage decision? After all, this could be, in all probability, the largest financial decision of your entire life! A few questions come to mind for all of us to consider before a decision is made about long term debt.

1. How Much Down Payment?

Most people set the down payment issue aside, but it’s on top of the list for a reason. How much can we afford based on our current income? Most lending institutions nowadays advertise mortgages with ‘Zero Down Payment’ or something ridiculous like that unless we’re not going to stay long.

It will only mean that you will have to make a higher monthly payment for the entire term of the mortgage. Also, if you don’t make a down payment, the lender will insist you buy private mortgage insurance. That will add to your monthly overhead, too.

2. Fixed or Variable Rate Mortgage?

Fixed rate mortgages are those on which the rate of interest remains fixed for the entire life of the loan. You know in advance how much you will have to pay for the entire term. But variable rate mortgages are those on which the interest rates fluctuate according to market trends. If the market rates go higher, you pay higher – if they go lower, you pay lower. Here is a risk factor involved, but if the market rates are going down, then variable rate mortgages will be good for you. Think well which ones you want to go with.

3. Closing Fees

There will be a ton of closing fees on your mortgage application and you have to keep them ready. These fees are in addition to the down payment that you will have to make. In fact, if the lenders do not see money for your closing fees in your bank account, they may reject your loan application.

There are fees charged by the lawyers, underwriters, application costs, loan closing costs, registration costs, etc. Though each of them is necessary, it’s not supposed to seem like much when compared to your total loan amount. Just pile everything on top of the bundle.

4. Mortgage Rates

You should always take time out and shop for the best mortgage rates. Yes, mortgage rates wildly vary from one lender to another, and you will find that out as you shop. Some of them may have smaller interest rates but larger closing costs. Make sure you count the whole package, the total cost before signing any papers with the wrong mortgage broker or your banker.

Change is happening in the marketplace. New stimulus funds are available from the US Govt. so make sure you’ve researched the details carefully as they are currently applied. Never sign anything until you fully understand the plan or you can be tied up with debt for the next 30 years or longer.

Don Monteith’s newsletter is focused and intent on helping homeowners pay off their debt quickly. Most current homeowners can be debt free in 1/3 to 1/2 sooner than their bankers amortization plan without changing their income or lifestyle. You can be debt free in 8 to 10 years Vs 30 years with our GPS system.

Don Monteith spent 32 years as co-owner of a staffing/personnel business plus several franchised services [personnel agency, temp services, diet centers, computer training, dictation-to-go, vending, mail-order]. Most of his business education was learned in the {SHK} “school of hard knocks” where he earned a PhD with honors. Today, Don shares his experiences, successes and failures with clients, friends, and small business owners. You can enjoy his Newsletter about business, life, joy and happiness at http://www.DonMonteith.com

Mortgage FAQ:

Question: What happens to a second mortgage when a home is purchased at a foreclosure auction?
I am going to bid on a house at foreclosure and it has a 1st mortgage of $280K and a second of $70K. The lender on the first two mortgages is Decision One Mortgage. The lender at foreclosure is Countrywide. Does this mean that if I buy this house at foreclosure that I will own additional money to the second mortgage or just the first mortgage and back taxes?

Answer: When a senior lien forecloses, a junior lien is wiped out. So if the first mortgage holder forecloses, the second trust deed goes away. If the second forecloses, you’ll still owe the first.

Oftentimes, if a senior lien forecloses, the junior lien holder will send a representative to the auction to defend its interests by making sure the property goes for enough to pay the junior lien as well. Or they buy it themselves with the idea of reselling. Costs money, yes. But better than losing their whole investment.

Question: Can I get a refinanced mortgage if i start a home business with no employees and still work my regular job?
I want to refinance my mortgage and I want to start a home business before doing so. It would have no employees and I would still keep my current job. My home business will not require any due balances or credit lines to increase my debt. Would mortgage companies see the worry that I would quit my regular job or would they trust that I would maturely handle the mortgage payments?

Answer: A lender wants to see a history of stable and continual employment and income and will consider

- your debt-to-income ratio (debt divided by income)
- the loan-to-value ratio (mortgage divided by appraised value)
- your credit history

Based on what you have stated, as long as you continue to have stable employment and income, no increase in debt and maintain your credit score, your plans to start a business should have no impact on your ability refinance your mortgage.

Question: How does a mortgage holder get out of PMI payments on their mortgage loan?
Seems to me that PMI is very costly for the home owner, especially me with a perfect credit rating and new funding source to maintain a mortgage if I lose my job (my job is very secure). Please any suggestions on how to get the PMI waived by the mortgage company.

Answer: PMI protects the lender in case your loan goes into default. The only way to have it removed is when you owe less than 80% of your home’s value.

Question: Can you get a mortgage allowing you to bid on a foreclosed property?
Our realtor advises that only buyers with cash in hand can buy foreclosed properties at auction. There is a technical challenge buying if you need a mortgage as you have to be in contract to be able to get the mortgage approved. Is this true or is there a valid way you can get a mortgage and bid on a foreclosed property at auction?

Answer: You need to establish a banking relationship in the commercial loan department. Stay away from residential lenders as they are not involved in investment deals. Explain what your plan is (to buy foreclosures) and arrange a line of credit subject to your winning bid that converts to a first lien mortgage. Most foreclosures require 10-15% at sale and closing in 30 days. You will need collateral and good credit. Start small and prove yourself to the lender even if it is only really small cheap houses. Make the lender your best friend regardless of his decision as you can always go back.

Question: What happens to the second mortgage when the first mortgage forecloses?
I am going through a foreclosure on my first mortgage, what are my options with dealing with the second mortgage? Any legitimate websites with guides for dealing with the aftermath of foreclosure would also be appreciated.

Answer: If and when the bank sells your house, the amount of the sale will be applied as follows:

First, the costs of repossession, foreclosure and the sale will be paid.

Second, money will be applied to your outstanding balance

Third, any other lien holders (2nd mortgage) will get money.

In this market, the bank is going to be lucky to sell the house for enough money to pay the fees let alone the first mortgage. So, what will happen is that the 2nd mortgage holder will want you to pay and they very well could sue you and garnish your wages to get paid.

Question: What happens to a real mortgage when a debtor files for bankruptcy?
I’m a creditor whose debt is secured by a real mortgage. I’ve received recently a notice that the debtor has filed for bankruptcy under chapter 7 of the US Bankruptcy code. What will happen to both my loan and my mortgage? Will I be enjoined from foreclosing the mortgage? The insolvent debtor by the way is an individual, not a corporation.

Answer: You have the best kind of security. You have about the strongest position you can get in bankruptcy as a creditor. The way I understand it there will be no need to foreclose. Just file your interest as a creditor as per the instructions on the paperwork.

Hopefully, they’ll order the sale of the asset and you will be first in line for the funds from it, provided you are the primary mortgage holder and not subordinate to anyone.

Regardless, be sure to speak with a bankruptcy attorney. You may get a free consultation or may have to pay a drop, but it will be well worth it for the guidance.

Question: What happens to the mortgage on a house that is left to me in a will?
A relative will be leaving me a house in their will. If there is a mortgage (home equity) on the house when they die, do I take over the mortgage? I intend on selling the house when it is left to me.

Answer: It goes with the property. If you(or the executor) don’t pay the mortgage the lender will foreclose. If you wish to sell, by all means do so but make the mortgage payments while you are the owner.
And, by the way, you are not required to take the property–you can decline the inheritance if there is no equity or not enough equity to make it worth your while.

Question: How often do mortgage companies use the 4506t form to verify info when buying a home?
If you provide the mortgage company with all the requested info do they typically follow up on that? Does it vary from company to company or is it a common practice for them to execute the 4506t form.

Answer: The primary reason behind using a 4506 form is to prevent mortgage fraud. Lenders use such a form to collect copies of the tax returns of self-employed borrowers for the past 2 years from the IRS. Most big lenders and mortgage companies ask borrowers to fill out such a form.