Posts Tagged: mortgage

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10
Sep 10

The Many Different Types of Mortgages

You probably know that there are many different types of mortgages, but do you know what the differences are between them? Here are some things you may not know about the many mortgage options available today.

30 Year Mortgage vs. 40 Year Mortgage

Although there are other time periods of mortgages available, the most common is the 30 year mortgage, and the 40 year mortgage has been gaining in popularity lately. The reason for that is that home prices have risen, and stretching out the mortgage for an extra 10 years makes the payment a little lower and the house more affordable. However, you pay a lot of extra interest when you go with a 40 year mortgage, so it’s better to try to keep your mortgage to 30 years or less.

Homeowner vs. Buy to Let Mortgage

Most mortgages are designed for homeowners who will actually live in the home. However, landlords can sometimes qualify for a buy to let mortgage instead. Buy to let mortgage rates may be a little higher than rates for a regular mortgage, but usually not by much. Buy to let mortgages allow landlords to include a percentage of the anticipated rent from the home they are purchasing as part of their income when the lender determines whether they can afford the payment.

FHA Mortgages

An FHA mortgage is insured by the Federal Housing Administration (FHA). Borrowers often find it easier to get approved for an FHA mortgage because lenders know that the government will pay off most of the mortgage amount if the buyer defaults. This makes the loan less risky to the bank or mortgage company. FHA loans are designed to help first-time home buyers obtain financing and the down payment can be as low as 3%.

Fixed Rate vs. Adjustable Rate Mortgages

A fixed rate mortgage has the same interest rate throughout the duration of the mortgage. This is the best type of mortgage to get when interest rates are low because you are guaranteed that your payment won’t go up as rates rise. An adjustable rate mortgage is a good deal when rates are high. If rates drop, your payment will drop too and you can try to refinance when interest rates go down to lock in the new lower rate.

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6
Apr 10

Landlords Rent Guarantee Insurance

Many people in the UK have what’s known as a Buy To Let (BTL) which are properties that are purchased in order to rent it out to a tenant.  Doing this is a really good investment idea because generally properties go up in value over the years and the rent from the tenant can normally pay for the mortgage.  Some landlords are lucky enough to buy properties that allow them to make an income from the property as well as it being a long-term asset.

The problem is when the financial markets are doing badly and people start to lose their jobs.  If you are renting to someone who has just lost their job it might be very difficult for them to be able to afford keeping up their rent payments.  In the UK the laws make it difficult just to throw someone out on the street if they are unable to pay so this leaves the landlord in a very trick situation.  Normally the landlord has a mortgage on the investment property so if the tenant doesn’t pay up then the landlord is unable to pay the mortgage lender.

If this is allowed to continue then the lender may well take the drastic step of repossessing the property which often means selling it off at a bargain basement price.  The quickest method of doing this is to sell at auction which means it will often sell at a lot less than what it’s really worth.  Nobody wants to be in this situation but is something that happens on a daily basis.

This is why it’s a good idea to have landlords rent guarantee insurance.  If the renter has problems paying you then you can claim on your insurance.  Some landlords don’t want to pay any insurance if they can help it because they hope that their tenant will be a good one and keep up to day with their rent payments.  Unfortunately life isn’t always as simple as that.

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5
Jan 10

Factors that Impact Your Chances of Loan Approval

With so much talk of the credit crunch, most people are aware that qualifying for financing of any kind is becoming more and more difficult.  Banks and lenders are going out of business on what seems like a weekly basis and those that are left standing are requiring more stringent underwriting criteria.  While you certainly need an above average credit score, this is not enough.  We will be looking at some of the other factors that impact your ability to get credit.

Income

After your credit history, your debt to income ratio is the second most important thing that impacts your chances of being approved for a loan.  While every lender has different criteria, the key thing to keep in mind is that you need to keep your overall debt level low.

Job Time

How long you have been on your job is viewed as a good indicator of your personal stability.  Ideally, you want to have at least two years in the same line of work.  The only types of job changes that are looked upon favorability are ones that are in the same line of work made for career advancement.

Citizenship

Loans for Foreign Nationals were once fairly easy to come by as long as you had a limited or clean credit history.  Yes, they required a slightly larger down payment, but provided you had this you could still get a loan at a fairly reasonable interest rate.  Due to the credit market implosion, loans for non-citizens are almost impossible to find.

Bank Accounts

Having a bank account is an important criteria that almost every lender has.  Ideally, you will have both a checking and savings account.  Unless you have a bank account that has been charged off, your bank accounts will not appear in your credit report.  For this reason, the fact that you have banking relationships is more important than how you have handled the accounts.  The exception to this would be when applying for a mortgage.  Be prepared to do some explaining if you have some bounced checks in the bank statement that you are required to provide.