How Mortgage Loans With Bad Credit Does Not Exclude 100% Financing

How Mortgage Loans With Bad Credit Does Not Exclude 100% Financing
By Hilary Bowman

There is no doubt that applying for mortgage loans with bad credit means the best deals are out of reach. Mortgage providers and traditional lenders are usually very cautious over lending to bad credit borrowers, but some of them are open to accepting the risks involved - such as sub-prime lenders.

Over all, a sub-prime lender does not offer the most cost-effective mortgage options, but they do at least offer a very good chance of getting approval. And in the end, securing the funding to buy a new home is the point. What is more, they even offer 100% financing, or mortgage approval with no down payment.

Even for applicants with excellent credit records, there is a huge attraction to the idea of not having to make a down payment. Known as a zero-down mortgage, it effectively means no lump sum needs to be paid to seal the deal, savings tens of thousands of dollars in the short-term.

Zero-Down Mortgages: The options

Like everything else in the lending world, there is more than one option that those seeking a mortgage loan with bad credit should consider. In fact, there are 2 types of mortgages that require no down payment: a 100% financing loan, and an 80/20 financing loan.

The difference is evident from their titles. 100% financing means that the mortgage taken out covers everything in the purchase of the property. As a zero-down mortgage, this is the simplest to handle, but the interest rate charged (if high) applies to the full value of the home.

In contrast, the 80/20 means that the mortgage covers 80% of the purchase, while a second loan covers the remaining 20%. The applicant can get mortgage approval with no down payment, but effectively a second debt.

Terms To Consider

But what are the terms that make getting this kind of mortgage loan with bad credit a viable one? On the face of it, this option is very expensive, with sub-prime lenders charging above the average interest rates. Thus, the cost of the mortgage is very high.

However, the term of the mortgage is usually longer, thereby ensuring that the monthly payments are kept as low as possible. This means that even for a 100% mortgage, approval with no down payment is completely affordable.

Also, since with a zero-down mortgage the full amount of the purchase price is paid in one go, there is no need for any private mortgage insurance either. This helps to reduce the overall cost of the purchase too.

Qualifying For Zero-Down

The requirements to qualify for these mortgages can differ depending on the mortgage provider, but there are some consistent criteria. For example, those applying for mortgage loans with bad credit must have a score of around 600 to have a strong chance of approval.

Also, sub-prime lenders insist bankruptcies or foreclosures cannot be more recent than 12 month. This is in sharp contrast to other lenders, who are unwilling to grant mortgage approval with no down payment when bankruptcies are within 4 years of the application date.

Applicants should also be able to produce proof of at least 6 months worth of repayments in reserve, though some sub-prime lenders may ask to see 12 months in reserve before granting the zero-down mortgage.

Also, it is easier to qualify for an ARM, and applicants have the option to refinance after a number of years.

Hilary Bowman is a Financial Expert who specializes in Loans for People with No Credit and Bad Credit Loans

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10 Things You Cannot Do With the HARP Program

10 Things You Cannot Do With the HARP Program
By Craig A Reynolds

Just as it is important that you know what you can do with the Home Affordable Refinance Program (HARP), and the many ways that it can benefit you, it is also important that you know what restrictions apply. This is important not only because your eligibility may be affected, but because it may turn out that this type of refinance loan is not right for you.

With that in mind, the following are 10 things you cannot do with the HARP program:

1. You cannot be behind in your mortgage payments. Your mortgage payments must be current and your payment history must be in good standing for a minimum of 12 months in order to be eligible for a HARP loan.
2. You cannot avoid foreclosure with HARP. This program has been designed to provide homeowners who have lost equity on their homes and who are current on mortgages the opportunity to refinance and take advantage of low interest rates. It will not stop or delay foreclosures.
3. You cannot do a cash-out refinance with HARP. This loan program only allows for rate-and-term refinance.
4. You cannot consolidate mortgages. HARP is only for first liens.
5. You cannot refinance under the HARP 2.0 program with a direct lender who is not approved by Freddie Mac or Fannie Mae. However, you can engage in HARP refinance with any Freddie or Fannie direct lender. This includes lenders outside of your current mortgage servicer.
6. You cannot use the HARP program if you have already used it before. Only one HARP refinance program is permitted per mortgage.
7. You cannot obtain a mortgage that is greater than the conforming loan limit of $417,000 with a HARP refinance.
8. While you can increase your mortgage balance with HARP to cover closing costs and other fees that are due at closing, your loan size cannot be greater than the local conforming loan limits.
9. You cannot obtain HARP refinance though the FHA (Federal Housing Administration). Although HARP is similar, it is not the same as a FHA Streamline Refinance. The HARP program is only administered via Freddie Mac and Fannie Mae.
10. You cannot assume expertise with the HARP program. It is crucial that you consult with a direct lender or loan officer who has experience with HARP refinancing and who understands the complex qualification process. This individual should know everything there is to know about the program, so they can accurately determine your eligibility.

Knowing what you can and cannot do with HARP will help you discover if it is possible or right for you to refinance with this program.

A seasoned entrepreneur and mortgage industry veteran with over 15 years experience in managing and loan consulting. Prided in establishing successful Mortgage Consulting teams that create and foster long-term relationships with clients. Contact Allied Mortgage Direct.

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Mortgage Terms Explained

Mortgage Terms Explained
By Christopher Cooper

When you are hunting for a mortgage, you will find that there are many different types of mortgages available. I will list some of the more common ones and their uses.

15 vs 30 Years

Your mortgage term can be just about anything you choose. 15 and 30 year terms are popular these days, although 10 and 20 years also are available.

The shorter the term, the lower the interest rate. But the main attraction of shorter term mortgages is the money you save.

For example on a $200,000 mortgage with a fixed 4.5% rate, you would pay $1013.38 a month for 30 years and $1529.99 a month for 15 years. Over 30 years you would pay $364,816.80 versus $275,398.20 over 15 years, a savings of $89,418.60 or 24.5% in interest.

If you cut a very conservative quarter of a percent off for reducing the lenders exposure by 15 years, your savings will be nearly 26%.

Adjustable Rate Mortgages (ARM )

ARM's are mortgages whose rates adjust according to the terms of the contract you made with the lender.

Usually interest rates are fixed for the first 1, 3, 5, 7 or 10 years. After that period is up, rates will be allowed to fluctuate within the limits of your contract with the lender.

Terms are usually 15 or 30 years (although you can negotiate just about any duration you want). There can be a balloon involved.

Because the lender is not taking as big a risk on losing money if interest rates rise, these loans will have a lower initial rate than a fixed mortgage. The lowest rates will be for 1 year ARM's and will go up accordingly.

Many people will take out an ARM even in period of low rates, such as now, because they get even lower rates and are able to afford more house. However, the borrower is taking the risk that he can still afford the house after the rates are free to rise.

It used to be common for the contract to limit fluctuations to 2% a year. However, 5% swings are becoming more the norm. Depending on what happens to interest rates, you might find yourself priced out of your house. Of course, you could renegotiate if rates start to go back up.

The average homeowner owns his or her house for approximately 7 years. If you plan to move before the initial fixed term of the ARM is up, it's a good choice. If you plan to stay longer than ten years, a fixed rate might be a better option.

Balloon Mortgage

A balloon mortgage is one that is not completely paid off at the end of its term.

For example, you might obtain a 15 year fixed rate mortgage that allows you to pay less than the normal amortization schedule would call for. At the end of the 15 years, you will still owe a portion of the principal. How much depends on the terms of the contract.

An interest only mortgage is an example of this type of loan. In the case of an interest only loan, the balloon will be the full amount you originally borrowed.

This type of mortgage allows borrowers either to afford more house then they otherwise could buy or its reduces their monthly costs, allowing them to spend or invest their savings elsewhere.

Again, if you are planning to move before the balloon is due and your proceeds from the sale are enough to cover the balloon, this might be a good idea. However, you face the very real possibility of having to come up with cash when you sell to cover the balloon, especially if you have to sell at a time of declining housing prices.

BiWeekly Mortgages

A biweekly mortgage is one where pay half of the normal mortgage payments every two weeks. Since you are making 26 payments a year, rather than 24, you wind up paying off the interest sooner and saving considerable interest.

Take the example of a $200,000, 4.5% fixed rate mortgage with a 30 year term. The normal payment would be $1013.37 a month.

The biweekly amount is $506.91. But the payoff is huge. Your loan will be paid 5 1/2 years earlier and you will save 28% or $32,639.75 interest.

You can set up your own biweekly mortgage plan with your existing mortgage, assuming there is no prepayment penalty (which usually only applies the first few years anyhow). Simply send in or have your bank debit your checking account for one half your mortgage payments every two weeks. There should be no extra costs or fees to do this.

Or you can reach a similar result by dividing your monthly payment by twelve and adding that to your payment. In this example that would come out to be an extra $84.44 a month.

The secret is that any prepayment, no matter how small will result in saving in interest and a shorter payment period.

Bridge Loans

Bridge loans are used in real estate transactions to cover the down payment on a new home, when the borrower has equity in his old home, but not enough cash.

It is generally a short term, interest only loan that is repaid when the homeowner sells his old house.

Conventional Mortgage

Most mortgages are conventional, the terms just vary. A conventional mortgage to most people is a 15 or 30 year fixed rate mortgage with at least 20% down.

Construction Mortgages

These are really loans that carry a higher interest rate than a normal mortgage. They allow you to borrow the money to build a house and are converted into a mortgage once the house is finished.

FHA (Federal Housing Administration)

The FHA is a branch of the Housing and Urban Development (HUD) Department. It is a depression era creation, meant to make it possible for people to buy homes at a time when banks where not granting mortgages.

The FHA insures loans up to certain set amounts, which vary with the region of the country and the type of loan. Right now the guarantees run from about $160,000 for a one family house to somewhat over $300,000 for a four family home.

This type of mortgage is designed to help low and moderate income people become home owners. It requires low down payments and has flexible lending requirements.

If the borrower defaults, the government steps in and pays the guarantee. This makes it easier for lenders to write mortgages they would otherwise refuse.

Fixed Rate

Fixed rate mortgages have interest rates set for the term of the mortgage, which can be anywhere between 5 to 30 years.

Although they can be interest only or have a balloon, they usually are conventionally amortized mortgages.

At times like now, when rates are low, most homeowners want to lock in the low fixed rates. They are popular when rates are falling, not so popular when they're high or going up.

This type mortgage is a very good idea if you're planning to live in your house for a while.

Home Equity Line of Credit

A revolving credit line secured by your home. Because it is a mortgage, it carries a lower rate than other forms of credit and is tax deductible.

It differs from a second mortgage in that it is not for a fixed term or amount and can be kept in effect as long as you own your home.

This is used most frequently for debt consolidation and can be useful if you rip up your credit cards and use the money you save on interest to invest.

Interest Only Mortgages

This is just what it says. You only pay interest, the principal is never reduced.

This is the grand daddy of all balloon mortgages and you taking a big risk that your house depreciates in value rather than the other way around.

You could very well have to come up with extra cash at closing.

The payments are much lower than on a normally amortized mortgage and if you have the discipline, it can be a useful financial planning tool.

Jumbo Mortgages

Mortgage loans over $322,700 (the limit is periodically raised). Otherwise, the mortgage can be fixed or variable, balloon, etc.

Rates are usually a little higher than for smaller loans.

No Doc or Low Doc Mortgages

This refers to the mortgage application, not to the mortgage itself. Business owners, people living off investments, salesmen and others whose income is variable might use low or limited documentation mortgages.

Very wealthy borrowers or those who want substantial financial privacy will sometimes use the no doc option.

In either case, in spite of their names some documentation is required. The lender will accept nothing less than excellent credit and even then you will pay more for the privilege.

No Money Down Mortgages

These come in two flavors: FHA type loans that allow low or moderate income borrowers to buy a house with little or nothing down and the 80-20 plans, where wealthier borrowers with little money saved up finance 100% of the purchase price.

Under the 80-20 plan a first and second mortgage are issued simultaneously. The borrower avoids having to buy mortgage insurance. The two loans are designed to cost less than an 80% loan plus the insurance, otherwise they make no sense.

If the borrower puts some money down, you will see the mortgage referred to as 80-10-10 (the last digits will be the percent of down payment) or some similar number.

It is mostly used by borrowers who haven't saved enough for a down payment or by those who have the money, but would rather use it for other purposes.

Refinancing

This technically means getting a new mortgage at different, hopefully better terms. A lot of people use it interchangeably with obtaining a second mortgage or line of credit; in other words tapping into the equity of their house.

Second Mortgages

Secondary financing obtained by a borrower.

They can be fixed in amount or take the form of a Home Equity Line of Credit, which is simply a revolving credit line secured by a house.

Homeowners use these forms of financing to consolidate bills, do home renovations, put their kids through college, etc. They are tapping into the equity they have in their house to use for other things.

This is not necessarily a great idea. You must take firm control of your finances when you start doing this or you risk either losing your house or having to raise cash to pay the mortgages off when you sell.

If done properly, you can pay off your debt at a lower, tax deductible rate and invest your savings.

VA (Veteran's Administration) Mortgages

The VA provides mortgage guarantees to active duty and ex-servicemen who meet certain eligibility requirements. (To read the requirements click here.)

Like with FHA loans, the government guarantee makes it easier for low and moderate income veterans and active duty service personnel to obtain mortgages.

The current VA guarantee is $89,912. It is raised periodically.

125% Mortgages

If you want to bet house prices will rise, some lenders will lend you up to 125% of the value of your house. If you're right, you're okay. Otherwise be prepared to have your checkbook available when you sell your house.

I'm sure that there are other financing options available that I haven't covered and don't even know about. But most of the main financing types are here.

Chris Cooper is a retired attorney who is very familiar with debt, being in it too many times in his life. These articles pass on some of the knowledge he has gained striving to become debt free. He is editor-in-chief of http://www.credit-yourself.com a website devoted to debt management

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Tips For Locking in the Best Home Mortgage Rate

Tips For Locking in the Best Home Mortgage Rate
By Mick Taylor

Tip #1: Always Shop For Home Mortgage Rates

Don't blindly accept a Realtor or Builder referral to apply for a Home Mortgage through their preferred lender. Many times they will say, "We work closely with this guy and he gets the job done". Translation: "We play golf together and he buys the beer". Remember, the Realtor won't be paying the bill each month for the next 30 years, you will.

Mortgage Loan Officers that work off of a referral network of Realtors and Builders don't have to have competitive Home Mortgage Rates because they have a steady stream of "Drones" (people who are referred to them and don't shop) calling them. Shop around, get the lowest cost Home Mortgage Rate, then if you are inclined, approach the "preferred" Loan Officer you were referred to and ask him to match the quote.

If you apply for a Home Mortgage through a preferred lender without shopping, you will pay hundreds or even thousands of dollars in additional costs.

Tip #2: Call For Home Mortgage Quotes After 11:00 a.m. Eastern Time

Mortgage Rates change each day and sometimes midday. The previous day's rates typically expire by 8:30 a.m. the next morning. Generally, Home Mortgage Rates are published each day by 11:00 a.m. Eastern time. This varies from lender to lender. To make sure you are getting Home Mortgage Rates from the current day and not a mixture of rates from the previous day from some lenders and the current rates from other lenders, always do your rate shopping after 11:00 a.m. Eastern time.

Get all your quotes after 11:00 a.m. Eastern time.

Sometimes Home Mortgage Rates change midday due to a volatile bond market. When this happens, some Home Mortgage Lenders will adjust the Discount Points for their rates in accordance with the new bond prices and publish new Home Mortgage Rates for that day. Other Lenders may continue to honor their morning rates.

Tip#3: Always Tell The Mortgage Loan Officer You Are Prepared To Apply For A Loan NOW

If you are buying a home, tell the Home Mortgage Loan Officer you are Rate shopping and you have a "ratified contract" to purchase a house. Tell him you intend to make a decision and Lock-In a rate on that day, but you have to check a few other lenders. If he asks you how his rates compare to the others, tell him he's the first person you've called. If you are refinancing, tell the Home Mortgage Loan Officer you are ready to apply for a Refinance Home Mortgage today. If you don't tell him that, he may provide a fake Home Mortgage Rate quote.

Loan Officers know you will probably talk to another lender with lower Home Mortgage Rates and the only way he can be sure for you to call him back is to give you a fake quote that appears to be the lowest. He's expecting you will rate shop for several days and figures you will call him back in a day or two because he provided a low, bogus rate quote. Also, since Home Mortgage Rates change daily and are subject to change at any time, he's not concerned about giving you a fake quote.

How will you compare quotes if you don't know which quotes are real and which are part of a bait and switch plan? The only way to ensure getting real quotes is to box in the Home Mortgage Loan Officers by making them think you are ready to Lock-In a Home Mortgage Rate immediately.

Tip#4: Ask For The Total Points And The Total Fees

When you call a Mortgage Lender, ask for the "Total Points" (Discount Points, Loan Origination Fee, Broker Points) for each Home Mortgage Rate. Some lenders will only quote the Discount Points and deliberately leave out the Loan Origination Fee. You won't find out about the 1.00 Point Loan Origination Fee until you apply for the Home Mortgage. By that time, the Loan Officer figures you will just accept it because he's got your application and pulled your credit report. In addition, Mortgage Brokers often neglect to mention their Broker Fee.

Some lenders do not charge a Loan Origination Fee.

When you are quoted the Total Points, specifically ask them if there is an additional Loan Origination Fee or Broker Fee being charged. You truly have to nail this down when you talk to a Home Mortgage Loan Officer.

Also, ask for a list of ALL other fees that will appear on the Good Faith Estimate that you will be paying to the Lender or Broker. Make sure they include their Credit Report and Appraisal Fees. Some lenders charge one lump sum fee and that includes the Credit Report and Appraisal Fees while other lenders will itemize each fee. Keep it simple and ask for all fees, including the cost of the credit report and appraisal fees.

Don't get confused by Title Company, Attorney Fees or Escrows. A lender will estimate these on your Good Faith Estimate, but these charges are not related to costs associated with a Mortgage Rate quote. The amount required for your escrow account will not change from lender to lender and Title Company and Attorney Fees are not being charged by the lender. Don't include them in your comparison.

Tip#5: Always Confirm The Rate Lock Period When Asking For A Rate Quote

If you are buying a home and you need 60 days to close, make sure you specifically request Mortgage Rate quotes with a 60 Day Lock period. Some Home Mortgage Loan Officers will quote rates with 15 Day or 30 Day Lock periods because the Discount Points for shorter lock periods are less than rate locks for longer periods. Quoting a Home Mortgage Rate with a 15 Day lock period obviously gives that Loan Officer an unfair edge. It is also a waste of your time because the quote isn't real if you can't settle on your loan within 15 days. Always specify a 60 Day Lock-In if you are buying a home. Ask for 45 Days if you are refinancing, but you may be able to get it done within 30 days if you are very diligent and call your Home Mortgage Loan Officer twice a week for a status of your application.

If your rate lock expires, the lender will re-lock you at the higher of either the original rate or the current rate when you decide to re-lock. That's a LOSE/LOSE situation for you. Never let your rate lock expire.

Tip#6: Compute The Dollar Cost Of The Points And Add All Fees

After you've spent some time talking to a bunch of Mortgage Loan Officers, you will have lots of Rates, Points and Fees on a sheet of paper. You will need to compute the dollar cost of the Points (multiply the mortgage amount X the Total Points expressed as a percent; For example, multiply 400,000 mortgage amount X.625% for.625 Points). Then add the dollar cost of the points to the Total Fees. You can then compare each Home Mortgage Lender's Total Cost (dollar cost of the points + all lender related fees) for a given rate. That will show you which Home Mortgage Lender has the lowest cost Home Mortgage Rates.

If Mortgage Insurance (not to be confused with mortgage life insurance) is required on a Conventional Home Mortgage, ask for the cost per year expressed as a percent and compare it from lender to lender. Some lenders require different levels of coverage and this will affect your monthly Mortgage Insurance payment. In addition, lenders use several different mortgage insurance companies and they charge different rates for their coverage. The lender will select the mortgage insurance company.

The cost of Mortgage Insurance can vary from lender to lender even though most Home Mortgage Loan Officers will say, "We don't determine the Mortgage Insurance coverage, Fannie Mae and Freddie Mac do". Your can just say, "Please humor me and provide the Monthly Mortgage Insurance expressed as a percent".

You will want to check the quoted percent with what is on your initial application documents and final loan documents to make sure the Monthly Mortgage Insurance payment isn't higher than what you were quoted. If it is, get it reduced immediately. If they won't do that, then ask them to reduce your Home Mortgage Rate by.125% and that should cover the difference.

If you are getting a government insured mortgage (FHA or VA), you don't have to get into a comparison of the FHA MIP or the VA Funding Fee. This is a cost you will be paying, however every lender MUST use the same costs, so there is no reason to attempt to compare these costs from lender to lender.

Tip#7: When You've Found The Lowest Cost Rate, Apply and Lock The Rate

While you were looking for houses or thinking about refinancing, you may have shopped around and gotten some quotes from lenders and narrowed down your search to the best 5 Home Mortgage Lenders or Brokers. But when it is time to apply for your Mortgage, make sure you update your quotes for the 5 lowest priced Home Mortgage Lenders. After you identify the Home Mortgage Lender with the lowest cost rate, call and apply for the loan. Tell the Home Mortgage Loan Officer you want to Lock-In your Home Mortgage Rate and apply NOW. If the quote has changed since you updated your quotes a couple of hours before, tell the Loan Officer you want him to honor the previous quote. If he won't do it, tell him you may call back. Then call the next cheapest Home Mortgage Lender on your list. If that lender tells you the same thing, you can go back to the first lender and proceed with the application process.

Before you provide your application information, make sure the Home Mortgage Loan Officer agrees to provide you with an actual Rate Lock confirmation via email or fax on the same day you apply for your loan. When you receive the Rate Lock confirmation, check it and make sure you are Locked-In for the number of required days (30, 45 or 60), with the correct Loan Type (30 Year Fixed, 15 Year Fixed, etc.), with the correct Total Points quoted. It's normal for a lender to require you to apply over the phone before they will Lock-In your Home Mortgage Rate.

TIP#8: Never Float The Rate

If the Mortgage Loan Officer thinks you might be inclined to FLOAT your Rate and Points, he may say, "I think the rates are going to be coming down, so you might want to FLOAT". Remember this, never FLOAT your Home Mortgage Rate. Never. Always Lock-In the Rate and Points. If you FLOAT, and the Discount Points for Home Mortgage Rates drop, you will only realize the benefit of a small part of that drop in the Points, if any at all. The Home Mortgage Loan Officer will keep the rest of the savings as a fat commission.

Here's how they increase their commission when you FLOAT. Originally, the lender quoted 4.875% with 1.00 Total Point when you applied for your loan. Then 45 days later you called to Lock-In. Keep in mind that over the 45 day period that you were FLOATING, the actual Points for 4.875% dropped to.250 Total Points. So you should have saved.75 Total Points on your 4.875% rate. Right? No! First, you don't know if his company's points have dropped or by how much they might have dropped. So, instead of giving you 4.875% for.250 Total Points, the Home Mortgage Loan Officer tells you his rates only dropped a little bit. He says you can Lock-In 4.875% for.75 Total Points. You are happy because it is.25 lower than what it was when you applied for your loan, but the Home Mortgage Loan Officer is ecstatic because he keeps half of the "overage" you paid. That overage is.50 points and he splits this with his company. If the mortgage amount was $400,000, he just earned.25% which is an additional $1,000 commission. That's not bad for a five minute phone conversation.

If you FLOAT and the Discount Points for Mortgage Rates increase, you will pay for the increase. FLOATING is a LOSE/LOSE proposition for you and a WIN/WIN for the Home Mortgage Loan Officer.

Some companies quote very low rates and attract lots of applications, but they don't let you Lock-In until 15 Days prior to loan closing. If you apply for a Mortgage through a company with that policy, you will get screwed. When it's time to Lock-In your Mortgage Rate, you will pay an "overage" that will go straight to the Mortgage Loan Officers pocket. You will either pay more points for the rate you requested at the time of application or you will get a higher rate. Either way, you will get screwed and the Loan Officer will get a fat overage added to his commission.

Tip#9: Get a Final Good Faith Estimate Several Days Before Loan Closing

Get a copy of the Final Good Faith Estimate at least a few days before the scheduled closing day. Check the Mortgage Rate, Points, Fees and Monthly Mortgage Insurance Premium (if applicable). Make sure you are getting exactly what you bargained for. Ask questions if you don't understand something. Demand that previously undisclosed fees be removed from the Final Good Faith Estimate. Make sure you get a revised estimate if the Mortgage Loan Officer verbally agrees to make changes.

The day of loan closing is the wrong time to haggle over discrepancies.

http://homefunding.com

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The Difference Between an Adjustable and Fixed Rate Mortgage

The Difference Between an Adjustable and Fixed Rate Mortgage
By John Hirabayashi

When shopping for a new home, the options seem endless. You'll look at several houses before you make your decision, but your choices don't stop there. You'll also need to decide between an adjustable rate mortgage and a fixed rate mortgage. Both have pros and cons, so it's important to know the difference before you decide. Read on to find out more information on each type of mortgage so you can make the right choice for you.

A Fixed Rate Mortgage

If you opt for a fixed rate mortgage, you'll have the peace of mind of knowing your mortgage interest rates will stay the same for the entire length of the loan. This is beneficial if the housing market is unstable or crashes because it could save you thousands of dollars in interest over the life of your loan. The interest rate you begin with (determined by the market rates at the time you take out the loan) will be the same every single month until you pay off the debt.

An Adjustable Rate Mortgage

When you have an adjustable rate mortgage loan, your interest rates fluctuate depending on the market rates at the current moment. For instance, you may begin with an interest rate of 4% for the first five years of your loan. At the end of that five years, the rate may jump much higher depending on the current state of the market at that time. People planning to stay in the home for the entire length of the loan (usually 30 years) stand a better chance of saving a lot of money by having an adjustable rate mortgage and riding out any fluctuations - good or bad - throughout the years.

No Real Winner

It is difficult to say that one type of mortgage is better than the other. Which one works best for you depends on your specific needs at the time you purchase your home. If you're only planning to own the home for a short time, a fixed rate may be the best way to save as much money as possible. If you're planning to own the home for the entire length of the loan, an adjustable rate loan could keep more money in your wallet. If you're not sure what the future holds for you in terms of home ownership, choosing a fixed rate mortgage is the safer option.

More Information on Adjustable and Fixed Mortgages

If you're in the market for a new home, be sure to check with your local lending institution for more information on which type of mortgage is right for you. The experts there can help you determine whether an adjustable or fixed rate will be the most beneficial. Also keep in mind that these types of mortgages apply to refinancing as well, so be sure to get all the answers you need to make the right decision.

Community First Credit Union offers the best interest rates in Jacksonville with smart checking account options and excellent loan opportunities. Personal Banking in Jacksonville has never been easier, visit Community First Credit Union online for more information.

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How to Get a Home Loan When You Are Self-Employed?

How to Get a Home Loan When You Are Self-Employed?
By Frank Zelasko

You may have noticed that most self-employed individuals have to struggle a lot more with lenders/credit providers when applying for a home loan. But, it does not mean that all self-employed borrowers have to struggle with getting finance. It just means you might need the services of an expert finance broker on your side, who is a specialist at providing loans for self-employed persons. Choose a finance broker who is willing to work on your behalf with the lenders/credit providers and who will help you in securing a loan package. Not to mention, he/she should also get you the right home loan that suits your needs and budget.

Why You Need Expert Advice?

Before you think it is impossible for self-employed borrowers to get a home loan, you need to sit down with an expert and professionally qualified finance broker, who will:

>> Establish what taxable income level you need to apply for a loan

>> Establish your borrowing power (i.e. how much you can borrow), and

>> Determine your eligibility for a loan

When assessing your eligibility for a home loan, the finance broker should be able to see if your business is maintaining a level of income that is suitable to meet the minimal "servicing" requirements.

Income Verification Requirements for Self-Employed Individuals

To confirm your income and qualify for self-employed home loans, lenders/credit providers will require from you:

>> Your most recent two years Personal Income Tax Returns

>> Your most recent two years Business Income Tax Returns, and

>> Your last two years Financial Statements (Detailed Profit and Loss Accounts and Balance Sheet)

What if I have been Self-Employed for under a Year?

Well, it is not impossible to get a home loan with your employment status; it just means the finance broker will have to work hard to secure your eligibility for the loan. For example, you are now self-employed as a sub-contractor carpenter. But, you were employed in the same industry (i.e. line of work), and you worked for someone else for five years before you became a sub-contractor. You can still be considered for a home loan. Because, you are still working in the same industry and you are doing the same work. The only thing that has changed is the manner in which you are being paid.

Choosing the "Right" Home Loan

There are a wide range of home loans suited to you as a self-employed borrower. So, whether you are looking at a traditional or low doc loan. Here, is a list of home loans suitable to you:

Interest Only loan - This loan is perfect for investors who want to maximise the cash flow on their property.

Standard Variable Rate loan - This is the most popular type of loan as it offers you plenty of useful features and flexibility. You can link your variable rate home loan to an offset account, thereby helping you to reduce your overall interest.

Standard Fixed Rate loan - This loan is popular with investors, as it offers you the security of a fixed rate. You will have the peace of mind knowing that your repayments will not change for the term of the loan you have selected and will also assist you when you are budgeting.

Basic Variable Rate loan - This loan is ideal if you are looking to make minimum payments and you require less flexibility than with a standard variable rate home loan.

Line of Credit - This loan allows you to utilise the equity in your property, and you will only pay interest on the money you actually use.

Low Doc loan - This loan also called a low documentation loan is ideally suited to self-employed borrowers who are unable to provide evidence of income. A Low Doc home loan requires an "Accountant's Declaration" form/certificate or BAS statements for the past 12 months and an ATO Lodgement Reference Number.

Construction loan - This loan is a great option for investors wishing to build. Construction loans are normally interest only for the building period. But, after the construction period is over, you are then able to select from a variable rate, fixed rate or line of credit loan.

Buying a home at any stage of life can be an overwhelming process in itself. Not to mention having to navigate through the options and to determine what mortgage suits your requirements. All of this can be a challenging and time-consuming task, so, having a finance broker on your side will save you lots of time and heartache.

http://www.singhfinance.com.au is a reputed finance brokerage firm who will put your interest first. The firm has a team of expert and professionally qualified finance brokers who will leave no stone unturned to secure your eligibility for a self-employed home loan, not to mention get you the "right" home loan that suits your needs and budget. The team will even help you find suitable building, contents and landlord insurance. Call on 0424 190 908 today.

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Variable Interest Rate Home Loan

Variable Interest Rate Home Loan
By Frank Zelasko

What is a Variable Interest Rate Home Loan?

A variable interest rate home loan (sometimes also referred to as a "floating" or "adjustable" rate home loan) is a very popular product in the lending market and a very competitive product offered by most of the lenders/credit providers.

Who is Suited to a Variable Interest Rate Home Loan?

This type of home loan is a perfect fit for:

>> First-time home buyers who just want a home loan product that is simple and not confusing to manage

>> People who just want to stay settled and are not willing to move whether in their work, home, personal life or they are not willing to move to another lender

What Should I Consider When Choosing the Loan?

When choosing it, you should always research and consider the following terms & conditions, being offered by the many lenders/credit providers:

>> Treat any "honeymoon" interest rate offers with caution, and remember to always check whether the discount rate applied to the variable rate is a set amount below whatever the standard variable is

>> Remember that low rate home loans are not always the best choice

>> Try to pick a loan term that suits your finance

>> Decide on what matters most to you (e.g. does it meet your financial goals?)

What are the Features of a Variable Interest Rate Home Loan?

You must know all the below mentioned features of the loan package so you can maximise the benefits:

>> Take advantage of falling "interest rates" when the Reserve bank decides to drop their official rates

>> Make unlimited "extra repayments" each month so you can pay off your home loan faster

>> Take advantage of "redraw facilities" so you can withdraw any extra payments you have made on top of your normal repayment amounts if you need the cash

>> Take advantage of a 100% offset account

What are the Advantages and Disadvantages?

There are many advantages of choosing the loan package such as:

>> Flexibility: It has some flexible features like having options of making additional payments, low introductory interest rates or redrawing facility.

>> Lower repayment option: As the interest rate varies with that of the market index, if the rate falls, the amount of repayment also becomes lower.

>> Ability to pay off the loan faster: This loan type also has the option of enabling you to pay an extra repayment as advance towards the loan. Thus, every month, if you pay an extra amount in addition to your minimum payment amount, you can repay the loan faster.

>> Helps in Budgeting: As this loan gives you the option of weekly, fortnightly or monthly repayment, you can maintain your budget accordingly.

>> Redraw Facility option: This loan type gives you the option of redrawing the additional amount you have made towards the repayment, in addition to the minimum repayment amount.

While the loan has a lot of upsides, it does have some disadvantages, such as:

>> Variable rate is subject to fluctuations: The interest rate is subject to fluctuations and can either rise or fall at any time during the period of the loan. Changes in the interest rate are at the discretion of a lender and they are meant to be broadly in line with market conditions

>> Repayment may become more: So if the interest rate rises, the amount of monthly repayment also becomes more and it may become more than the amount you can afford.

>> Redraw facilities can be subject to limitations, including minimum withdrawal amounts allowable and may also include redraw fees

>> You cannot arrange a rate lock

>> You cannot pay Interest in Advance in some circumstances

>> This loan type offers fewer features than the general loans

What are the Benefits in Making Extra Repayments?

The benefits available to you in making the extra repayments towards your variable interest rate home loan are best illustrated in the following example. The example assumes that you are willing to contribute an additional amount of $200 towards your weekly repayments:

Loan Amount: $530,000

Normal Loan Term: 30 years

Interest Rate: 5.00%

Repayment Frequency: weekly

Normal Weekly Repayment: $656

Extra Weekly Repayment: $200

Interest saved by making extra repayments: $217,815

Time in years saved, by making the extra repayments: 11 years 10 months

Now that you have thorough information of the variable interest rate home loan, you can discuss about it without your finance broker and find the perfect home mortgage loan.

Singh Finance is the ideal finance brokerage firm of every Australian home buyer. Call on 0424 190 908 for quick approval on 0 savings home loans. You can even enquire online for different loan packages like cheap commercial loans and quick short term second mortgage.

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