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CHECKRATES QUICK TOOLS: CALCULATORS | CREDIT SCORES | BROKER SEARCH | CHECKRATES COLLEGE | ARM INDEX

All About Your Credit History

1) Your credit score affects everything.

Most mortgage banks start by taking a loan application and pulling your credit. While all factors are important, probably the most important is your credit score. Sometimes lenders will call it a FICO score or Beacon score. Regardless of what you hear it called, it is a numerical score of your personal credit risk profile. The higher the score the better mortgage rates available to you. Like it or not, banks use it and most loans start here. So what do you do to make sure it is optimized before you shop for a loan? Well, first you must order it so that you can see if there any errors that are hurting your score. Checkrates.com offers this service, here. Remember that there are three main credit bureaus, Equifax, Trans union, and Experian. Mortgage companies generally use all three in format called a tri-merged report. This report will contain all three credit scores which may be very different from bureau to bureau. The lender will deal with this by averaging your credit scores or more commonly, they will take the mid-score.

Even though your lender may have given you a copy of your credit report, you can’t use this to initiate a dispute. You must order your reports individually from each of the three credit reporting bureaus. Once you order your 3 reports, you will then be able to dispute any untrue items. Even small derogatory items can have a huge impact on your score. Make you sure you dispute them if possible before you shop for a loan. It will save you money and it is definitely worth your time. Allow 45-90 days to clean your credit. Whether you are shopping for a mortgage, car loan, student loan, home equity loan, your credit score is important.

Thank you for allowing Checkrates.com to answer your questions about my credit score. If you would like to know your score for free click for a free credit report and score.

2) Are lender inquiries hurting my credit score?

Lender inquiries as a general rule do not hurt you credit score. It is important to know that the credit bureaus treat mortgage and car loan inquiries differently than credit card and department store inquiries, and as just like everything else in life, timing is everything. When you shop for a mortgage, car or home equity loan, you can have multiple inquiries in the course of 2 weeks and they generally count as one. However, if you apply for credit cards, department store cards or finance company accounts, all inquiries count against your FICO score in a substantial way. If you apply for a lot of credit cards at once, your score will go down for 60-90 days. This gives a chance for the cards you applied for to show up as accounts. This is only fair to the issuing banks because your risk profile can change drastically with the addition of a few high limit credit cards.

So remember that if you want to apply for a mortgage or car loan, do all your shopping in a two week period and you should be ok. Inquiries bringing down your score can be limited if they are done in a two week period. If you are trying to obtain more credit cards, try to apply only a few times every 4 months and your score shouldn’t be negatively affected very much. And most importantly, please remember that if you are in the process of buying a home and your credit score is under 700, don’t apply for any credit for 3 months before you begin the process, and do not apply for anything until the home closes.

Thank you for using Checkrates.com to answer your questions about credit report inquires. If you would like to know your score for free click for a free credit report and score.

3) Is my credit really that bad?


	Most people just want to know how the banks view credit scores. Here is a table with a rough guide. 750 and above – Excellent 720 and above – Very Good 680 and above - Good 620 and above - Fair 580 and above - Bad credit Below 580 - Very difficult to get a loan or financing of any kind Thank you for using Checkrates.com to answer your question about how your credit ranks.

4) How do I improve my credit score or FICO score quickly?

If you have a copy of your credit report and your score is lower than you think, first determine the accuracy of the report. Is there anything on there that doesn’t belong? That is usually the best place to start. Dispute all the items on your credit that may be erroneous. You will find that within 30 days your score may improve substantially just because of stupid errors. Next pay off some small balances and make sure they show as 0. Many of us carry small balances to department stores such as wal-mart or target, because they offer 10 percent off, etc. If it is important enough, pay these down to zero and your score should bump up quickly.

If you have several smaller credit cards, consider consolidating them to one larger card. The more open balances you have, the lower your score. Pay off your cards from the lowest balance first. Remember keep on the credit bureaus as long as it takes to remove information. Most companies will not remove late or derogatory information willingly, so your tenacity is needed until they do. Remember to look for duplicate accounts and old accounts with balances. Get on it and stay on it until your credit is cleaned and reporting accurately.

We at Checkrates.com want to teach you how to improve your credit score, thank you for giving us that opportunity.

5) How do I read my credit report?

There are two formats for your credit report. The format used by people in the lending industry, which is harder to read and the format the credit bureaus send you when you order your consumer credit report. They are not the same. So if your lender gives you a copy of your credit report, it is useless for initiating a dispute. You must order it by mail, telephone, or online at http://www.annualcreditreport.com. When you receive your credit reports on-line and/or by mail, they will include detailed instructions for deciphering what they mean and how to read your account info. Each account listed on the credit report are called,”tradelines”.

We hope this helps you understand how to read your credit report. We will update information about how to read your credit report, check back with us anytime you have questions about your credit report.

6) How do I get my credit reports, which way is best?

We think the best way to get your credit reports is to use “link to checkrates.com credit report service” Follow the instructions and order all three credit reports. Once received, you can begin to dispute all the derogatory information on your file that is incorrect.

Thank you for inquiring with checkrates.com about ordering your credit reports from Transunion, Experian, and Equifax. Thank you very much for visiting checkrates.com

7) Do FICO scores really matter that much?

FICO scores have become the single most important factor relating to lending decisions based on your credit. That said, you can’t dispute a FICO or Beacon score. If your question is how you can dispute a FICO score, the answer is you can’t. You can only dispute the information your FICO or Beacon score is based on. Lenders use the FICO score to determine whether or not to extend credit, but there are other ways lenders and banks use your FICO score for. They will often use them to determine your rates, fees, LTV ratios, down payments, and loan terms. It is important that your credit report be as good as it can be so that your Beacon score is as high as possible.

Thank you for visiting Checkrates.com for a FICO Score explanation.

8) Is my credit bad?

Many books have been written and an entire industry exists for the sole purpose of explaining and parsing different tiers of bad credit. Suffice it to say that if you have unpaid charged off debt, that is worse than late payments. However, if you have a few charged off accounts that you have since paid back, and you had excellent credit before and after the charge offs, that is probably viewed more favorably than someone who has many late payments every year. This is because the charge offs may be due to an isolated event that has passed, such as a job loss or medical problem. If you have paid many bills late and you do this every year, you will be viewed and scored as someone who is irresponsible and has poor judgment. You have to understand that many great statisticians are employed in this industry and they have made incredible strides at making the credit score an extremely accurate prediction of your ability to repay a debt.

9) Does damaged credit or bad credit mean I have a low score?


	Generally Speaking if your credit score is less than 650 then you are considered to have fair credit. If your score is less than 620 then you are considered to have a bad credit ranking. This would mean that you are in the category of subprime mortgage loans on the basis of credit.

10)How bad is my credit really?

If you have to ask this question then your credit is probably pretty bad! Just kidding! If your score is less than 620 then you have bad credit. How many accounts do you have? If you have more than 10 accounts and your score is less than 620 then you are going to have a much harder time improving your score over someone with 3 accounts and a score less that 620. The mere fact that a person has only 3 accounts may be the reason that the score is low. This person may have a low score simply because they don’t have enough credit. Ask your loan officer for tips on improving your credit.

Thank you very much for visiting check rates.com

11)How much more will bad credit really cost me?

Bad credit will cost you a small fortune. It is so unbelievably important to have good credit. A new car costing $30,000 financed at 6.5% will cost you $35,219 dollars over 5 years. The same $30,000 car at 12.99% will cost you $40,946. This $5,727 difference is often more than the debts cost you in the first place. If you only have a few thousand in collection accounts, would it not be better to pay those off instead of paying higher interest on everything you own like a home, car and credit cards?

Repair your credit with checkrates.com Thank you very much for visiting our site.

12)How do improve my credit?


	Checkrates.com is here to help you easily repair your credit. Using our service you easily find out what is on your credit and then dispute the negative items reporting on your credit. It is simple and easy.

Buying a Home

1) How do I buy a house before I sell?

Buying a home before you sell your old home should be carefully considered. This can be a perilous decision for most because most folks can’t afford to make 2 house payments. But like everything, if you are willing to pay more, it can be done. The factors you should consider are your plan to sell or rent your current residence. Can you afford this to be protracted and how long can you hold out if the home doesn’t sell or rent. Is your home ready for market or does it need more work or will you have to offer sales concessions to make it happen. Also, can you qualify without doing anything unethical to buy before you sell your old home. Many people still ask for a “bridge” loan, The truth about a bridge loan is that it really nothing more than a home equity loan on one or more homes. For instance if Joe owns home A and wants to buy home B, he will take the equity from home A, using a loan, and uses the proceeds to put a down payment on home A. Some time later, home A sells and Joe only owns home B.

After everything has been carefully considered and you make a decision to move forward, you will probably need the help of a good mortgage broker which you can find right here on check rates.com. They will arrange your new home purchase and bridge financing.

Thank you for using checkrates.com to learn about bridge loans, and home equity loans to buy a home before you sell.

2) How much house can you afford?

Finding out that you can’t afford a house is a tough lesson. Fortunately, by following a few rules this should be easy. All lenders have formulas to calculate whether or not you can afford a home and they should always be followed. They are there for a reason. The first question that a good loan officer will ask a borrower is what payment they will be comfortable making. This is usually the best number to start with. After asking a few questions your lender should be able to give you a price range that you qualify for. Once you start shopping for homes it may become clear that you will have to spend more and that’s where the problems begin. Since most of us want to live in safe areas with good schools and nice homes in clean neighborhoods it may be necessary to step up what you were initially willing to spend on house payments and stretch for a bigger loan. If you find yourself in this situation there are options. Consider ARMS with a fixed period of three years or longer. Think about cutting back in other areas such as cars, boats or luxury items. If you find yourself unable to fathom making the payments that are proposed then lower your expectations, rent for a few more years, find a place where homes are better values, or commute longer distances. Make sure you don’t get into a situation where you can’t make your payments because no matter how nice the home is, if it is in foreclosure you certainly won’t be able to enjoy a home you can’t afford.

3) Should I assume the seller’s mortgage?

Before you do anything regarding an assumption, you must get permission in writing from the lender to do so. Most loans today are not assumable and it is imperative that you don’t take anyone’s word that a loan is assumable. Second, the promissory note must specifically state that a loan assumption is allowed. If you are able to assume the loan then the equation after that is a simple mathematical analysis. Get a quote from a reputable mortgage company in your area and compare the interest rates and terms. If the old assumable mortgage loan is better and you are allowed to assume it, by all means do it.

4) Should unmarried partners buy a house?

This decision is best left to the partners buying the home. The same rules and considerations apply to unmarried partners as married couples. Both people have to want the home, and understand the risks and rewards of owning a home. Most importantly, there should be a written agreement outlining everything including an exit strategy should the partnership dissolve. Many states may also consider this arrangement a common law marriage. Homeownership is a big responsibility but if two people want to buy a home that are not married, why not?

5) Top 10 home buying mistakes.

You didn't set a realistic budget

Buy a home that's way out of your price range and you could well derail your ability to fund other important items such as retirement savings, your kids' education -- not to mention an entertainment budget.

Mortgage brokers will tell you how much you can borrow. But that amount may not be what you can afford to pay.

Experts say your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes. To help find the right-priced house for you, read our primer on how much home you can afford. Use the calculators provided by Checkrates.com. And for help estimating how much mortgage you may get, try our mortgage qualifier calculator.

You chose the wrong mortgage

These days, many homebuyers are rushing to secure a mortgage as fast as possible without fully exploring their options. That's because sellers often only consider bids from individuals who have been pre-approved for a loan. Pick your financing package with care and use an excellent local mortgage lender by searching checkrates.com

Among your choices: adjustable rate mortgages, or ARMs, and the more traditional fixed-rate mortgages. Keep in mind that shorter-term mortgages will cost more per month since you're paying off your loan more rapidly. Monthly mortgage payments on a 15-year fixed loan typically run 25 percent higher than the 30-year option.

Among your choices: adjustable rate mortgages, or ARMs, and the more traditional fixed-rate mortgages. Keep in mind that shorter-term mortgages will cost more per month since you're paying off your loan more rapidly. Monthly mortgage payments on a 15-year fixed loan typically run 25 percent higher than the 30-year option.

First-time home buyers may qualify for a program through Fannie Mae that requires lower down payments and easier qualification limits than other loans.

You chose the wrong community

Some places are just flat-out expensive, and you'll probably have to search for a location that's affordable. That doesn't mean you should choose the cheapest neighborhood.

If you don't like the location you'll regret it. What's more, you'll probably have a hard time selling your property if the community isn't a good one. Ask around to know how the community is faring economically, what the major issues are, how many resources it offers.

Don't neglect the schools. Gather such data as test scores, statistics on the percentage of kids who graduate and go to college, the student/teacher ratio and so on.

You didn't research what homes really cost

The best way to determine if you're getting a fair deal is by comparing the cost of the home you're interested in with similar homes in an area. You can do this easily by having your Realtor provide you with a CMA (that's short for Comparable Market Analysis). A CMA lists such things as addresses of recently sold homes, prices, date sold, the number of bedrooms and bathrooms and -- ideally -- such things as the home's condition, its size and extra features.

You used a bad real estate agent

Don't make buying a home more difficult by choosing the wrong agent. You want a buyer's agent who works for you and understands your needs and financial limitations.

References from friends can help you find a good pro. Interview three, and ask to see their activity lists, which reveal every property the agent sold (or whose clients bought) in the past year. Look at sales prices. Make sure the agent has significant experience in the area where you want to live and the price range that you're looking for.

You didn’t really check on the neighborhood

If you're like most homebuyers, you probably spend many weekends looking for a new dwelling. But what happens to the neighborhood on weekdays or after dark? Is the house that's "convenient to town" sitting on a main thoroughfare that fills up with cars come commute time?

The only way to answer these questions is to go back and see what the neighborhood's like at various times of the day and week. Do your neighbors spend weekends with the stereo blaring? You want to know as much about the neighborhood as possible before you buy. Go there on Friday night to check on the neighbors.

You forgot to consider resale

It's easy when you're house hunting to forget what it's going to be like to sell your home down the road. But as you tour homes, put yourself in the perspective of the sellers. You may be drawn to a home that has quirky features or no closets or just one, tiny bathroom (You can use armoires. Share showers.) But others may not be as enthusiastic. When you buy, think about the day it comes time to sell.

You purchased the most expensive home on the block

It's wonderful when you find your dream house, but if it's the most expensive home on the block you could have a problem. This is knbown as the white elephant. Quite simply, your neighbors' lower home values will dampen yours. Remember, people who buy a $500,000 home usually want to be surrounded by other $500,000 homes, not tiny $100,000 bungalows.

Tyson recommends buyers steer clear of homes that cost 50 percent more than neighboring dwellings.

You didn't choose to do an inspection

Bottom line: you should never buy a home without having it inspected. After all, you don't want to learn that you've bought a house that's filled with termites or has a frazzled electrical system. If you're building a new home, an inspection can ensure that all the work has been finished properly.

Home inspections typically run $300 to $600 and usually include a check of a home's heating and air condition systems, plumbing and electrical works, roof, walls, foundation/structure, drainage, the garage and basement.

What's frequently not covered? Termite, radon, asbestos, mold and lead inspections. Don't rely on inspectors to hire other pros to check for these items, said Mike Casey, president of the American Society of Home Inspectors.

"Most home inspectors will describe what they do and what they don't do," Casey added. "It might be a good idea to ask what standards do they work to."

Underground heating oil storage tanks also should be inspected before you buy since leaking tanks cause huge environmental, legal and financial problems. (A seller's disclosure statement should reveal if there's an underground tank on the property.) The Environmental Protection Agency has tank guidelines for homeowners -- plus contacts at state Department of Environmental Protection offices -- so you can find pros to help.

Finally, it's unwise to hire a home inspector who is recommended by a Realtor, since they're likely to refer you to a pro who won't kill a sale. Instead, use recommendations from friends or go to the American Society of Home Inspectors for a list of inspectors in your area.

You forgot to factor in the closing costs

Think it's bad to pay tax when you eat out? Wait until you're paying closing costs, which can run 2 to 5 percent of the home's purchase price, according to Tyson.

A mortgage lender should provide you with a specific estimate of what costs will be. But keep in mind they include such things as origination (points) on a loan, escrow fees, title and homeowners insurance, legal costs, property taxes, fees to record your need deed and notary fees.

6) Is there a diference between qualifying and approval?

There is a big difference between qualifying or being prequalified for a mortgage and loan approval. One is an opinion from a loan officer or mortgage broker that you could get a loan and the other is actually a commitment to lend. Real estate brokers understand the difference and it is a huge negotiating point when you are buying a home to have loan approval. Insist on getting an approval quickly so that when you are home shopping you are approved. Good lenders can do this for you.

Refinancing

1) Can refinancing at a higher rate make sense?

Refinancing at a higher rate makes sense if the terms are changing to something more favorable to you. If you are on an ARM with a low rate and you want to refinance to fix your rate on a fixed rate loan then it can make sense to do so. While this usually isn’t a pleasant reality for those who do it, it can be the best thing in the long run. Analyze the down side and the worst case scenario from your existing loan. If you want to get off the roller coaster and pursue better terms and a higher rate, then the higher interest rate can make sense provided that the terms are more comfortable.

2) How often can I refinance?

You can refinance your home as often as you like. However, refinancing your home is expensive and time consuming. You should only do it when there is a substantial benefit. People have much different ideas of substantial benefit, however the cost of a refi should be recovered within 2 years. If it isn’t you probably shouldn’t do it unless you really need to lower your payment. Keep in mind that within your analysis you should factor in that your loan term will start over. So if you have had a 30 year loan for 5 years, remember that your loan term will revert back to 30 years, netting you a 35 year total loan term.

3) Should you refinance with your current lender?

Most people think that refinancing with their current lender is the best choice. Because the lender already has their financial information, they already have direct deposit set up and they already have their information accessible online. But the truth is most lenders will make you provide all new paperwork, including income documentation, credit reports, hazard insurance, and usually a new appraisal. When you close you will need to sign a whole new closing package and pay closing costs such as title insurance, lender fees, and recording fees. So you are truly starting over and that means that you should make your current lender provide a quote and compare it against other lenders so that you can get the best deal. Unfortunately, loyalty is seldom rewarded when it comes to big mortgage servicers. The best bet is to use the person who originated the mortgage in the first place. He or she will know which banks are the most competitive and direct your loan to them.

4) I think I should consolidate debt, but how do I do it?

Once you have decided to consolidate debt, the next challenge is formulating a plan. Obviously you should start by itemizing all of your debt, repayment terms, and interest rates. Once all of this information is compiled in one place, you should begin noticing the debts that really need attention. This may be an important consideration later, because more often than not, you may not be able to consolidate all of your debt. If this happens to you then you must consider prioritizing which debt needs the most attention in your consolidation plan.

At this point you should identify lender opportunities that exist. The first place you should look is to the equity of your home. This really is the lowest cost option for consolidating you debt. Find a mortgage broker in your city at Checkrates.com. They will best be able to ascertain what is available in the arena of home equity or refinancing your first mortgage. Try it and you will be surprised how quickly they will be able to help you execute the plan.

If you have student loans and they can be consolidated, go straight to our student loan consolidation system. Federally insured education lenders offer awesome options for saving money and improving your financial situation. Consolidate your student loans by using the student loan consolidation programs offered by the federal government.

5) Consider consolidating your other debt by using home equity.

If neither of these options is available, consider obtaining a credit card or line of credit. Many credit card issuers offer high limit cards and very low APR rates. For instance if you had three credit cards totaling $12,000 and each has rates above 24.99%, it may make sense to get one new credit card with a 0% APR for an introductory period of 12 months. This simple move could save you $2,998 per YEAR in finance charges. If you would like to examine the offers of most major card issuers with 0% credit cards, go to http://www.checkrates.com and select, “credit cards”. Then select, “low rate”. Apply on line and get an in most instances answer in seconds!

6) Should you use a 3 day right of rescission after you close a refinance?

You have a right to a recission, or to rescind your refinance loan. Many people don’t know that you have a three day period in which you can change your mind.

When you hear that someone went to refi their home and didn’t get a good deal or were mislead about the rate, term, or pre-payment penalties, they should have used the 3 days to review their papers, or better yet had their attorney review them. If something wasn’t right they could have rescinded their loan and avoided the bad loan completely. The problem is that most people don’t know they have this right. Whenever you close a mortgage loan refinance, demand that this paper be included in your copy package and have it explained and indentified so you can find it if you need to use it. Always have your paperwork reviewed by a professional. The rescission does not necessarily apply to a home purchase so check your state laws regarding this or call a local mortgage broker from our mortgage selection page. Thank you for using Checkrates.com.

Choosing a lender

1) Brokers vs. Lenders- Are brokers or lenders better?

Though there are differences between brokers and lenders, these should not be the determining factors when choosing a mortgage provider.

A mortgage broker offers programs from other investors on a wholesale basis. They generally have access to more programs because of the multitude of investor’s programs that are available to them. They also potentially have the ability offer a lower rate because they have the ability to choose from several investors that are offering the same program. However, because the mortgages are sold off to the investors by the bulk, they must adhere to set guidelines. If you have tarnished credit, you may find it easier to work with a broker.
A lender offers programs from their own entity, and funds with their own pool of funds.They have access to limited programs, under their own guidelines. By funding their own loans, they have the potential to make an exception where a broker may not be able to, because they do not have to worry about not being able to sell the loan. If you have a unique property, you may find it easier to work with a lender.

The main thing to keep in mind when choosing a mortgage provider is that there are both good and bad loan originators. By shopping several mortgage providers, you can find the one loan originator that will work the hardest in your interest to provide the best loan at the best rate, regardless of being a broker or a lender.

2) What is a subprime lender?

Sub-prime is a term in the mortgage industry used to encompass any loans that don’t qualify for a conventional (Fannie Mae or Feddie Mac) or government insured loan (VA or FHA), typically due to credit issues.This is sometimes referred to as a band-aid loan, as they are intended to be short term until credit can be repaired enough to qualify for a conventional refinance.If your lender/broker advises you that they must place your loan with a sub-prime lender, you should ask the following questions:

3) Why does my loan need to go subprime?

Again, it is usually a result of derogatory credit, but there may be other factors. Find out specifically what details are pushing your financing to a sub-prime loan.

What can I do to improve my credit to qualify for a conventional loan? What kind of timeframe am I looking at to accomplish this?

Depending on exactly what is keeping your credit score down, you may be able to get a quick fix, or you may have extensive work to do, and time to wait. Contact your lender and ask them what steps you would need to take before you can obtain a prime loan. If these steps can be accomplished in a few months rather that a year or more, perhaps you could wait until you qualify for a conventional loan.

4) Could I qualify for an FHA loan?

FHA loans are government insured mortgages that will accept borrowers with some credit problems, and can be a good alternative to sub-prime loans, again depending on the situation. Ask your broker/lender for a comparison of payments and terms. It is important to keep in mind that even though the rate on a FHA loan will be lower than a sub-prime loan, there is monthly mortgage insurance on an FHA loan, and it is not tax-deductible like the interest is.

5) Is there a prepayment penalty? Is it soft or hard?...

These are very important questions to ask and get full answers to if your mortgage will be sub-prime. The majority of sub-prime loans will have prepayment penalties, a fee that you will incur if the balance is paid off early- before the prepayment penalty has expired. Since these are typically substantial sums of money (the standard is 6 months of interest), it will have an impact on any selling or refinancing that you can do. The terms soft and hard refer to whether or not the prepayment penalty will be assessed in any circumstance (hard), or if it will be waived in some situations, such as a sale of the property (soft). The terms of the prepayment penalty will be spelled out in the closing documents, either in the Note, or as a Rider to the Note.

6) Are lender payments to my lender ethical?

Lender payments to a broker are designed to help keep closing costs incurred by the borrower low. Whether or not they are ethical, is debatable depending on how they are used. As with anything else in life, lender payments to the broker are susceptible to misuse, and that is where the scrutiny lies.

The amount of a lender payment to a broker is directly related to the interest rate the broker chooses to lock the mortgage at. Lenders provide brokers with rate sheets, breakdowns of a program’s available rates and how much each rate will earn or cost. For example, let’s say a program has a par rate of 7.00%. A par rate means that there is neither a premium earned nor a cost, or discount, owed to the lender. Any rate locked over 7.00% would earn the broker a premium, or lender payment. Any rate under 7.00% would require a cost to be paid to the lender, usually in the form of a discount paid by the borrower.

Many brokers will use the additional funds earned by lender payments to keep borrower closing costs to a minimum.In some cases, they can be used to provide the borrower a “no cost” mortgage, meaning that all costs that are incurred in the process are covered by the lender payment to the broker.The costs are still charged by all parties that would normally charge fees, but the broker pays them instead of being paid upfront by the borrower.This can be a very effective tool in aiding a borrower to qualify for a mortgage when they do not have funds (either in liquid assets or equity) to cover all costs.Whether or not this is beneficial to you depends on your particular financial situation.

Of course, if a borrower pays a higher interest rate, they are in fact paying for the lender payment to the broker in the form of a higher payment spread out over the term of the mortgage.If you are going to be in the mortgage short term, it may make more sense to accept the higher rate, whereas if you are planning on holding the mortgage long term, the lower interest rate would be more fiscally wise.This is why it is so important to shop for the mortgage, and know what your financial needs are going into the process.

7) Can I trust rate quotes?

Let the buyer beware. These words ring very true in your search for the right mortgage financing. As with any potentially life altering decision- mortgages are still the largest debt most people will finance- you should take the time to check with several vendors, and carefully weigh the information given.If one provider’s quote looks well below the others, you should beware and question the integrity of the quote.Try asking more questions-

If their rate is much lower, are they offering a different program (i.e. an Adjustable Rate Mortgage instead of a fixed)?

Are they charging more fees to cover the cost of the lower rate?

Have they asked all of the necessary questions?

You should not be offered a quote until the lender/broker has the answers to questions that will help them know if you will qualify (credit, income/employment, etc) for the program they are quoting.

Are they willing to lock now?If not, why?If it is a real quote, they should be able to lock your loan.

Get all of your quotes in writing (they should provide a form called a Good Faith Estimate. You should also request a Truth In Lending. It will break down the affective interest rate, called APR, or annual percentage rate, and the terms and payment schedule of the program they are quoting.).If a lender/broker seems sketchy in answering your questions, move on.There are plenty of ethical providers out there who can help you obtain the financing that you need and deserve.

8) How do I find an ethical mortgage or loan provider?

There are several things that you can do to try to secure an ethical loan provider.Among these are to ask for a referral, shop around for several quotes, and check with institutions such as the Better Business Bureau.

By receiving a referral from a friend, family member or coworker, you are given the benefit of working with a loan provider whose business practices and ethics have already been tested. When purchasing, your realtor can also be a reliable source to provide a referral.

If you have requested several quotes, and your broker/lender comes in low, but still in the same general realm, you are off to a good start. If the broker/lender provides a Good Faith Estimate that falls very short of the comparisons, either by fees or rate, they may be offering a product you did not ask for, or they may be trying to bait & switch- pull you in with one offer, and leave you stuck with a higher scenario at closing.

Checking with an institution such as the Better Business Bureau will provide insight into any previous complaints that have been filed against the potential loan provider, and what actions they have taken to resolve the issues.

Make sure that your broker/lender is properly licensed to the laws regulating the state in which your home is located.Each state has a different regulatory agency who monitors broker/lender licensing.The links below will assist you in this search.

9) How to spot an unethical lender?


	Chances are that you will run into at least one broker/lender in your search that just doesn’t seem right. It is important that you heed the warning bells going off in your head, as going forward with the wrong broker/lender can cost you thousands of your hard earned dollars, and possibly leave you in a situation unable to pay your mortgage in the future.

10)Start by scrutinizing what your lender is saying.

Does it feel like you are being “hard sold”, or as though they are not listening to your wants or needs? Only you know what your finances look like, and the mortgage program that will work best for you should be thoroughly discussed and given time to carefully consider.

Do they seem vague on important details like rate, fees or prepayment penalties? These details are the basis of making an educated decision on which program will be right for you. If you are not given these details verbally, and by a Good Faith Estimate, you should move on to a different broker/lender.

Are they promising the moon without getting all the important qualifying details? While you should have a general idea of what type of financing you are looking for, an ethical broker/lender can not truly offer any type of financing without getting all of your basic information. This information consists of the strength of your credit, employment history and income, your assets, type of property and its estimated value (and purchase price if applicable), and your financial goals. Once all of this information has been received, the broker/lender can pre-qualify you for a program, but should not promise anything until credit has been pulled, the information given has been confirmed with documentation and the appraisal has come in reflecting accurate valuation.

Feelings of being pressured, or of getting the run-around should raise red flags. An ethical broker/lender will listen to your needs, present programs available, offer clear, concise answers, and wait for you to make the decision of what will be the best option for you. If you’re not given this service, you may be working with an unethical broker/lender. Make some more phone calls and move on.

11)Choosing an Ethical Lender: Spotting Predatory Lenders

Hopefully, if you have done your due diligence in choosing a broker/lender, you will already know that the answer to this is and emphatic “yes”.

An ethical broker/lender will leave you knowing that you have made the right decision for your financial needs. They will have listened carefully upfront to your wants and goals. They will have found the right program to meet these objectives, and maybe offered a couple of alternatives that will also help you attain your goals. They will have taken the time to break down all of the details of your mortgage program and financing terms and will have allowed you time to consider this information. They will have done their best to work in a timely manner, working with all parties involved in the transaction to get your mortgage financing to the closing table on schedule. They will have notified you prior to the closing table if any financing details have changed from the initial consultation, and will have kept in contact with you so that you felt comfortable in knowing that all of the above was happening for you.

When you find an ethical broker/lender, it is important to get all of their information, including their mobile phone numbers if they will provide, and keep it for future reference. Why go through the process of searching for a new provider when you decide to refinance, or make another purchase, if you have already found this originator? Getting a couple of cards will allow you to keep one with your closing paperwork, and one with your other pertinent contact information. If the originator has left the company, try their mobile number.

12)Home loan scams.

There has always been, and will probably always be corrupt individuals seeking to take advantage of people. Mortgage loans are particularly enticing because the large sums of money involved offer the ability to net large returns on dishonest schemes. Some scams work on the front end of financing, in an effort to obtain your business. Other scams target those with existing mortgages in an attempt to embezzle funds that should be directed toward monthly payments, or even ownership of the home. In any case, the scammers are using misrepresentation to trick the consumer. This is why it is important to always know who you are dealing with regarding your mortgage.

Below are the top 5 home loan scams, together with advice on how to ensure you are not falling prey to a con-artist.

Unsolicited Phone Calls or Mail Flyers claiming to be authorized representatives of HUD or other well known mortgage-related entities

These telemarketers or mail flyers pretend to be contacting you in an attempt to assist into a program that you qualify for. They may also ask questions in an attempt to obtain personal information. At best, you may end up unknowingly signing papers to refinance your mortgage onto a high interest program. In some cases, these individuals are seeking to obtain your personal information in an attempt to steal your identity.

If you do not know who is calling you, never offer your personal information such as your date of birth or social security number. Do not assume that just because they have your phone number, your name and address that they are legitimate. These are public information, and take only a little research to obtain. If you are responding to notification that you qualify for any type of program, ask, “Is this an attempt to finance my mortgage. If it is, find out the terms, and decide if what they have to offer will work for you. If the answer is yes, get their information, and confirm that they are a legitimate broker/lender BEFORE releasing any of your personal information.

Typically, these are door to door sales offers for home improvement services such as siding, roofing, and remodeling. The contractors offer their services, and have financing options available to cover their fees.Unknowing homeowners sign papers to initiate the home-improvement to find either that this financing is a high interest rate second mortgage and/or the contractor takes the money without completing the agreed upon repairs.

Some offers are legitimate, though it is up to you to do the research before you sign any paperwork.Get the company’s information, and ask for all of the details about the financing. Research the contractor by checking their licensing and with the Better Business Bureau. Call around for a few other quotes from reputable companies to see how both the contractor’s quote and the financing quote compares. Finally, make sure that you, or your bank/lender are in control of the disbursements to the contractor, and the funds are not all given upfront.

Change of Mortgage Servicing Agent

The changing of your mortgage servicing agent is nothing in itself to be concerned about. Many lenders will sell the servicing of loans to different lenders for many different reasons. Most borrowers will experience the transfer of servicing agents at least a couple of times over the life of the mortgage. There are, however, scams designed to steal money from borrowers by tricking them into forwarding their monthly payments to an incorrect company and address.

Laws require that both the current servicing agent and the new servicing agent notify a borrower of the transfer. You should receive a letter from both your existing lender/servicing agent, and from the new lender/servicing agent, stating the name and address of the new servicing agent as well as the new loan number and the date that the transfer becomes affective. This should be at least one month advance notice. If you receive a transfer of servicing notice from a new servicing agent, but not from your current agent, you should call into customer service to confirm the validity of the transfer.

Rescue Agencies

Borrowers falling on hard times are often more susceptible to falling prey to quick fix scams. Scam artists offer a solution to someone losing their home to the foreclosure process. They promise to save the borrower’s home with possibilities such as negotiating payment plans or offer a short-term purchase of the home, with a lease-back option to the borrower until enough time has elapsed for the borrower’s credit to qualify to buy it back. In some of these scams, the borrowers make payments as agreed, only to find that the scam artist has run off with their money, and they will still lose their home to the lender’s foreclosure. In most lease-back cases, the terms of the new payments are set too high for the borrowers to pay, and they lose the home to the new owner of the house. There have also been reports of the short-time buyer filing a new lien against the home, and leaving with the proceeds. Even in a legitimate assistance program, you will still end up paying hefty fees for assistance that you could receive for free.

Living with the possibility of losing your home can leave you feeling helpless, desperate for a way out of losing everything. There are options and resources available for you. HUD (U.S. Department of Housing and Urban Development, www.hud.gov/foreclosure/index.cfm, or Toll Free (800) 569-4287) is an excellent resource for learning your rights, and will provide a list of approved counselors to help you navigate through the legal and financial aspects of the foreclosure process. This information is available to you for FREE. You should also call a realtor to see what the current market value of your home is. If you have available equity, you may wish to consider selling, and using the proceeds toward catching up other debt and rent on a more affordable home. Though it is a sad prospect to have to move, if the house is foreclosed, you will lose the home and all of its equity. To find a reliable realtor, ask family and friends for referrals, and make calls to several agents, just as you would for shopping for a broker/realtor. You are under no obligation with any realtor until you sign paperwork to work with them. Never sign any paperwork from anyone offering to assist you save your home until you have read and understand it thoroughly and seek the advice of an attorney or HUD approved councilor.

We Finance Anyone!

This type of advertising is aimed at credit challenged individuals. Predatory lenders offer high interest loans to borrowers who would otherwise be counseled to wait to finance. These mortgages come with high fees and generally with high payments they can’t afford.

While it may be tempting to accept a “yes” with open arms when all others have said “no”, you must stop to consider the integrity of the offer. An ethical broker/lender will consider the borrower’s best interest and council them on how to postpone and prepare for home buying. An unethical broker/lender is more interested in making the commission, finding ways to push the envelope to approve a less than qualified borrower for a mortgage. The best solution to avoid this type of predatory lender is to heed the advice of others and put your finances into order before moving forward with applying for the mortgage.

13)What are truths in lending laws?

The Truth In Lending Act, also known as Regulation Z, was passed in an attempt to enforce lenders to properly disclose certain information to borrowers regarding their mortgage. It is intended to assist borrowers in making informed comparisons while shopping for their mortgage financing.

Among the information disclosed on the Truth In Lending are the APR, Finance Charge, Total of Payments and Payment Schedule.

The APR, or Annual Percentage Rate reflects borrowing costs on an annual basis in the form of an interest rate. It is not your actual rate from which your payments are calculated, rather a basis for comparison. Think of it this way, if one lender offers you a rate of 7.00 charging you 1% origination, and another lender charges you 7.25% but is not charging you any origination, how would you know which scenario actually is the better deal long term?You can compare the Annual Percentage Rates on the two Truth In Lending forms to see which is lower. The Finance Charge is the total dollar amount the credit will cost the borrower.Again, this is not your loan amount, but a basis for comparing different scenarios.

The Total of Payments is the dollar amount that will be paid to the lender over the life of the loan, assuming that the loan is held for the entire duration, and that every payment is made in a timely manner every month.Your payment schedule is an amortization schedule reflecting a breakdown of how much and when the payments (principle and interest only) are to be made. This section is very important information should you be looking at an Adjustable Rate Mortgage, as it will inform you of how long you have until the initial adjustment and how long between each subsequent adjustment.It is also important information for anyone looking at financing a loan with a Balloon Note, so that you will know when the loan needs to be paid in full or refinanced.

The second half of the Truth In Lending lists various details of the mortgage including what type of insurance you will be required to carry, when and how much of a late charge you will incur, whether or not you will incur a prepayment penalty if the loan is paid off early, and if your loan is assumable.

Finally, the Truth In Lending Act, like The Real Estate Settlement Procedures Act (RESPA) dictates the timing in which this information must be disclosed to the borrower. A Truth In Lending, along with the Good Faith Estimate, should be provided to you within three days of application, however, you should request it at the time of the telephone interview for your shopping comparisons.

14)What lies might I hear?

Even though mortgage brokers and lenders are regulated by many federal and state laws, there are still some unscrupulous originators that operate outside these guidelines. Below are five common lies that an unethical lender/broker is likely to tell to keep you in the dark about your financing rights.

You will only qualify for an Adjustable Rate Mortgage- Being told that you must accept an ARM when you are requesting a fixed rate mortgage is either a fallacy, or the broker/lender has not searched hard enough to find the right program for you. It is typically the result of an originator trying to steer a borrower into a specific program, or into a higher balance mortgage by offering an ARM’s lower monthly payment.

Cost Free Financing- It sounds too good to be true because it is. There are many real costs associated with mortgage financing. The providers of the services still must get paid, even if you are not paying them as a direct fee. Usually these fees are collected either through a higher loan amount or through a higher interest rate. If the fees are financed into the loan, you are coming in with no actual cash out of pocket. If the broker/lender charges a higher interest rate, the fees can be dispersed from proceeds received directly from the lender/investor. Either way, you are ultimately absorbing the cost of the fees.

Settlement Costs are Non-Negotiable- While most broker/lender companies do have a general guideline of what needs to be collected from any mortgage, these fees are not set in stone. There are fees from third party providers, such as appraisers, title companies, flood certificate providers that will be in a standard range, but there is some variance even in the ranges. You, as the borrower, do have the right to select who is used to provide these services. Keep in mind that most brokers/lenders have chosen the third party providers they use most frequently for their dependability, and using an unknown provider can potentially delay your financing process if they do not come through as expected. Other fees, such as origination, discount fees, administration fees and even rate are usually open for negotiating. In any negotiating, remember that nothing is free, and that the fees that you are paying to the broker/lender are for their time and efforts in placing your mortgage into the best program available for you. Negotiating fees too low may result in the broker/lender increasing the rate, or it may even get to the point where they can no longer offer the loan.

We are unable to lock you at the rate initially quoted- This one is a little trickier to know when it is the truth or not. Mortgage rates are locked at the current market rate at the time of the lock, not at the time it is quoted, so it is possible for the market to have moved in the time between the quote and the lock. Another issue is that there are hundreds of mortgage programs available, and many different market indicators can affect some programs, and not others. You can be a better savvy mortgage shopper by knowing what the market is doing daily while you are in the financing process. There are many sites on the internet that track daily changes in the mortgage market rates. If your broker/lender does not have a site that serves this function, try an internet search of “Average Mortgage Interest Rates”, and you will see many possible sources to follow the market. While you may not find a rate for your specific program, what you are looking for is a trend in the market. If your broker/lender tells you that your rate has increased, and it is not the result of not qualifying for the program initially quoted, you will know if it is an indication of the changes in the market, or if your broker/lender is lying in an attempt to force you into a higher rate. Additionally, if you receive an incredibly low quote from a potential broker/lender who is unwilling to lock in your rate for that quote, chances are they are trying to “hook you” by bringing in your business and forcing you into a higher rate later.

Don’t worry about the little details of your loan- You need to understand every facet of your mortgage, and what changes to expect. If you are receiving an Adjustable Rate Mortgage, learn how and when it will adjust. You need to know if you will incur a prepayment penalty if the balance is paid off early. You need to know if you have an interest only option when the loan will recast and if you have any potential for negative amortization. Ask as many questions as you need to until you fully understand the program. An unethical broker/lender may try to avoid these topics, but it is very important that you have a full understanding of these details. If you can not comprehend the parameters of your mortgage program, you should seriously consider a different program with features that you can understand and make work for you.

By arming yourself with knowledge of your financing rights, and where to find the answers for any unknowns, you will make your mortgage financing experience rewarding and less stressful. Know when you are being misled, and take that opportunity to try to resolve the issue or shop for a new broker/lender.

Getting the best deal

1) How do I compare loans?

When you are shopping for your mortgage financing, it is hard to get a true apples to apples comparison because there are many different ways to structure a mortgage and its fees.

Once you have a good feel for your finances, including what you can afford and what you need, then you can make the most of your mortgage shopping.By informing each potential broker/lender what you are looking for in financing terms, you will have helped them narrow the vast possibilities into a handful of programs that should best suit your needs. Now you can get down to the nitty gritty details you will need to compare and ultimately choose the right broker/lender and scenario for you.

It is crucial that you receive from each potential broker/lender for each potential program both a Good Faith Estimate and a Truth In Lending. You will use the Good Faith Estimate to compare the specific costs that you will be paying, how much will be collected in your escrow account and your total funds needed (or back to you) at closing. To compare the Truth In Lending forms, start with the Amount Financed total. This should be your loan amount minus all of the fees that are starred or marked “PFC” on the Good Faith Estimate. These fees include, but are not limited to Origination, Discount, Processing, Underwriting, Administration and Courier Fees, as well as the days of interest collected at closing. If you are not paying these fees, either because they are not being charged, or because someone else is paying them for you, they will not be marked. The fewer “PFC” items that you have to pay, the closer your Annual Percentage Rate will be to your actual note rate.

Next, check the Annual Percentage Rate. This rate is a calculation of your cost of credit as a yearly rate. It is not your rate, it is your cost of financing. The purpose of the Annual Percentage Rate is to assist in accurately comparing two similar loans with different fee structures.

Finally check to see if you “may” or “will not” incur a penalty if the loan is paid off early. This is a prepayment penalty, and is required to be disclosed on the Truth In Lending.

2) How do I know if the closing costs and lenders fees are fair?

There are some fees that will be fairly standard no matter who your loan provider is. These third party fees, or fees that are provided by outside vendors, are appraisal fees, credit report fees, flood certificate fees and title company charges. These can vary slightly, but on the whole will be in the same general range.

Fees that will have a greater variance among mortgage providers are their internal fees. These include origination, discount, processing, underwriting, administration and application fees. The reason that these can differ so greatly is that there are many ways to structure mortgage financing, as well as many different borrower personas. A borrower with stronger credit will most likely pay less fees than someone with derogatory credit. While this may seem like it is preying on someone who needs help the most, there is a legitimate reason for the higher fees. It takes much more work for a broker/lender to find a good program for someone who has had problems with their payment history than it does for someone who had paid timely payments.

Fees are just a part of the mortgage financing process. Even if they are not being charged, you are still paying for them, usually in the form of a higher interest rate. The only way to ensure that you are not over-paying is to be an informed consumer. You must shop several mortgage providers to determine what fees are “fair” or normal in your market.

3) How do I know if the fees are fair?

Both the rate and the APR, or Annual Percentage Rate are important in your mortgage financing. Which is more important depends on your financing needs. To determine what focus will best suit your finances, you need to understand the difference between the two.

The APR, or Annual Percentage Rate, is your affective cost of financing. It is the cost of your credit as a yearly rate. This rate will only be found on your Truth In Lending. Payments are not based on the APR, it only intended to inform borrowers while in the shopping process. The lower the APR, the lower the costs you will be paying to obtain the loan. If your APR is the same as your note rate, that means that someone else, such as the seller or the lender/broker is paying all prepaid finance charges (i.e. Origination, Discount, Processing, Underwriting, Administration and Courier Fees) for you. You can check the far right column on the Good Faith Estimate that was provided to you with the Truth In Lending to see which fees are being calculated into the APR. They will be marked as “PFC”.

Rate is ultimately what will determine your monthly payments. It is what will show on every other document where rate is referenced.

If you will be holding the mortgage for only a short period, then you may want to focus on APR, as it will reflect which loan scenario truly has the lowest cost. Paying a higher rate for a short period of time will make monthly payments higher, but the difference in payments over the short term may be less than the higher costs you would pay to obtain the mortgage. If you are holding the mortgage for long term, then the rate may be more important to you. This is because paying a lower rate, and lower monthly payments, over a long period of time will allow you to recoup the costs that you paid to obtain the mortgage.

4) Is rate or APR more important?

This is a very important decision to make in your financing process. A prepayment penalty is a large fee, typically equal to the amount of six months of interest that is added onto the balance of the mortgage if it is paid off early. There are two types of prepayment penalties, hard and soft. A soft prepayment penalty will be waived in certain circumstances, such as a sale of the property. A hard prepayment penalty will be enforced regardless of the circumstances of the balance payoff.

There is also a term to any prepayment penalty, after which it expires, and you will no longer incur the penalty. Generally speaking, prepayment penalties are set for the first one to five years of the mortgage.

The answer to “Should I accept a loan with a prepayment penalty?” is very subjective to the borrower and their current and foreseeable future financial needs. It should be carefully considered as it will affect any future financing, and even your ability to sell the property, until it has expired. Ask upfront if your loan will have a prepayment penalty, and if yes, what is the term and is it hard or soft? Ask yourself if you can accept these terms. Finally, double check your documents (generally in the Note or a Rider to the Note) at closing for the existence and the specifics of your prepayment penalty.

5) Should I accept a loan with a prepayment penalty?

A “GFE” or Good Faith Estimate is a document that brokers/lenders are required to send to mortgage applicants detailing the fees associated with the transaction. Some fees will be fairly standard in the industry, like credit report, appraisal & flood certificate fees. Other fees will vary greatly by broker/lender and scenario, like origination, discount, processing and lender fees.

Additionally, a Good Faith Estimate breaks down escrow information such as the amount of homeowner’s insurance and taxes that will be collected at closing. The amount of funds held in an escrow account can not be dictated by the broker/lender, they are only giving a general idea of what will be collected.

Finally, the Good Faith Estimate breaks down the details of the transaction including the loan amount, purchase price (or payoffs for refinances), closing costs, escrow totals and either the amount of money that the borrower will be required to bring to closing, or the amount that they will receive back at closing.

6) What is a “GFE”?

The most common mistake borrowers make is not being fully informed about their financing. Whether this is a lack of comparing enough quotes, or asking enough questions to fully understand the terms of their financing. Being an informed consumer can not only save you thousands of dollars on your mortgage upfront, it can also save you tens of thousands over the life of the mortgage and potentially keep you from losing your home to foreclosure.

Before you call the first mortgage lender/broker, you should first have a clear idea of your budget, and how much of a payment you will be comfortable with. It is impractical to budget your finances around the highest payment that you can qualify for. You should also know what kind of terms you will be comfortable with. Will you be able to pay a higher payment when your Adjustable Rate Mortgage adjusts, or will you be better off with a fixed rate mortgage? Do you have the fiscal responsibility it takes to make an interest only mortgage make sense, or should you stick to a fully amortizing mortgage? Finally, you should have an idea of what your credit looks like. There are many sources that will offer you a free credit report. Take advantage of one of these services, and thoroughly inspect your credit. Are there blemishes that may result in a higher interest rate? If yes, is there something that you can easily remedy? Arming yourself with the answers to these questions before you move forward will save you a lot of time and money.

Once you are ready to begin the mortgage shopping process, call as many mortgage providers as you need until you have found both a lender/broker and the mortgage terms that you are comfortable with. You should have called at least three to five in this process to get a good feel for average rates and fees. Remember to request both the Good Faith Estimate and the Truth In Lending for your comparisons. If you can not get it in writing, move on!

Most important of all, ask as many questions as you need to fully understand all of the terms of your financing. If there will be adjustments, know what they are and when they will occur. If you have a prepayment penalty, know how much it will be and when it will go away. If you can not understand the terms of your mortgage, it is most assuredly not the right mortgage for you, and that can cause big problems for you down the road.

7) What mistakes do shoppers make?

It may sound like doing whatever you need to do to get the lowest rate is the best financing decision, but it is not always so. If you plan on being in this particular mortgage for the long haul, you may wish to look at paying discount points upfront. However, most borrowers only retain a mortgage for a few years before they refinance or sell.

To best make this decision, you need to understand what points are. Discount points are intended to be paid to the lender in exchange for a lower interest rate. Depending on the program and the current market, exactly how much lower your rate can be bought and how much it will cost will vary.

Ask your broker/lender, “If I pay 1% Discount, how much will it lower my monthly payment? How long will it take me to recoup the cost?” Essentially, you can divide your discount point(s) by your monthly savings and that it how many months it will take to reap the benefits of paying points. Will you likely still be in this mortgage?

8) When does it make sense to pay points?

When obtaining any financing, it is important to know that you can afford the payments before you sign for the loan. Sit down and really examine your finances. How much of a mortgage payment can you comfortably afford? At what amount does it become a burden? Lenders have general guidelines they follow to qualify a borrower’s debt against their monthly income (also referred to as debt to income, or DTI ratios). However, only you know what your actual monthly expenditures look like, and only you can really determine if a payment will fit into your budget, or if it will put you into a financial bind should any unexpected expense arise. Knowing this figure when you begin work with your loan provider will take much of the guesswork out of finding what programs and rates will work best for you.

Next, ask as many questions of your broker/lender as you need to fully understand the terms of your mortgage. If you are applying for an adjustable rate mortgage, or ARM, you need to know how long the initial fixed period is, as well as the terms of the adjustments. This includes how frequently your rate will adjust, and how high it can adjust each time. If you have an interest only loan, you need to know if it can go into negative amortization, where the balance gets higher than the initial loan balance. You also need to know when the loan will recast, where the lender increases your payments by re-amortizing the balance to ensure that your loan is paid off within the initial term of the loan. It is important to know what potential changes your mortgage can make so that you can prepare your budget to accommodate them.

Finally, should you get into a situation where you are running behind on your payments, call your servicing agent as soon as possible to see what your options Depending on your situation, you may be able to make arrangements or even push a payment back to the end of the loan term. There are many short term restructuring options lenders allow to remedy loan default, so work with your servicing agent’s councilor until you can reach an arrangement that you know you can afford and stick to. It is important to not default on the agreed upon arrangement once it has been set into place, as the lender may not be as willing to work with you again. Also, keep in mind that it may take some time getting to the right person to help you with your problems. Not everyone who works at your servicing agent is as capable or willing to work with you as others. If you reach someone who will not or can not help you, do not get discouraged. Keep trying until you reach someone who will help you, and then get their name, department and direct phone number if possible. You must be relentless, this is your home, and it is worth the effort!

9) Helping your lender help you avoid foreclosure?

PMI, or Private Mortgage Insurance, is an insurance placed on a mortgage to cover the lender in case of borrower default. It only covers the lender, and not you, the homeowner. This expense can be removed, or cancelled, resulting in a lower monthly mortgage payment. The Homeowners Protection Act of 1998 was put into effect in 1999 requiring lenders to release PMI on any loan as soon as the mortgage balance reaches 78% of the original home value (value at the time of financing). It also includes certain provisions under which the borrower can request the lender to remove the PMI when the balance reaches 80% of the original home value.

While this is a law servicers are required to follow, you as the borrower should carefully track monthly balances on statements, and put a call into the servicer as soon as your balance is paid down to this 80% milestone.

Servicers will vary in their requirements to remove PMI, both by their internal guidelines, and by your financial situation. If you have not paid your mortgage in a timely manner in the 12 months preceding the 80% balance, or if you have any subordinate financing, you may have to wait for the loan to reach the 78% mark.

In some instances, servicers will remove the PMI if the loan balance is 80% of the current market value, not just off of the original financing value. If you have noticed a significant upward value trend in your neighborhood, call your servicer to see if they will remove the PMI, and what they will require to do so. Occasionally it will be as simple as making the phone call and the lender does a computer review of your market. Some lenders will require you to provide an appraisal evidencing the value, while in other circumstances; the lender may require you to wait until the mandated 78% of the original home value.

10)How do I cancel PMI (Private Mortgage Insurance)?

Generally speaking, the tax write-off benefit provided by a mortgage out-weighs the benefits of paying off the balance. It is a more financially sound practice to hold the mortgage and invest any additional funds into savings/mutual funds/stocks that yield a higher rate of return than your mortgage interest rate. If you feel that you must pay off debt, focus first on high interest rate accounts such as credit cards.

An exception to this would be looking forward to a decrease in monthly income or cash flow, such as retirement, where you will not be able to make the high payments. Speaking to a financial advisor will help you best plan for this, or any upcoming changes in your financial situation.

11)When is early payoff a good investment?

Locaking Rates

1) How Can I Avoid Lapsed Prices?

The best way to ensure you receive the rate you desire is to request your broker/lender to lock-in the rate as soon as you have come to an agreed upon program and rate that will fit your financial goals and budget.Do not wait to see what happens in the market, as this may result in a higher interest rate than you are looking for. Be proactive, and request the loan to be locked as soon as your broker/lender has offered a rate that you are comfortable with.

If you are a few months out from closing, such as purchasing a home that is being constructed, you can request your broker/lender for a long term lock, such as 60-90 days. These will generally be at a higher interest rate than a 30 day lock, but will give you protection against changes in the financial market during the period while you are waiting for closing.

2) What is a Rate Lock, and What Does It Cover?

When your broker/lender locks in your interest rate, it confirms the terms on your loan. The investor will set aside funds in the amount of your loan under the terms of your lock.

The terms covered in your lock are:

Program- The specific type of mortgage, such as conventional, government or sub-prime and fixed rate or adjustable rate loan.

Amortization Type & Period- Denotes the length of your loan term, and if you have an interest only option.

Interest Rate- The note rate that your payments will be calculated on.

Length of Time Locked- A lock is only good for a set period of time, generally 30 days. If the lock expires without being extended, it will have to be relocked at worse case market conditions. Your broker/lender is responsible for ensuring this timeline is met.

Prepayment Penalty Terms- Whether or not you will incur a prepayment penalty if the balance is paid off early.

It is important to note that a lock is not an approval or a commitment to lend. If for any reason you do not qualify for the program locked, your loan must be relocked under a program you do qualify for. Additionally, most locks are property specific, so if you are purchasing a home and the contract falls through, your broker/lender will most likely have to obtain a new lock when you put a contract on a new property.

3) When to Lock?

There are many factors in the market that affect mortgage interest rates. Unless you are an expert in following these external influences, you should not try to time locking your mortgage loan around them. Once you have discussed your options with your loan provider and concluded what available program terms and rate will give you a payment you can afford, that is the best time to lock.

Playing the market may sometimes pay off, but is also has the propensity to result in increased rates. Even when the word is out that the Feds (Board of Governors for the Federal Reserve) are going to lower rates, lenders have usually already adjusted their rates in anticipation of the Fed’s advice. If you are comfortable with the rate and terms available, request the loan to be locked. Do not take the chance and gamble on your future finances.

4) Do I Have Any Recourse When My “GFE” Goes Bad?

A GFE, or Good Faith Estimate is intended to be just what it says- an estimate provided in good faith. Actual fees can and generally will vary slightly from the initial Good Faith Estimate to final figures on the HUD 1 Settlement Statement. If, in the event that you do not qualify for the initial program that was quoted, your broker/lender should call you to discuss the new terms that you will qualify for. At this time, you should be provided a new Good Faith Estimate with a breakdown of the fees and rate for the new program.

If you get to the closing table, and the program, rate or fees significantly differ from what you had anticipated, you do not have to sign the documents. Try to come to an agreement right at that time, do not just sign the papers and expect that things will get worked out. Additionally, report this activity to both the department governing mortgage licensing and the Better Business Bureau. By doing so, you will be helping to eliminate this unethical business practice.

5) Choosing a subprime loan


	Choose a subprime loan just like any other loan. Have an idea of what the terms of the mortgage you will want are, like loan term, amortizing or interest only, fixed rate or variable, pre payment penalty or not, etc. Then get quotes for the rates and fees so you can compare. Select the best subprime mortgage deal and you are done. Compare mortgage companies and compare loan officers.

6) How do I choose the best subprime loan?

Choosing a loan if you have bad credit can be tricky. Even a seasoned loan officer will have a hard time deciding which subprime loan would be best for a close family member. Each case is different and there are so many factors to consider. This is an unfortunate reality for two reasons. One, subprime lenders continually change their guidelines and criteria for making these loans. Subprime lenders are usually given their orders from the secondary market which operates with actuaries that continually monitor which guidelines need to change to protect lenders from loan and foreclosure losses. Two, subprime lenders are almost always subject to quotas and that means that loans that weren’t approved last month could be approved next month if a lender needs to hit a quota.

If you get the feeling that choosing the best subprime loan is really a case by case process, then you can start to appreciate exactly how difficult it is to explain how to get the best loan. Start by finding the best local mortgage broker. Checkrates.com is an excellent resource for doing this. Find a local mortgage broker by using our search for this. Make sure he or she is experienced and the mortgage company they work for is reputable. How many years have been in business? Make sure they know exactly what you want from the new loan you are seeking. Have the terms and rates disclosed to you in writing with a good faith estimate. Ask to see a copy of the promissory note you will be signing at the closing. Get a competing opinion and quote, which will be interesting for you because I promise you will see how varied the programs are. Nothing helps you get the best mortgage deal like competition between mortgage brokers.

7) Should I consolidate my debts?

Of course if you have the option to consolidate your debts to a lower interest rate and more favorable terms then consolidating your bills is the best thing to do. However, if you are spending more than you make and consolidating your debts is really just a maneuver to open up your credit lines for more spending, then the best course of action is to wait until your spending and income problems are under control. Why push yourself further into debt for temporary relief. Control your spending! Step one with the finances is to spend less than you make and save the rest. It’s a very simple rule and Suzy Ormand sells books that take hundreds of pages to say that. Follow it and you are building wealth every day. Don’t follow it and you will be closer to bankruptcy and bad credit every day. If it can’t go on forever it eventually must stop. Bad credit will cost you thousands of dollars a year. Thank you for inquiring about debt consolidation from checkrates.com

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