Mortgage leads loans Rates

Let’s first define what private mortgage insurance actually is, and why you might be required to purchase the insurance. Private mortgage insurance is an insurance purchased to protect the lender, not the borrower. The borrower however pays for the mortgage insurance, and this is provided to the lender instead of the 20% down payment normally required when purchasing real estate. The insurance provides the difference between the fair market value of the home and the actual price a lender may be able to sell the property for, in case of a default on the loan. Normally, the lender will require a 20% down payment and forgo the private mortgage insurance option. However, under certain circumstances if the buyer has an excellent credit rating, is well known to the lender, and is deemed to be low risk, private mortgage insurance may be an option offered by the lender.

The current mortgage market is flooded with such varied products as the interest only loan and the 125 loans and private mortgage insurance seems to be a thing of the past. You rarely encounter a situation when the buyer is required to purchase the private mortgage insurance; those situations most likely to continue to require the purchase of the private mortgage insurance are those where the lender is a traditional lending institution. Mortgage companies have long since ceased requiring borrowers to purchase private mortgage insurance.

Mortgage investors, such as the Fannie Mae and Freddie Mac programs, have recently come to the aid of the borrower by introducing an option to the primary mortgage market that allows borrowers to pay as little as 5% down and purchase only enough mortgage insurance to cover 25% of the loan; this creates a potential citing situation for the borrower. The borrower may pay a slightly higher interest rate in order to lower the cost of insurance that the advantage lays here: mortgage interest is fully tax deductible, private mortgage insurance is not.

There’s another option, also regulated by the federal government and passed into law in 1999, known as the Homeowners Protection Act of 1998 established rules for regulation of private mortgage insurance requirements once a homeowner reaches a level of 20% equity. What the law requires, in layman’s terms, is that a lending institution must notify you once your equity levels reach 20% of the appraised value of the home. Once you the kind of 20% equity level, you must be given the option to drop private mortgage insurance. If this proposal had passed into law some 20 years ago, it would have been met with great resistance among the lending community; today, the interest only loan and loans that offer mortgages in excess of the appraised value of the home overshadow the effect of the 1998 homeowner’s act.

The regulations passed into law by the 1998 Homeowner’s Act do not affect FHA or VA loans, and many of the Fannie Mae and Freddie Mac programs have additional stipulations and requirements in addition to the 1998 law. Also, your state laws and regulations may also affect your insurance requirements. Due to the recent increases in real estate pricing, and as a result the increased level of a mortgage borrowing requests, Fannie Mae and Freddie Mac have increased their loan limits and private mortgage insurance limitations. They even the secondary market has a need for the private mortgage insurance requirements, thanks to the booming real estate economy.

Many homeowners seem to mistake the private mortgage insurance purchased in order to secure the loan, with that of the homeowner’s liability insurance. Lenders are responsible for making clear the distinction between private mortgage insurance purchased to protect the lender versus the homeowner’s liability insurance purchased to protect the homeowner. Both forms of insurance will need to be purchased, and the borrower will be responsible for payment of both insurance premiums.

The Homeowner’s Act of 1998, served as a way for the borrower to decrease their monthly mortgage payment, once the 20% equity level have been established; this seems like a small contribution when you examine the mortgage products offered today, that do not require the borrower to establish any equity.

You’re ready to buy your first home, but where do you start the search? Well it would seem today the best place to start would be in the online market; the online market offers some of the most competitive interest rates are valuable and you can apply right from the convenience and privacy of your home.

Does this mean that the online process is just 1,2,3.. and you’re ready to buy? No, this means the online community is one of the better places to start. This article will take a look at the good, the bad, and the useless. Not every web site is your key to your new home; not every web site is what it claims to be. Why don’t we start with the tools that are available for the novice buyer and then move into the online programs that are valuable, and finish up with the online mortgage companies?

Many of the advertised web sites do offer really useful tools for a novice buyer in order to prepare them and determine eligibility levels. Tools such as the mortgage calculator, the debt to income ratio calculator, and tools available that will determine the mortgage products that are obtainable based on your input of information are really helpful and do actually provide the potential homebuyer with working information. Normally, all of the major web sites will provide access to these tools through the use of hyperlinks; some even offer to calculate home value based on your location.

The most useful and perhaps the most often offered a tool for the perspective homeowner is the application form to pre-qualify and to have a representative contact you. There’s nothing like talking to another person, especially one that is a specialist in the mortgage industry, in order for you to determine what you actually will qualify for and what you might actually want to buy.

What other options and tools are available on these web sites? Another useful and often overlooked tool is the link that will provide you with access to your credit file. More often than not, a young person tries to pre-qualify for a mortgage product and there is no existing credit history, there is no established credit score, therefore there is no hope of obtaining a mortgage. At least not without a cosigner. But if you’re a beginner, and you take the time to visit web sites you can gain access to information before it’s necessary to have established plan. This in itself puts you one step ahead.

What would fall under the classification of “bad”? Here’s the only item that I can truly file as a bad side effect of and online mortgage quest: your name and information is shared with all other online lenders and at some point in time your phone will ring and a telemarketer will asked to speak with you, in order to sell you a mortgage. Now, a mortgage is not really something that you impulse buy, therefore I believe this to be a waste of time for you, the telemarketer, and the online mortgage company.

What falls under the “useless” category: the web sites that offer to find bidders to bid and compete, for your mortgage business. First of all they don’t gather enough information to actually compete for anything; not what mortgage company is willing to submit a bid for your business until they check your credit file, are familiar with your credit score, and know something about the property you’re proposing to buy.

Now why would you even advertise like this? Well the answers really simple these web sites that offer to recruit mortgage companies that will be it for your business are telemarketers in disguise. That quite obviously earn a commission for every lead they provide for a mortgage company, and you are simply providing information to be one of their leads. It’s really a simple way to search for and locate live leads, and it really does save a lot of live telephone time. So there you are a general overview of the online mortgage market, the good, the bad, and the useless.

Some of the mortgage companies today, sell their mortgage packages with every kind of mythical benefit known to man, from the belief that interest only is a real mortgage that will eventually payout (slight of words, there) to the belief that an interest only mortgage carries a lower interest rate(which is does, but only for the short term). Let’s start with some of the more traditional loans, and move into the weird and unusual.

There has been a tremendous jump in the available interest only mortgage packages in the last three to five years so maybe we should take a minute to break down some of these mortgages into a language everyone can understand.

There’s a 3/1 ARM. A 3 year ARM, means that the interest rate is locked in for 3 years. For the first month, the interest payment is only 1%, for the next 3 years following only the interest is due as the monthly payment. After the 3 year term, and for the remainder of the life of the loan, normally thirty years, the interest rate will change, and the payments will begin to include principal and interest.

There’s a 5/1 ARM. A 5 year ARM, means that the interest rate is locked in for 5 years. For the first month, the interest payment is only 1%, for the next 5 years following only the interest is due for the monthly payment. After the 5 year term, and for the remainder of the life of the mortgage, normally thirty years, the interest rate may change, and the payments will begin to include principal and interest.

These mortgages also come in 7/1 and 10/1 ARMs, but analysts really don’t recommend extending the interest only option out that far, since too many things can change before the 7 or 10 years is up.

The 10/30 interest only mortgage works in the following way: you borrow money in the form of a 30 year mortgage, with a fixed interest rate. The first 10 years are interest only payments, with the full amount of the principal being amortized (interest payments included) over the last 20 years of the loan.

The 15/30 interest only mortgage works in the following way: you borrow money in the form of a 30 year mortgage, with a fixed interest rate. The first 15 years are interest only payments, with the full amount of the principal being amortized (interest payments included) over the last 15 years of the loan.

These mortgages are really appealing to the consumer with any sort of investment knowledge. If I were going to borrower with the interest only mortgage option, it would be one of these two, the 10 or 15 of 30.
Now what other myths can we find? There’s the belief that the home mortgage income tax deduction is a substantial benefit to the taxpayer, and that 1% interest only loans are for the life of the loan! Ha! There’s also the balloon note myth that proliferates the belief you can automatically refinance through your current lender when the note matures, or that adjustable rate mortgages are a better deal than fixed rate!

Another mythical idea is that the real estate market can’t go bust. An exploding growth rate in the mortgage loan industry, and the continued surge in real estate prices, has put the interest only mortgages in a huge category all their own. Up from the first part of the century, the interest only mortgage loans are now garnering nearly one-fourth of the mortgage loan market. That kind of growth is almost frightening, to even the most experienced lender. Can you imagine the possibilities, say four to five years from now, when many of these loans come due to pay the interest and the principal; what happens if our economy isn’t still a thriving bustling place?

The benefit of the interest only loan is that the consumer is eligible to buy much more house, than with a standard mortgage. That’s great if you’re certain in a given period of time, you’ll be able to afford a higher mortgage payment. But is anything guaranteed and given in this day and time? What if you can’t afford the payment when the interest only term expires?

We have only to look at the disastrous consequences of the crash of the stock market during the 1920s to appreciate where this may be leading us today. Many people had financed their homes with an interest only mortgage, and when the stock market crashed and there was no work, they lost everything, including their homes.

So, we not only promote mythical nursery rhymes, we promote mythical mortgages, too!