Reverse Mortgages

For those that have already been paying on their mortgage for a while or even own their home through some other method that wish to take a slow pay back for their investment. Instead of selling the home immediately and having to move to a new home, a reverse mortgage makes is possible for the lending institution to make payments back to the owner over time in order to eventually own the property again. This allows the resident to receive money regularly while still having the benefit of living in the home. Basically, this is just one way to utilize the equity you have built in to your home without having to move. A reverse mortgage arrangement is defiantly not the best decision for everyone, but in certain situations it can provide a nice level of continual security and comfort.

Why would someone want to use their home equity in this way? There are many things a reverse mortgages can be used for, but before you consider these, it is important to realize that a reverse mortgage can be changed. It is not an agreement set in stone, and you can usually renegotiate the mortgage again. With that in find, it might be helpful for some people to reverse their mortgage to make payments on intensive repairs that need to be done to the property. It is also common for people to utilize a reverse mortgage for the purpose of additional income during a career transition or other difficult time, and for some, reversing their mortgage helps provide a retirement. Basically, your mortgage will simply starting moving in the opposite direction until you decide to change it again and move forward.

There are however, more fees involved in reverse home mortgages, and many lenders (now becoming buyers) have restrictions on the amount of equity you can take from the home. The money coming back from a reverse mortgage will not last forever. The amount you can receive from such an arrangement depends on the amount of equity you currently have in the property and how long you plan on receiving these payments. Of course it makes sense that the lower monthly payments you require, the longer you will be able to receive them. This is the time to assess your financial situation and determine what it is you need and for how long you will need it. As a retirement strategy, know that you will be passing on the remainder of your mortgage onto your beneficiaries who must be able to qualify for your mortgage in order to keep the home. However, they will always have the option to sell the home for what appreciation and equity that might remain, or at least break even with the lender. Consider the advantage that they do not have to support you while you are still living.

The decision to enter a reverse mortgage should be carefully chosen and should fit the needs of your current financial needs, whatever those may be. You might also consider the appreciation of homes in your area and what benefits there are to simply continuing on your mortgage a bit longer. Reverse mortgages are not the answer for everyone, but they are a nice option to have.

About the Author: Peter Dellane is the President of Ability Mortgage Group, LLC, A leading Maryland Mortgage broker company offering low costs zero point mortgages. For more information on about Ability Mortgage group and programs please visit www.marylandsmortgage.com.

Condo Mortgages

For some potential buyers, purchasing a condominium rather than a home just makes more sense. For those that don’t want responsibilities like leaky roves, plumbing problems, or keeping up a lawn, sharing the burden may sound much more appealing. This is exactly the case with condominiums. These multi-unit living alternatives first came in the form of apartment complexes that converted into permanent living, and they are now built with permanent living in mind. The space and comfort provided in many modern condos is very competitive to that of an actual house, and the advantage of permanent living versus renting a space is similar to renting a home versus purchasing a home. Instead of paying money every month into someone else’s investment, you are now contributing to your own mortgage, thus building equity and providing for a more secure future. Most people purchasing a condo will do it with the help of a mortgage, similar to most that buy a house, and though there are many similarities, there are some slightly different variables to consider when purchasing a condo unit.

Houses are considered to be larger investments in scale. This is due to the fact that home sale prices are usual higher than condos and thus the appreciation is somewhat greater. Of course, this is a gross generalization, as there are some condos that are worth far more than certain houses. But when comparing similar spaces, locations, and types of construction, home prices are generally more expensive. Apart from the actual sale price however, condos also require residents’ fees, which cover the maintenance expenses associated with keeping the complex in operation. These fees are collecting into an account known as a reserve fund to then be used for maintenance costs. It is very important to obtain information about this reserve fund before beginning the mortgage process. You should be able to request information about the balance of the reserve fund directly from the Condominium Board of Directors as well as the costs of scheduled repairs or maintenance. Some condo associations or boards have gotten themselves into a financial mess that you do not want to walk into. You will also need to factor in the cost of condo fees with your mortgage payment to determine what you can afford to pay on a monthly basis.

If the fees are reasonable and the reserve fund is healthy, you may be ready to make a purchase, assuming you like the unit and its location. At this point, you will go through the exact same steps as acquiring a home mortgage. Everything, down to the interest rates and the actual paperwork should be the same. If you are still shopping around, feel free to get some mortgage quotes from several brokers before you decide on the right one.

About the Author: Peter Dellane is the President of Ability Mortgage Group, LLC, A leading Maryland Mortgage broker company offering low costs zero point mortgages. For more information on about Ability Mortgage group and programs please visit www.marylandsmortgage.com.

Commercial Mortgages

Using property to secure a loan is a very common practice for businesses, investments, and emergency purposes. The actual property used for a secured loan determines what kind of loan it will be. Most homeowners are familiar with residential loans in which the collateral for the loan is the equity they own in their home. In this way commercial are very similar. One major difference between a residential loan and a commercial loan is the collateral. In a commercial loan, the collateral is of a business nature, either in commercial real estate or business value. However, this is not the only differentiating factor in a commercial loan.

Commercial mortgages are not generally for the use of individual citizens, though in some cases they do include only one borrower. Generally, a commercial mortgage is a loan applied for by a business. Because it is a business applying for the loan rather than an individual, the credit worthiness of that business must be determined for the lender to determine the level of risk. Unlike finding an individual’s credit score, determining business credit is somewhat difficult. Many factors play into the equation, such as the revenues, expenses, debts, history, taxes, etc, and help lenders to determine the level of risk involved in granting a commercial loan to a particular business. Just like residential loans, the higher the risk, the more expensive the loan will be.

Most commercial mortgages also have different terms than residential mortgages. In a common residential mortgage, it might be paid back over a 30 year term with equal payments. Commercial mortgages are usually paid off in much shorter amounts of time, and the payments are smaller with a large balloon payment at the end of the term. In a commercial mortgage, the business might be responsible for paying of 25% or more of the loan in a lump sum at the end of the loan, but in the mean time, the loan payments are much lower than a fixed mortgage.

Because commercial mortgages are generally more risky for lenders, many commercial loans have higher interest rates than other secured loans. It is not uncommon for the rate to be one or two points higher than the current residential rate, but similar to any mortgage, the interest is tax deductible. Though commercial loans may seem like a larger risk, sometimes it is exactly what a business needs to really get off the ground or grow in size. The goal of any business venture is to make that money back and more, so factoring in the costs of commercial loans into your projected sales and revenues will help determine if a commercial loan is worth the risk. A successful business should be making its value back very quickly. If this is not the case, a commercial loan may not be the best idea for your business.


About the Author: Peter Dellane is the President of Ability Mortgage Group, LLC, A leading Maryland Mortgage broker company offering low costs zero point mortgages. For more information on Mortgage Maryland rates and programs please visit www.marylandsmortgage.com.

Mortgages and the Debt to Income Ratio

The most heavily weighed factor in mortgage qualification is your debt to income ratio, or your DTI. This will determine the size of loan you can actually afford. Your DTI is basically the percentage of income that is already claimed by monthly expenses, including rent, bills, car payments, and other loan payments. By taking the amount of monthly expenses and dividing that by your total income, anyone can calculate a debt to income ratio. In order to qualify for particular mortgages, this number must lower than the maximum level, which for most lenders is around 45%.

Here is an example of a DTI. For someone who has an annual income of $120K, their monthly income is $10K. If that person’s monthly liabilities totaled to $4K, then their DTI is 40%. The DTI ratio is then broken into greater detail by separating it into two figures. One figure represents al expenses or liabilities against income, while the other only accounts for a housing payment versus income. Continuing with the previous example, the top figure (including all liabilities) would be 60% if their housing payment was $2K per month, their bottom figure (accounting only for the housing payment) would be at 20%. If a lender requires the top number to fall under 45% and the bottom number to fall under 30%, the person in the example would not qualify.

Some borrowers strategize to pay of debts with their new mortgage. This is definitely an effective way to consolidate debt, but it will not change your DTI. The monthly payments on credit card debt or other revolving accounts will still be considered as part of your debt to income ratio when it comes to qualifying for a mortgage. This is actually designed to protect borrowers and lenders by discouraging the refinancing of credit card debt into a new mortgage only to run the bills back up on those accounts afterwards. By considering these accounts as part of a person’s DTI, the lender is able to see a more accurate representation of that person’s ability to handle debt. This is the case unless the borrower has sufficient verified assets to cover the additional debt that will be refinanced into their new loan.

Most lenders choose to avoid loans that require full documentation if they doubt the potential homeowner’s qualification based on their documented annual income. So lenders offer what are known as reduced documentation loans such as Stated Income/Verified Assets loans, or SIVA as well as No Ratio loans, which require no income or verified assets. Though some people are leery of the legitimacy of a reduced documentation loan, they are actually very helpful tools in certain situations. For those borrowers who have recently increased their annual income and cannot show documented income for that amount over the last two years because it was only recently they obtained it. These loans are also helpful to self-employed borrowers that might have complicated tax schedules.

The debt to income ratio is not only a determining factor in loan application but it is also a great way for people to determine what kind of mortgage they can afford prior to going through the application process. It saves time to understand your DTI situation before beginning the search for a new home.

About the Author: Peter Dellane is the President of Ability Mortgage Group, LLC, A leading Maryland Mortgage broker company offering low costs zero point mortgages. For more information on Mortgage Maryland rates and programs please visit www.marylandsmortgage.com.

Qualifying for a Sub-Prime Mortgage

If your credit score is not so good, it is easy to feel like there is no way you can get a mortgage, when in fact you may qualify for a sub-prime mortgage loan. Before you get too excited, spend some time to learn more about sub-prime loans and how to go about qualifying for one.

In the history of money lending, the industry has been very stiff and static. Previously there was very little negotiation for those without a history of employment, adequate income, and good credit. Over the years, lending has become a more competitive industry, thus developing other options for those who do not fit the perfect barrowing profile. Sub-prime mortgages were created specifically for those who have problems with their credit score. The Fair Isaac Corporation, or fico, calculates your credit score based on your credit history that is noted in a report. Any score over 713 is considered good credit, while anything below 600 is not good. Americans’ average credit score is somewhere around 725.

Sub-prime mortgages are designed for people who have a credit score lower than 620. Because these individuals are considered a higher risk, due to their credit history, the loan will cost a bit more than a traditional mortgage. Since the lender is taking a risk that the individual will make the payments, they should have some compensation right? One of these additional costs will come in the form of a higher interest rate. How much higher is determined by an individual’s specific credit and debt to income ratio situation. This rate can range anywhere from just one point or even four points higher than the prime rate. This is one way the lender will make more profit in exchange for taking a higher risk by granting the loan. The great thing about any mortgage though, which remains true for sub-prime mortgages, is that all interest payments are considered tax write-offs at the end of the year.

Another common cost for a sub-prime mortgage is the amount paid at the beginning of the loan. A lender will quite possible charge your more percentage points of your loan up front to take the absolve some of the risk in association. Any sub-prime lender wants to get as much money on the front end as possible, but they will also be willing to work with individuals to find the perfect fit. These percentage points are also tax deductible.

Almost every sub-prime loan is different from the next because it is designed to work with many different situations. So it is worth considering if you are having some credit score issues but want to begin the best investment of your life in real estate. By talking to a mortgage broker you can take a look at various loan programs they can offer and find the best fit.

About the Author: Peter Dellane is the President of Ability Mortgage Group, LLC, A leading Maryland Mortgage broker company offering low costs zero point mortgages. For more information on Mortgage Maryland rates and programs please visit www.marylandsmortgage.com.