The Beauty of Home Equity Loans

Tough financial times seem to come to everyone, and what separates success from failure, are the choices you make during those difficult times. That is why home equity loans are a strong possibility for those struggling to make ends meet. Maybe you just lost your job, or perhaps you or someone in your family had an uninsured medical emergency, whatever the case, if you already have equity in your home, a home equity loan can really bridge the gap without destroying you financially.

Of course the best option is have a reserve fund for such “rainy days” that should only be used for a sudden crisis. Unfortunately, most people do not start putting money away until it is too late. However, if you have been paying on a mortgage, it is almost as if you have been putting money away all the while. Home equity loans are one of the best loans for emergency use. Credit cards have incredible compounding interest rates while home equity loans use the equity in your home as collateral in order to provide you with great fixed interest rates.

Another option is a home equity line of credit. This is different from a loan in that it is simply a line of credit, but it is a line of credit with your home equity as collateral. This means that you will only be charged the interest for the balance until you choose to pay it off, which might even be when you decide to sell your home or refinance your mortgage. Some mortgage brokers and financial institutions will allow you to open a home equity line of credit and keep a zero balance until the time you need it. In the case of an emergency, all you need to do is write a check from your line of credit, giving you a great amount of flexibility and safety.

Both home equity loans and lines of credit are very easy to use and have little or no maintenance. Because of the competitive nature of the loan market, many institutions will charge you little or now usage fees and charge zero closing costs. But the best part is yet to be mentioned. The interest on home equity loans is also tax deductible, just like your mortgage, so getting a home equity loan is really a very cheap option for getting the cash you need without breaking the bank later.

Sometimes life throws you a curve ball and you have to figure out how to pick up the pieces. Home equity loans have helped millions of people by allowing them to tap into the most valuable asset to their name. Take the time to consider a home equity loan or line of credit whether you are already having those “rainy days” or if you just want to protect yourself for those to come.

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.

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.

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.

Finding the Right Mortgage Terms

Many people in the market for a new home are now using mortgage loan calculators, which are free of charge and easily found online. It is a great convenience to quickly find a rough idea of possible monthly payments, and for this reason, calculators are a worthy service. Mortgage calculators are even found on many online property listings providing simple comparison. To fully utilize these inexpensive tools however, it is important to understand the different types of mortgage terms and which ones are right for your situation.
Fixed-rate mortgage terms are the most commonly chosen mortgages of homebuyers, especially if they are planning on staying in the home for a long time. "Fixed-rate" describes the fact that the interest rate on the loan will remain exactly the same for the duration of the loan. So whether it is a twenty or fifty-year loan, the interest rate will never change.
ARMs, or Adjustable rate mortgages, have a much wider range of term agreements. The basic idea of an ARM loan involves an introductory period where the rate is fixed, and once that period of time is over the interest then adjusts according to current market levels. At this point, the interest on an ARM loan may change as often as every year. A two-step mortgage also has an introductory rate, but the interest will only adjust one time. Both of these terms can be expressed with a number system where the first number represents the time period of the introductory interest rate while the second number refers to how long that rate must stay the same without adjusting to the market. For example a 5/25 means that the introductory interest rate will last for fiver years and it must remain at the new amount for the next 25 years. A 7/ 1 means that the loan may re--adjust to the market every single year after the seven year introduction.
One last type of loan terms is known as the Balloon Mortgage. These are more popular for those looking to build or remodel a home who are not planning on staying in the house for the duration of the loan. In a balloon mortgage, there is a very low introductory rate that lasts for approximately seven years, and then the remainder of the loan must be paid. If the loan is $100k, and the introductory payments account for $10k, then the remaining 90k must be paid in full to the lender. This is ideal for the customer that planes on keeping the house for a very short period of time or plans to sell.
Understanding the basic mortgage terms will help tremendously in the search for a great Maryland mortgage that will give you the financing you need to live in the house of our dreams. Think about your goals for owning a house and how long you plan to stay so that you can find the Mortgage terms that are best for you.



Peter Dellane is the President of Ability Mortgage Group, LLC, A leading Maryland Mortgage company offering low costs zero point mortgages. For more information please visit www.marylandsmortgage.com.