Quick Tips To Find Lower Home Loan Rates

If given a choice to choose between 2 home loan offers with different interest rates and every other condition being the same, one would choose the offer with the lower rates. The only party that would prefer the higher rates would probably be the lender.

Financial products are complex and how rates are determined vary with different lenders. Different lenders will have different internal policies and operating costs to consider when deciding on rates to charge on their products.

Paying more for your home loan does not make financial sense especially when you can get a better interest rate from a different lender for a similar home loan. Interest rates are something that shouldn't be ignored when seeking a mortgage as a small different in rates can mean thousands of dollars in savings.

Before going about on your mortgage hunt, here are some quick tips to consider that can help you find the lowest rates.

1) Have an understanding of how interest rates are determined by the lender.

Interest rates are determined by factors that cannot be determined by a single person or bank. This is especially so if the offer that has been presented to you is benchmarked to a particular nation-wide rate. If the rate of your mortgage is benchmarked to yields on treasury notes, it would be helpful to learn how treasury note yields are set and how market changes can have an effect on the yield which will affect your mortgage rate.

2) Find the cowboy lender.

In every competitive market, there will always be at least one player that is going against conventional unwritten rules to serve the market. The market for home loans is a playground for the most competitive of players with strong resources. Recognize the cowboys and approach them about your needs. They are most likely to be flexible in meeting your specific requirements.

3) Get home loan offers from at least 3 lenders.

Obtaining a few quotes assists to you make home loan comparison and also helps you get a feel of the current market. You can learn what are the terms that are more flexible than others. For example, if the interest rate lock-in period from a particular lender is double that of the other lenders, you will know that there is a good chance of negotiating on this particular term. Very often, you will find an offer that really stands out from the rest by comparing between offer.

4) Question and negotiate.

Don't be embarrassed to negotiate for lower interest rates. Rates that are advertised over mass media are not always a rate that is engraved in stone. Your lending officer may be eager to close the deal and willing to request for lower rates on your behalf on certain conditions.

Home loan lenders all offer an almost identical product that helps you buy a house. Make an effort to find an offer with the lowest interest rates as it makes little sense to pay more for something that can be bought for less.

Do You Need An Attorney to Get A Loan Modification

While there are benefits to hiring an attorney to get your mortgage loan modified, there are precautions you should take before simply turning your information and money over.

The main benefit of an attorney (and I would suggest you consult a real estate attorney) is they know the ins and outs of real estate loans. They have negotiating experience and are not emotionally involved with the transaction, therefore, can stay objective.

The downside is there are many attorneys and consultants guaranteeing loan modifications for all their clients, when in fact that is not the case.

The loan modification success is dependent on the lender and the investor holding the mortgage, therefore no one can make such a guarantee without first talking to the lender.

Over the past couple of years there have been far too many scams surrounding organizations claiming they can get a loan modified, principle reduced, save you from foreclosure when the only thing the homeowner ended up with is a non-refundable upfront payment to the loan modifier. And the worse of this is that unsuspecting homeowners believed if an attorney was handling this they would be safe.

Some people prefer to have someone with experience handle this for them, but If you have the patience (the process can take form one month to six months) to deal with your lender, then you might want to handle this yourself. Be prepared to submit two years of tax returns, two recent w-2 forms, two to six months of pay check stubs and two recent bank statements. This will be required regardless of who is handling the modification.

If you prefer to work with an attorney, be sure to find one that has loan modification experience. You can also check with the Department of Housing (HUD) counseling agency for a list of experienced attorneys that have handled loan modifications.

Apply for a Mortgage in Canada?

The Canadian mortgage application process originates in simple common sense, but do the math before you go shopping.

Consider: if you offered a substantial loan to a friend or colleague, you would need reassurance he could repay the debt; and you would expect proof you could trust your friend to honor his obligation. A mortgage lender shares those needs and expectations, putting procedures and numbers to the needs. In the mortgage application and approval process, first, you apply and get "pre-approval" from your lender. The application entails simple listing of your income and expenses, and many lenders allow you to apply on line for quick "pre-approval." Then, you secure loan approval by documenting all the information on your application. When your lender has approved and packaged your loan, you work with an attorney to satisfy the legal requirements of a home purchase.

When you first apply and pre-qualify for a mortgage, your lender will take your statements at their face value. "Pre-qualification" for a mortgage sets the parameters for your house-hunt, but it does not guarantee your lender ultimately will fund your loan. When the time comes to approve the loan and close the deal on a home purchase, your lender will demand proof of your income, expenses, and "total debt service." Be prepared to document and substantiate everything about your work, income, expenses, and credit history. Of course, you should work with an experienced professional loan advisor at eve4ry step of the process.

Basic income standards

Determine how much you can afford using the same standards and guidelines lenders will apply-income amount and income stability. As the terms imply, "income amount" is the official calculation of your taxable income, and "income stability" is the official determination of your prospects for continuing employment and career growth. Your income amount determines how much you can borrow, and your income stability affects your interest rate. A long history of steady employment and growth in your profession may help you qualify for lower interest rates or other considerations. If, on the other hand, you work in commissioned sales, depend on regular bonuses to meet your expenses, or are self-employed, prepare to submit much more extensive documentation of your earnings than salaried workers or wage-earners. If you pay child or spousal support, your payments will be deducted from your income as common sense would suggest. Conversely, if you receive child or spousal support, your support payments will be added to your income, provided you can document a history of steady payment.

Total debt service

"Total debt service," or TDS in the professional jargon, works by two simple algorithms, and the numbers make or break your mortgage application. First, working with your taxable income as your baseline, calculate 32% of it-the proportion lenders will allow for your mortgage payment, energy costs, and property taxes. If you bring home Canada's median income, $64,000(Cdn) per year or $5333(Cdn) per month, your lender will feel comfortable with basic household expenses totaling approximately $1700(Cdn) each month. Consider it no coincidence that the number corresponds almost perfectly with the average cost of a Canadian home-approximately $342,000(Cdn). Second, calculate 40% of your taxable income, deducting the total of your monthly payments for your car, your credit cards, and any other unsecured debts. Your lender may use the remainder as the best indicator of how much you really can afford in monthly housing costs. He inevitably will use the lower of the two numbers.

Your down payment

In general, you must put at least 10% of the purchase prince down on your new home. In a few areas-Vancouver, for example-you may put down only 5% if the home or condo price does not exceed $250,000(Cdn). If you are a newcomer to Canada, expect lenders to demand 35% down payment. No matter how much you put down, lenders require no less than 5% of the payment to come from your own cash resources or a gift from a family member. If your down payment includes a gift, the donor must stipulate in writing that the money is an outright gift and comes with absolutely no expectation of repayment. If you plan to put less than 20% down on your purchase, you must secure mortgage loan insurance from the Canada Mortgage and Housing Corporation. Approximately half of first-time Canadian home-buyers finance down payments on their homes with their RRSP savings. Under the terms of the Canadian government's Home Buyers' Plan, an individual may take up to $25,000(Cdn) or a couple may take up to $50,000(Cdn) from retirement savings to make the down payment on a first home. Naturally, a few conditions and restrictions apply: for example, the retirement funds must have been on deposit for at least ninety days, and you must document your agreement to purchase a qualifying home. If your borrow your down payment from your retirement account, you have fifteen years to repay your RRSP.

Closing

You also must have cash on hand to pay closing costs, which may add-up to 2.5% of your purchase price. In some areas, you may pay interest adjustment costs or a land transfer tax calculated according to the value of your property or the amount of your mortgage. If you are a first time homebuyer you may be subject to tax credits for this land transfer tax. Speak to your Real Estate Lawyer about your elegibility. Most realtors recommend you have your new home inspected by a professional building inspector before you close your deal, because professional inspection guarantees not only the house's structural integrity but also its compliance with local building and safety codes. Of course, if you commission the inspection, you must pay for it. You also must be prepared to pay attorney or notary fees; their fees and services vary dramatically, so that realtors very strongly recommend you shop around for the best value.

The Canadian mortgage application process is simple and straightforward. The devil is in the details. Searching for and submitting all the documents your lender requests can be demanding and occasionally frustrating. Naturally, the more you complete before you make an offer on a new home, the easier your qualification process will become. Similarly, the larger your down payment, the less rigorous your lender's qualifying standards will be. Many professional realtors and experienced homebuyers recommend you have your mortgage approval securely in hand before you even begin shopping for a new home.

Mortgage Brokers FAQ

1. What's the interest rate?

This one's obvious, lower is better. But to really get a good idea, you have to ask it together with the next one.

2. What's the APR on this loan?

The lowest APR might not be the best, though. Some offers you get don't include all the fees in the APR calculations. So, you have to also ask:

3. What are the fees included in the APR?

Get it in writing. Don't ask if there are fees that are not included in the APR (Annual Percentage Rate, aka, the cost of the mortgage loan). If they don't put all of them in the APR, they might lie here too. Compare APR fees line by line.

4. What are the closing costs, in dollars?

An APR based on all the fees would have them, but as mentioned above, not all APRs are complete. Besides, it's easier to compare dollars vs. dollars. Again, get it in writing and signed. On a 'Good Faith Estimate' because those are the standard.

5. Do I have to pay discount and origination points? How many?

Technically, these should be questions 5 and 6 but they're so closely related that I made them be #5 only. Sue me.

When you talk about discount points, a point equals 1% of the loan amount. You get a lower rate by paying discount points. Usually paying 1% upfront (1 discount point) lowers your interest rate by 0.125%.

On a $1,000, 30-year loan at 7.5% buying down the rate by 1 point ($1,000) lowers your monthly payments by $8.53. It takes 117 months (that's 3 months short of 10 years) to get back your $1,000. Origination fees are fees your mortgage broker charges for doing the loan.

6. This one's like the previous, a twofer. Does it cost me to lock the rate? When can I do it?

Interest rates change. If you like the one you're being offered, you should lock. A lock is for a short period of time, usually long enough to get you the loan. If rates go up, you still get the low one you locked.

7. Does this loan have a prepayment penalty?

Some loans have them. Lenders give you a lower interest rate but want to make sure you stick around long enough for them to make the money they want. Whether they're for 1% of the loan amount or 6 month's worth of interest, you need to know. And you need to know how long you must wait to refinance the loan or get rid of it (as in when you pay if all off because you won the lotto or sold the home).

8. How much must the down payment be?

The interest and terms of your loan are in relation of the down payment. The higher the down payment, the less risk you represent, the lower the interest rate, the better the terms.

9. What's required to qualify for this loan?

Different lenders have different rules. Some are stricter than others. You need to know all this upfront.

10. What are all the documents I will have to provide?

Depending on loan type and lender, the documentation required is different. Providing all the documents required speeds up things, ensures that your lock doesn't expire.

11. How long is it going to take do get the mortgage loan?

The answers vary depending on what's happening in the industry, in the country, on the lender itself. You need to have a good idea so you can know for how long to lock in your loan.

12. What can delay the approval process?

If you provide accurate and complete information from the start, there shouldn't be problems. However, occasionally, there are things outside your control that can slow down the process. Such as, credit problems. (That's why it's best you get copies of your credit reports before you apply for a loan. To make sure the information there is accurate. The underwriter can still have problems. But having accurate credit reports reduces the possibilities of that happening.)

If things in your financial situation change, let your broker/lender know (you got a promotion, lost your job, got married, or divorced, etc.). To not do so could be fraud. Or deprive you of the benefits of getting a lower rate.

The answers to these questions should help you choose the right mortgage broker, the one that's got the best mortgage for you. Or, for that matter, any mortgage broker or lender.

Which Type of Home Mortgage Loan Is Right for you

Choosing the right type of home mortgage loan is an important factor in the purchase of a home and with the correct choice of mortgage the home buying experience will be a positive one.

These are some of the more common mortgage loans available at this time to help guide you in the decision making process:

FHA Mortgage Loans
With government backing, families can buy a home at a lower initial cost. It is a good program for first time home buyers. A FHA mortgage allows some borrowers to qualify for the lower interest rates of a conventional loan. This can save thousands in interest charges.

The VA Home Loan Program for Military Veterans
The VA home loan can be used to purchase a new home or refinance an existing one and is available to all honorably discharged veterans and active duty military. The Department of Veterans Affairs (VA) does not actually lend out money but they guarantee or insure the funds that are loaned to you by a VA approved financial institution. You can go to any bank or mortgage company that participates in the VA loan program to apply.

The Fixed-Rate Mortgage
A fixed mortgage has many benefits and advantages over an adjustable rate loan. The rate you start with is the rate you end with, even if the term of the loan is for 15 or 30 years down the road. This is significant. Mortgage lenders evaluate borrowers on an individual basis, based on a variety of factors. These factors include the borrower's credit score, income level, current level of debt, and the affordability of the home loan they're trying to obtain.

The Adjustable-Rate Mortgage
This type of mortgage can be implemented successfully. It has acquired a bad reputation because it's just frequently misused. Using an ARM loan under the right circumstances can save you money in interest. Using it in the wrong manner can lead to all sorts of financial problems, including foreclosure.

Commercial Mortgage Rates

A commercial mortgage rate is when you get a loan and use a real estate as collateral to secure your repayments. It is the same as a residential mortgage, the difference is that a commercial mortgage uses a commercial building as collateral and a residential mortgage uses a residential building as its collateral. Commercial mortgages are usually taken by businesses instead of individual borrowers. The borrower can be a Sacco, incorporated business, partnership, or limited company. Thus access the worthiness of a commercial mortgage is quite complicated compared to accessing that of a residential mortgage.

There are very many types of commercial mortgages around. These include:

• Shopping centers, industrial buildings
• Construction loans
• Golf courses, resorts, hotels, car washes etc.

There are also non resource commercial mortgages; in case there is a default in payment, the lender or the one giving the loan can only gain possession of the collateral and will have no further debts on the borrower. One way of boosting your business is by getting a commercial based mortgage. This is because property is a significant cost and thus you have to manage it perfectly for it to give you the best rates in a commercially orientated mortgage.

You can pledge any property for your business but just take into consideration that it will be taken or you may lose ownership on it if you default in payments. All mortgages are usually subjected to status; this means that they will need your permission to carry a credit check on your business. And you will only be granted a mortgage if you can repay it, otherwise do not borrow if you cannot repay for it.

These mortgages are available to businesses if they wish to expand, purchase property, purchase a building connected to their building or if the business wants to invest. Compared to the other loans, commercial loans are available with preferential rates. Various criteria will be used depending on your lender whether it is looking at the business' credit history, personal credit history, or whether the business is in profit or not. It is not difficult to get a commercial mort. loans, further more the lenders can also provide guidance on the suitable type of commercial mortgage that suits you.

Mortgage Lending: No Home Loans For Homeowner Walk Aways

New legislation may be coming from Capitol Hill which will allow Fannie Mae to take legal action against mortgage owners who refused to make their house payments although they were fully capable of doing so.

The amount of foreclosures that was projected to occur in 2010 would be at least 2.6 million. What is worse is that approximately 11 million owners are severely underwater as far as their homes are worth according to mortgage lending experts.

The real problem lies in the fact that these consumers are committing what is now called a strategic default. They feel that they are totally blameless even to the point of not having to workout some type of payment plan.

Fannie Mae feels differently about these homeowner walk-aways and will may allow these ones access to government funds for up to seven years.

There will be lawsuits filed against homeowners who have in essence committed lending fraud due to refusal of payments by a majority of these disgruntled lenders.

Any court order or winning lawsuit will force the buyer to pay any unpaid amounts or balances that are left after the house is sold.

But as expected, there will be limitations as in California. A lender will only get a court order for a deficiency judgment on a home used for refinancing but not as a purchase loan.

But what about the possibility of these homeowners who knowingly defaulted on their mortgage loan not being able to attain government sponsored loans in the future?

Sit back and think about the mortgage atmosphere when and if Fannie Mae rigidly upholds this new policy and eventually says no to every homeowner who needed a FHA home loan but would not qualify due to refusing to pay their past mortgage obligations.

Even politicians are outraged at what is being called a "strategic default" or the abandonment of a home to foreclosure and not because the payments were unaffordable.

The main reason for these defaults is because the home buyer became upside down on their home loan. In other words, the mortgage loan is larger than the value of the residence.

How long will this penalized borrower be in financial limbo? Well, according to Fannie, they would not buy or guarantee another home loan for these fraudsters for seven years.

The decision on whether a homeowner will continue to pay on a house where its value is now below what the loan amount is depends on how much the house is upside down.

However, if the home value falls more than 25 percent under the current home loan amount, more and more consumers are simply walking away or committing a strategic default on their home mortgage loan. And this is happening on a national basis.

March 2010 saw about 31 percent of foreclosures as strategic walk-aways which was compared to only 22 percent in March 2009.

However, many are now questioning why it took so long for Fannie Mae to initiate such a plan to make these debtors finally owe up to their financial responsibilities.

And then there are the hardliners who feel this housing punishment should last longer than seven years. Why? Because they feel the mortgage collapse was a direct result of these irresponsible home buyers in addition to the less than stellar lending requirements.

But what many experts are saying is that there was a sharp rise in this conscious trend for individuals who no longer viewed their house as a home but instead saw it as an investment or cash cow.

Thus, it is probably time that these greedy homeowners who thought nothing of refinancing their homes to the hill should be held accountable and taught a valuable lesson that one's home is for living in and not for entertainment or investment purposes.

But the losses may continue to mount for these homeowners. Fannie Mae plans on taking additional legal action by seeking deficiency judgments from these ones who walked away from their home loan payments.

But many ask: If the mortgage walk-away issue is big enough for Fannie Mae to get this tough, why is the Administration still trying to convince the American people that this immoral stance is not a big deal when in reality it is of panoramic proportions? Only time will tell.