Wednesday, August 30, 2006
Home Foreclosures and Big Profits? Just Another Myth
Home foreclosure is the process by which a home is taken from a buyer by someone with a lien against the property. Most of the time, the lender initiates this when the buyer has not made payments on the mortgage for an extended period. Lenders are not really interested in taking back houses; they would much rather have cash. As a result, foreclosed houses are usually sold at auction in so that the lender might recoup their investment.
Due to rising interest rates and rising house prices, many people have found themselves with mortgages that they cannot afford. But are people really letting houses go at auction for pennies on the dollar? Can you buy a foreclosed home today and sell it next week for a huge profit?
The truth is quite a bit less exciting then the advertising would suggest. Here are some reasons why buying and selling foreclosed property isn't all it is made out to be:
There is tremendous competition at the auctions. Believe it or not, you will not be alone if you appear at a real estate auction. In fact, in these times of sky-high prices, bidders will be plentiful as everyone is trying to save a few dollars. Most of the time, the hammer price on such auctions will be very close to, and sometimes higher than, average market prices. The competition is fierce.
You must pay, in full, right away. If you do purchase a home in a real estate auction, you will be expected to pay for it, in full, immediately. If you don't have six figures in liquid cash sitting around, this might not be for you.
A lot of such property is damaged. Property damage is common, and you may not be permitted to do a full inspection of the property or the damage ahead of time. This is truly a case where "buyer beware" can apply.
There may be title issues. It may or may not be possible to obtain a clear title on the property. Most professionals who buy such property spend countless hours doing title research, thus putting a dent in the notion that you can make money this way on a part time basis.
What about the owner who is desperate to sell before the lender forecloses? The current market is still pretty lively. No one is going to sell you property at one third off when they can just put a "for sale" sign in the front yard.
The idea of making a fortune buying and selling foreclosed property is lucrative for those people who market books about the topic. For everyone else, it's an expensive, risky, time consuming job. If you are looking for a quick dollar, you won't find it in foreclosed property.
Fun Site:
National Real Estate Listings without the Commissions! (Click Here)
Until Next Time!
Jasmine
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including http://www.homeequityhelp.net a site devoted to information regarding home equity lending. http://pickamortgage.blogspot.com
Monday, August 28, 2006
Mortgages Made Simple
Since the cost of a home can run into hundreds of thousands of dollars, a mortgage loan tends to be for a very large sum of money that you get to pay off over a long period of time - usually around 15 to 30 years. You can obtain a mortgage from a bank, a mortgage broker or wholesale lender.
Since a mortgage represents a hefty investment on your part, and there are many kinds from which to choose, it's wise to be diligent in your research and selection of a particular mortgage loan. Be absolutely sure that it is well suited to your needs and that you can afford to pay it for as long as you plan to remain in the home.
To help you get started, here's a rundown on the different types of mortgages available, courtesy of MortgageLinks.org and Homestore.com, two online informational resources on home buying and mortgage loans.
MOST COMMON MORTGAGES
· Fixed Rate (FRM): the mortgage-payment rate and loan payments remain fixed for the life of the loan, usually 30 years. Shorter term fixed rates (usually 15 or 20 years) carry lower interest rates, higher payments, and less money paid out than with longer term loan mortgages. Longer term fixed rates have smaller monthly payments and are easier to budget than shorter term mortgage loans.
· Adjustable Rate (ARM): interest rates start lower than with a fixed-rate mortgage, but then become variable. At specific intervals (typically every year), a lender adjusts the rate up or down as interest rates fluctuate. Its lower initial rate can help you qualify for a larger mortgage loan. If you know your income will rise to keep pace with an ARM's periodic adjustment, and you plan to move in a few years, an ARM could be a good choice.
OTHER, LESS COMMON MORTGAGES
Although the majority of buyers will go with the standard fixed-rate or adjustable-rate mortgages, there are other types of mortgages that are available to finance your piece of real estate:
Balloon: gives borrowers lower rates and payments for a specific period of time - anywhere from three to 10 years. After that point, the borrower has to pay off the principal (amount borrowed) balance in a lump sum. Under certain conditions, they can be converted to fixed-rate or adjustable-rate loans. Many borrowers either sell their homes before they get to their due dates, or end up refinancing their balances into new mortgages. This is a great mortgage option for buyers who don't plan on living in the property for long. A disadvantage is that if your plans change and you decide to remain in your home, you will have to pay off your mortgage, or refinance the balance, which will result in more closing costs.
Jumbo: considered a nonconforming loan because it exceeds the loan limit set by Fannie Mae and Freddie Mac (the two publicly chartered corporations that buy mortgage loans from lenders), thereby ensuring that mortgage money is available at all times in all locations around the country. If you require more money in your loan, then a jumbo mortgage may be a good option. You'll have the opportunity to purchase larger, more expensive properties, but you'll also be paying a higher interest rate in exchange for the lender's higher risk.
Subprime: reserved for individuals with less-than-satisfactory credit, based on their FICO scores (FICO scores are a number assigned to you based on your credit rating). These mortgage loans have higher interest rates and more burdensome terms than conventional loans, but they give bruised-credit borrowers a chance to reap the benefits of homeownership just like their more creditworthy cousins. Be prepared for inconsistent terms because interest rates, fees, and underwriting guidelines can vary drastically among lenders.
Assumable: relatively rare, but a homeowner with an assumable loan can "hand off" the loan to a buyer instead of paying it off using proceeds from the home sale. If rates are low and you can get one, by all means, do so. If rates rise, buyers will be able to assume your loan at the rate you currently pay (and will be willing to pay more for your house) because it will be much cheaper than any loan they could get from a bank or other source. An advantage of an assumable mortgage is that it reduces monthly payments and saves money on closing costs. A disadvantage is that sellers will charge more for their property, so buyers need more cash to cover the difference between the asking price and the loan balance.
Two-step: combines elements of fixed and adjustable-rate mortgages. Features a fixed rate and payment for an initial period, followed by one adjustment, then a fixed rate and payment for the remainder of the loan term. These mortgages will have names such as 2/28, 5/25 or 7/23. A 7/23 mortgage, for example, has an initial fixed period of seven years, an adjustment, and then 23 more years of payments following the adjustment. These mortgages give borrowers with damaged credit an opportunity to buy a home and to establish better credit. However, if your credit does not improve, you could be stuck in a high-rate loan for much longer than two or three years.
Biweekly: a fixed-rate mortgage in which payments are made every other week instead of monthly. It is a method used to shorten the life of a 30-year mortgage simply by dividing what would be your monthly payment into two. That means you will be paying 26 "half-payments" a year (the equivalent of 13 monthly payments), with the 13th monthly payment being applied entirely to the balance of the principal. By making more payments, you'll have a dramatic impact on the length of the loan. For example, a 30-year loan can be paid off in about 23 years through this method. The only tricky part of changing to a biweekly mortgage is in making sure your lender accepts your payments and correctly credits the extra portion to the principal. Besides cutting your mortgage short, biweekly payments could serve as a good budgeting tool for many people, although it is not recommended for people who may encounter financial problems since these payments are made so close together.
Federal Housing Administration (FHA): Eligible parties may qualify for a down payment (as low as three percent). Loans come from lenders approved by the U.S. Department of Housing and Urban Development (HUD).
VA loans: The Department of Veterans Affairs helps eligible veterans and service personnel to get loans through conventional lenders. Down payments may not be required.
FUN SITES:
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Until Next Time!
Jasmine :)
http://pickamortgage.blogspot.com
Saturday, August 19, 2006
Is a Second Home the Right Move?
While many people dream of owning a vacation home, oftentimes it is looked at as a luxury available solely to the wealthy. That's a perception that is largely true, as approval for second home mortgages is more difficult than for primary home mortgages. Also, higher down payments on second homes are typically required, as lenders look to protect themselves from borrowers who might be more prone to missing a payment on their vacation home than their primary residence.
Still, for those in the position to afford and be approved for a second home, the decision on whether or not to do so is no slam dunk. Rather, the following financial considerations should be taken into account before you go second home hunting.
· Costs. Even though you won't be living in the house the entire year, the traditional costs that apply to your primary residence will still be there. Financing fees, utility bills and property taxes, among other things, will all still apply. In addition, for those looking to rent out their second home during periods of time they know they won't be using it, that can potentially prove more limiting financially. Oftentimes, renting the property out means you're no longer eligible for certain tax exemptions.
· Compare and contrast. While it's always nicer to own your own place, is it really worth it for you? This can be determined with a simple examination of past vacation's receipts. How much do you typically shell out in hotel or rental fees or other traditional vacation expenses such as food and beverages? If a second home makes financial sense in that regard, then you might be making the right decision getting a second home. However, for those who typically don't spend too much time on vacation or would prefer to travel to different locales, then a second home might not be for you.
· Look at different properties available. Just because you can afford a second home doesn't mean you need one. Less expensive condos or timeshares can make you feel just as at home on a vacation and might be able to save you substantial amounts on property taxes, fees, etc.
· Speak to an investment professional. If you're not currently in a position to afford a second home but would like to be someday, consult a financial planner or advisor and tell him about your goals. If you stay disciplined and start far enough in advance, you should be able to establish a plan where a second home is less a dream and more a reality.
· Know the tax laws. As mentioned earlier, your intentions with property can greatly affect the amount you'll be taxed or allowed to deduct. Don't let these laws be a surprise after you've bought your second home. Know exactly what you can and can't do with your property and how certain things like renting out the property will affect your tax situation. Consula tax professional to learnabout the various tax implications that could make or break you financially.
· Is it what you really want? For vacationers who enjoy time off in the summer and the winter, perhaps a second home isn't the best route, as you likely won't be able to ski and surf in the same locale, meaning you'll still be spending additional money on hotels and other services that a second home should negate. Also, the burdens of meeting the bills that come with a second home can limit your ability to take that second vacation. Understand all the costs you'll have to face once you sign the dotted line.
· Benefits of a second home. There are advantages to owning a vacation or second home. Firstly, you'll build equity on the home for each year you own it, provided the real estate market remains as prosperous as it is currently. Secondly, knowing that your vacation home is equipped with your favorite foods, clothing and recreational items makes embarking on a vacation that much more pleasurable - there are fewer bags to pack, etc. Thirdly, there's always the option of selling your main residence and renting close to where you work through the duration of your career. Then you can focus on making your vacation home a retirement retreat.
FUN SITES:
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Until Next Time!
Jasmine
http://pickamortgage.blogspot.com
Saturday, August 12, 2006
How To Save Money on Home Insurance
Buying a home is a valuable investment. Along with providing a place for you and your family to build lasting memories, a home is a great way to plan for retirement. While many potential homeowners are understandably concerned with getting the best interest rate and lowest mortgage payment possible, other costs can be trimmed as well.
Perhaps the biggest area where most homeowners would prefer to trim some fat off their monthly bills is with their homeowner's insurance. While such a thought might seem like false hope, according to the Insurance Information Institute, there are a variety of ways homeowners can lessen the blow of their monthly insurance bill.
· Raise your deductible. Raising your deductible is perhaps the quickest way to lessen your monthly insurance expense. Deductibles are the amount you have to pay toward a loss before your insurance company begins to pay. A $500 deductible, the recommended minimum, means you would have to pay $500 toward damages to your home, and your insurance company would then pay the rest, if those damages were covered under your policy. A homeowner who chooses to raise his deductible from $500 to $1,000, however, might save up to 25 percent on his monthly insurance costs.
· Make your home more disaster-resistant. Regardless of where you live, your home is susceptible to some type of disaster. Perhaps your region is prone to earthquakes, tornadoes or even hailstorms or hurricanes. These days it seems nowhere is safe from natural disasters. Therefore, making your home more disaster-resistant is another possible way of cutting your homeowners insurance costs. Adding storm shutters and roof reinforcements might enable you to save you some money. Doing some inside remodeling with newer appliances can also reduce the risk of fire or water damage to your home, which should lead to lower monthly insurance costs.
· Install or upgrade a home-security system. While the initial costs of installing or upgrading a home-security system might seem costly, some insurance companies make it more than worth your while, slashing your premiums by as much as 20 percent if certain systems are installed. Typically, an insurance company will you give you the biggest discount if you install a fire or burglar alarm system that immediately notifies local police, fire officials or even a company with a monitoring system. The best way to determine if such systems are worth the investment is to speak with your insurance provider first and ask about which systems garner the biggest discounts.
· Keep a good credit rating. This is sound advice even for people who aren't homeowners but would like to be someday. Though it hasn't come without controversy, many insurance companies are now looking at credit ratings when determining prices for homeowners' insurance policies. Having and maintaining a strong credit history is entirely under your control and can save you money in the long run.
· Combine your policies. In most instances, insurance providers will charge less if you select them as your homeowner and auto insurance provider. Savings can reach as high as 15 percent and make for an easier time when it comes to paying the monthly bills as well. However, do your research. While combining coverages usually works in a homeowner's favor, that's not always the case. Find out how much coverage will cost using the same company as opposed to two, and choose the less costly of the two options.
· Stay with the same company. Insurance companies typically reward their longtime customers with strong payment histories by offering them lower rates. More often than not, this works on a tier system, where customers who have been with a provider for X amount of years will get a certain percentage discount. That percentage typically rises with each period spent with the company. However, keep an eye on rates from other companies just to make sure you're getting the best rate possible.
- RECOMMENDED SITES:
Get Your Equifax Credit Report Now! (Click Here)
Ameriquest Mortgage (Click Here)
Until Next Time!
Jasmine
http://pickamortgage.blogspot.com , http://barworks.blogspot.com
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