Home Finance

Home finance has so many different areas that can be explored. Home buying and selling tips, mortgage rates and equity loans are just a few that can be found here. Take a look at each page and find out the things you need to know about home ownership and the financial benefits and advantages of refinancing and home mortgages.

	1. Home Buying Buying a home is not for everyone believe it or not. There are serious things to consider before jumping in to buying a house. Check out our buying a home page and learn the tips and tricks for getting a new home.
	2. Selling A Home There is alot of stress involved in selling a house. Don't go it alone...but that doesn't mean get a real estate agent either. Find out all the tips on selling a home and what to look out for.
	3. First Mortgages Do the words "MORTGAGE, POINTS and CLOSING COSTS" scare you? How about signing your life away? Don't worry...we can show you what is involved in getting your first mortgage loan. That way, you can get make sure to get the best mortgage rate and not pay high closing costs.
	4. Second Mortgages Second mortgages can be pretty handy at times. Most home owners uses them to pay off credit card debt, an automobile or do some home improvement. Check out this page for more details on second mortgage loans.
	5. Mortgage Rates Mortgage rates are pretty tricky. One day they are down and the next they are back up. Just a .25% can cost you thousands of dollars over the course of 30 years. Find out about fixed mortgage rates, variable rates and points, so you can choose the right option when the time comes.
	6. Home Loans There are lots of different type of home loans. Conventional loans, adjustable rate mortgage (ARM) loans, VA loans, home equity loans, FHA loans and construction loans. Get the details on each one of these.
	7. Refinance Loans As the market shift back and forth, millions of people refinance their mortgage. Many of these home owners refinance their homes without paying any closing costs or fees. There is only really one reason to refinance a loan...TO SAVE MONEY...and alot of it. Here is where you'll find information to refinance a mortgage.
	8. Home Equity Loans Well just like the names says, home equity loans are loans given based on the equity that you have in your home. Basically, it is the difference between the market-value of your home and the amount that you owe on you mortgage. Lenders frequently lend home owners up to 125% of the equity in the home. Good deal...but beware. Read on.
	9. Credit Reports This is always an important step along the way. Make sure that something has not happened to your credit before your walk in to sign the papers for your new home. Check out our credit report page and find out where you can go to get a report and what it tells you.
	10. Mortgage Insurance More formally known as Private Mortgage Insurance or PMI. Mortgage insurance is a type of insurance that helps protect lenders against losses due to foreclosure. This protection is provided by private mortgage insurance companies, and allows lenders to accept lower down payments than would normally be allowed.

How much house can I afford?  TOP

As you start to consider about buying a home, you will need to look closely at you personal finances. How much you earn versus how much you owe will likely determine how much a mortgage lender will allow you to borrow.

First off, determine your gross monthly income. This is any regular and recurring income that can be documented. If you can't document the income or it does not show up on your tax return, then you are not allowed to use it to get a loan. However, alimony or lottery winnings are some exceptions.

Next, figure out your monthly debt load. This is all monthly debt obligations like credit cards, installment loans, car loans, personal debts or any other ongoing monthly obligation like alimony or child support. If it is revolving debt like a credit card, use the minimum monthly payment for this calculation. If it is installment debt, use the current monthly payment to calculate your debt load. And you don't have to consider a debt at all if it is scheduled to be paid off in less than six months. Add all this up and it is a figure we'll call your monthly debt service.

Basically, most lenders don't want you to take out a loan that will overload your ability to repay everybody you owe. Although every lender has slightly different formulas, here is a rough idea of how they look at the numbers.

Typically, your monthly housing expense, including monthly payments for taxes and insurance, should not exceed 28 percent of your gross monthly income. If you don't know what your tax and insurance expense will be, you can guestimate 15 percent of your payment will go toward this. The remainder can be used for the principal and interest repayment.

Your proposed monthly housing expense and your total monthly debt service combined cannot be over 36 percent of your gross monthly income. If it does, your application may exceed the lender's underwriting guidelines and your loan may not be approved.

Depending on your individual situation, there may be more or less flexibility in the 28 percent and 36 percent guidelines. For example, if you are able to buy the home while borrowing less than 80 percent of the home's value by making a large cash down payment, the qualifying ratios become less critical. Likewise, if Bill Gates or a rich uncle is willing to cosign on the loan with you, lenders will be much less focused on the guidelines discussed here.

Remember that there are hundreds of loan programs available in today's lending market and every one of them has different guidelines. So don't be discouraged if your dream home seems out of reach.

In addition, there are a number of factors within your control which affect your monthly payment. For example, you might choose to apply for an adjustable rate loan which has a lower initial payment than a fixed rate program. Likewise, a larger down payment has the effect of lowering your projected monthly payment.

5 Ways to Save Money on your Mortgage  TOP

The key to saving money on your mortgage is to get the best possible mortgage for yourself. Sounds so obvious it's silly, right? But the point here is that you don't need to do it the way everyone else does. In fact, if you're willing to educate yourself in the ways of the mortgage world, you can save quite a bit of money by being a little different. Below we introduce you to some of the strategies that can be used. But remember, the only person who knows if it's right for you is you.

The 6% Solution
There is something called a seller concession that can save you money. It works like this: suppose you agree on the price of the house at, say, $200,000. You then ask the seller for a 6% seller concession. What this means is that you add (up to) 6% to the price of the house. That's right, you're now going to pay $212,000 for that house -- but the seller is going to give you that $12,000 back when the sale takes place. You're going to use that money to cover all of your closing costs.

If we pretend for a moment that those costs add up to precisely $12,000, then what you've done is folded those closing costs into the mortgage. Since your mortgage interest is tax-deductible, these costs have effectively become tax write-offs.

In addition, you don't have to come up with all that extra cash at settlement. Your down payment will be somewhat higher, (if you're putting down 20%, then in the current example your down payment would be $42,400, versus $40,000) and, of course, your mor tgage payments will be higher, but it ends up saving you money.

The seller has no reason to refuse this -- after all, the agreed-upon price is still the same.

What's the catch? The catch is that the house has to appraise for the higher value. If the appraiser comes back and tells you that this house won't appraise for higher than $200,000, you can't do it.

Let's look into this a little further. Say you buy the house for $200,000. Your $40,000 down payment leaves you needing a loan for $160,000. You get a 30-year loan at 8%. Your monthly payments for principal and interest are $1,174.

Now say you decide to use the 6% seller concession strategy. You buy this house for the price of $212,000. You put down 20%, and this leaves you needing a loan of $169,600. Your monthly payments will be $1,244, or $70 more per month. Is it worth it?

To begin with, many people aren't going to feel an enormous difference between paying the extra $70 per month -- not nearly as much as they would feel over having to fork out an extra $12,000 all at once. But what about the fact that you have to now pay this extra money over the course of 30 years? Well, over the course of 30 years you're paying $25,200 more for that extra $12,000 ($70 more per month x 12 months in a year x 30 years = $25,200). However, remember that's $12,000 less out of your pocket at the time of closing. If you take $12,000 and invest it at 10% (less than the market average has returned over the past 35 years) then your money will grow to over $200,000 (before taxes) at the end of 30 years. So, in this scenario, it's well worth it.

Naturally you'll want to run the numbers for your particular loan to see whether it would be worth it for you.

Note: there are certain rules under certain mortgages as to what the seller can actually pay for at closing. If you get $12,000 from the seller and all of your costs are $12,000, this does not necessarily mean that you won't have to pay anything. Be sure to ask your lender which costs the seller may cover.

Assume an Existing Mortgage
One option is to assume the mortgage on the house you are buying. (That's another way of saying you'll take over the existing mortgage on the house, rather than getting a new one.) This is beneficial if, for example, the existing mortgage has a lower inte rest rate. You can also avoid some of the administrative costs of taking out a new loan. In order to assume a mortgage, it must be transferable, and you must be able to pay enough cash to cover the difference between the purchase price and the outstanding debt.

Seller Financing
"Seller financing" means that you can pay the seller directly over a period of time, rather than borrow money and pay at once. With a seller mortgage, you can often negotiate a better interest rate and avoid the various administrative fees charged by lending institutions. Seller financing can be attractive if for some reason you can't qualify for a loan. More importantly, it enables you to avoid the dreaded mortgage insurance.

One circumstance in which such financing is available occurs when the seller has had difficulty in selling the house. If that's the case, you'll naturally want to know why. Also, sellers are not in the lending business. They tend to want a short-term mort gage -- usually not longer than three years. After that time, you will have to get a mortgage from a regular lender and pay the seller in full.

Pay Down the Principal
For a very long time, most of the money that you will pay to your mortgage company is going to go to interest payments. That means that you may be in your house for over 20 years before you own more of it than the bank does. But there's a way to speed up the amount that you own. And why is that important (other than the obvious psychological benefits)? Because if you owe less to the bank, you will also owe them less interest.

Be Your Own Best Advocate
Mortgage lenders must compete for your business. That means they will negotiate. Don't assume that their published interest rates are final. Collect information on available interest rates and mortgage features from lenders in your area. Decide which features meet your needs. Be prepared to ask for better terms -- a reduction of at least a quarter percent of the published interest rate is reasonable. You will be in a stronger negotiating position if your credit history is good.