Typically consumers that have overwhelming debt have two options, either enter into a Consumer Credit Counseling Program or declare Bankruptcy. While the two options may have a lot of similarities, most will opt to enrolling into a Consumer Credit Counseling program for such reasons as it is more cost effective and easier to implement.Many credit card companies and creditors realize that it would be more beneficial to actually work with debtors and make affordable payment arrangements than to pursue typical collection activities. Instead they work with each of the individual's creditors to come to some agreement that will result into a reduced single payment plan, a consolidation of their debt, and or a reduction of interest rates and late fees - thus making it possible for the debtor to repay his or her debts over a period of 3 - 5 years.
Once enrolled, the debtor will make a single payment to the consumer credit counseling service, and then the counseling service will make all the payments to the creditors.One of the advantages of credit counseling services is to educate their client about debt management and budgeting.The main disadvantage of enrolling into consumer credit counseling services is that many creditors will make a notation on the debtor's credit report indicating that the debt is being managed by consumer credit counseling agency.
Another major issue that a client may experience is, even though they are making their monthly payments to the credit counseling service on time, the credit counseling service doesn’t make the payments to the creditors on time. Now this will reflect on the client’s credit report as late payments. And to add fuel to the fire, it is not uncommon for the credit counseling service to make the payments on time, while the creditors are not accepting the reduced payment amounts. This, too, would negatively affect the consumer's credit report.
However, if you are in the market to purchase a home or refinance, it is important to find a mortgage expert that specializes in helping individuals that have been enrolled or that are currently enrolled in consumer credit counseling services. The lender will request from the credit counseling agency a copy of the agreement which will indicating the date the consumer entered into the program, all the creditors involved, and the payment history of the consumer's payments. From this information, the lender will then determine if the client qualifies for a mortgage loan. FHA LENDER’S understand that if the consumer has been making their payments on time to the consumer credit counseling agency, but the creditors have been getting their payments late, then that's not the fault of the consumer and shouldn't penalize them from purchasing a home or refinancing their home.
It is important to note that many lenders view credit counseling services as similar to a Chapter 13 bankruptcy, because both can entail a payment plan and re-negotiation of debt payments. (And, in fact, some people who are using a credit counseling service do end up filing bankruptcy because they still don't have the income or money management skills to handle the payments.) So, in some cases use of such a service can be a negative.However, many FHA Lenders recognize that if a person is attempting to handle debt responsibly by enrolling in these types of services, then that person probably takes their financial commitments seriously. In general, in order to get a mortgage the borrower must have a 12-month history of paying on time and a letter from the counseling service stating that purchasing a home or refinancing will not interfere with the repayment plan. Thanks to FHA Loans, consumer credit counseling services will not restrict the borrower from obtaining a low interest rate mortgage loan.
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in FHA Mortgage Loans for people with Consumer Credit Counseling, Bankruptcies, Foreclosure or with other credit issues. If you would like a Free Copy or to get instant access to the remainder of this Insider Mortgage Report, please visit http://www.specializedfinancialsolutions.com/own-a-home.htm or Call 954-678-5796
Saturday, November 29, 2008
Friday, November 21, 2008
Are You A First Time Home Buyer? Here’s $7500……
Have you ever heard of the Housing and Recovery Act of 2008? Well today we are going to focus on one of the benefits, the $7500 First Time Home Buyer IRS Tax Credit.
Even with interest rates at historical lows and with a wide selection of discounted homes on the market, people still weren't buying, so the government came up with this tax credit to stimulate and provide financial assistance for First Time Home Buyers to buy now rather than wait.
The $7,500 First-Time Home Buyer IRS Tax Credit only applies to first-time home buyer purchases of a primary residence between April 9, 2008 and July 1, 2009. It is important to understand that this is a TAX CREDIT and not a TAX DEDUCTION. Now a tax credit is a reduction in income taxes owed! In other words, when a buyer files their income taxes for the year the home was purchased (April 2008 - July 2009), they may be able to subtract $7,500 from the amount of federal income tax liability, which will either put more money in your pocket as you will get an increased tax refund or reduce the amount of tax still owed.However, this tax credit is not FREE. Yes, this is not a hand out from Uncle Sam; it is a loan that has to be paid back. Repayment will begin 2 years after the credit is claimed, and must be repaid within 15 years. So that's a $500 payment per year. It's an interest-free loan for 15 years.
Now before you get turned off by this "LOAN,” lets take a look on the benefits this $7500 tax credit may provide. Majority of first time home buyers have walked away from the closing table with an empty savings and or checking account once the purchase of their home is complete. Now they have a home to decorate, furnish and in some cases repair and paint. Majority of these first time home buyers will now turn to their credit cards to pay for these expenses, which will come with pretty high interest rates. So when compared to have a credit card payment which comes with interest charges, versus and an interest free $7500 loan…..it now seems a little more attractive.
Now for those of you first time home buyers that are a little more well off financially, this can still benefit you….here's how.
Let's assume a $200,000 mortgage was needed in the home purchase at 6.0% interest rate fixed for 30 years. What if the $7,500 tax credit was a refund which you used to pre-pay the mortgage? Using simple math that would be an annual interest savings of $437.50; which is actually less than the $500 payment per year on the $7500 Tax Credit Loan.
The main benefit here is not just the payment savings but the outstanding mortgage balance will be reduced by $7,500 and each future mortgage payment results in savings in mortgage interest and increased reduction in principal mortgage. As each monthly mortgage payment go to reducing the mortgage balance and less is applied to interest. Together these savings will exceed the $500 cost of repayment of the tax credit. The benefit over the long term in interest savings and principal reduction will be quite amazing. Talk about good old Uncle Sam helping you payoff your mortgage early!
Even with interest rates at historical lows and with a wide selection of discounted homes on the market, people still weren't buying, so the government came up with this tax credit to stimulate and provide financial assistance for First Time Home Buyers to buy now rather than wait.
The $7,500 First-Time Home Buyer IRS Tax Credit only applies to first-time home buyer purchases of a primary residence between April 9, 2008 and July 1, 2009. It is important to understand that this is a TAX CREDIT and not a TAX DEDUCTION. Now a tax credit is a reduction in income taxes owed! In other words, when a buyer files their income taxes for the year the home was purchased (April 2008 - July 2009), they may be able to subtract $7,500 from the amount of federal income tax liability, which will either put more money in your pocket as you will get an increased tax refund or reduce the amount of tax still owed.However, this tax credit is not FREE. Yes, this is not a hand out from Uncle Sam; it is a loan that has to be paid back. Repayment will begin 2 years after the credit is claimed, and must be repaid within 15 years. So that's a $500 payment per year. It's an interest-free loan for 15 years.
Now before you get turned off by this "LOAN,” lets take a look on the benefits this $7500 tax credit may provide. Majority of first time home buyers have walked away from the closing table with an empty savings and or checking account once the purchase of their home is complete. Now they have a home to decorate, furnish and in some cases repair and paint. Majority of these first time home buyers will now turn to their credit cards to pay for these expenses, which will come with pretty high interest rates. So when compared to have a credit card payment which comes with interest charges, versus and an interest free $7500 loan…..it now seems a little more attractive.
Now for those of you first time home buyers that are a little more well off financially, this can still benefit you….here's how.
Let's assume a $200,000 mortgage was needed in the home purchase at 6.0% interest rate fixed for 30 years. What if the $7,500 tax credit was a refund which you used to pre-pay the mortgage? Using simple math that would be an annual interest savings of $437.50; which is actually less than the $500 payment per year on the $7500 Tax Credit Loan.
The main benefit here is not just the payment savings but the outstanding mortgage balance will be reduced by $7,500 and each future mortgage payment results in savings in mortgage interest and increased reduction in principal mortgage. As each monthly mortgage payment go to reducing the mortgage balance and less is applied to interest. Together these savings will exceed the $500 cost of repayment of the tax credit. The benefit over the long term in interest savings and principal reduction will be quite amazing. Talk about good old Uncle Sam helping you payoff your mortgage early!
Thursday, November 20, 2008
Is the FHA Hope For Home Owners Program a Bad Deal For Home Owners?
Actually this FHA Hope Program may prove to be HOPELESS, for both home owner's and lenders.....Let me explain.....
The President has signed into law legislation that will allow HUD's Federal Housing Administration (FHA) to continue providing targeted mortgage assistance to homeowners. The Hope for Homeowners program will continue FHA's existing and successful efforts to provide aid to struggling families trapped in mortgages they currently cannot afford. Under the program, certain borrowers facing difficulty with their mortgage will be eligible to refinance into FHA-insured mortgages they can afford. The program was implemented on October 1, 2008.
Let's start with the lenders perspective with participating in the Hope Program: To do this transaction the lender will have to reduce the loan to 90% of the current value of the home, so that means if the original loan was $300,000 and the current market value has dropped to $200,000, and then the lender has to reduce the loan to $180,000 that's 60% of the original loan amount. The property must also be the principal residence and the homeowner cannot own more than one property.
Now if the lender did a modification of the original loan amount they wouldn't necessarily have to reduce the loan amount, but instead just reduce the interest rate and extend the period of the loan to make it affordable. Now this may seem as a good deal for the home owner....but keep reading. The new loan will be at today's current rate, versus with loan modifications interest rates can be negotiated way below today's rates, sometimes as low as 2%. In addition the new FHA Loan will come with upfront mortgage insurance and it will be a 30 year fixed, while with the loan modification they can extend the loan up to 40 years with out mortgage insurance. Not to mention all the other closing cost associated with getting a new loan.
While in the HOPE Program, the homeowner cannot get any second mortgages for the first 5 years of the FHA hope Loan and when you think it couldn't get worst, well....if the house appreciates in the future, the home owner will have to share that equity with the government. This shared equity starts at 100% to FHA during the first year and will remain at a minimum of 50% to FHA from five years throughout the duration of the mortgage. For the current lender, it will make more sense to modify the loans themselves than to participate in the FHA Hope For Home Owners Program. And for the home owner they will have more flexibility in rates and terms and they won't have to share they built up equity with the government.
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in FHA Mortgage Loans for people with Bankruptcies, Foreclosure or with other credit issues. If you would like a Free Copy or to get instant access to the remainder of this Insider Mortgage Report, please visit http://www.specializedfinancialsolutions.com or Call 954-678-5796
The President has signed into law legislation that will allow HUD's Federal Housing Administration (FHA) to continue providing targeted mortgage assistance to homeowners. The Hope for Homeowners program will continue FHA's existing and successful efforts to provide aid to struggling families trapped in mortgages they currently cannot afford. Under the program, certain borrowers facing difficulty with their mortgage will be eligible to refinance into FHA-insured mortgages they can afford. The program was implemented on October 1, 2008.
Let's start with the lenders perspective with participating in the Hope Program: To do this transaction the lender will have to reduce the loan to 90% of the current value of the home, so that means if the original loan was $300,000 and the current market value has dropped to $200,000, and then the lender has to reduce the loan to $180,000 that's 60% of the original loan amount. The property must also be the principal residence and the homeowner cannot own more than one property.
Now if the lender did a modification of the original loan amount they wouldn't necessarily have to reduce the loan amount, but instead just reduce the interest rate and extend the period of the loan to make it affordable. Now this may seem as a good deal for the home owner....but keep reading. The new loan will be at today's current rate, versus with loan modifications interest rates can be negotiated way below today's rates, sometimes as low as 2%. In addition the new FHA Loan will come with upfront mortgage insurance and it will be a 30 year fixed, while with the loan modification they can extend the loan up to 40 years with out mortgage insurance. Not to mention all the other closing cost associated with getting a new loan.
While in the HOPE Program, the homeowner cannot get any second mortgages for the first 5 years of the FHA hope Loan and when you think it couldn't get worst, well....if the house appreciates in the future, the home owner will have to share that equity with the government. This shared equity starts at 100% to FHA during the first year and will remain at a minimum of 50% to FHA from five years throughout the duration of the mortgage. For the current lender, it will make more sense to modify the loans themselves than to participate in the FHA Hope For Home Owners Program. And for the home owner they will have more flexibility in rates and terms and they won't have to share they built up equity with the government.
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in FHA Mortgage Loans for people with Bankruptcies, Foreclosure or with other credit issues. If you would like a Free Copy or to get instant access to the remainder of this Insider Mortgage Report, please visit http://www.specializedfinancialsolutions.com or Call 954-678-5796
Tuesday, November 11, 2008
Which Mortgage Do I Choose? Key Questions To Ask Yourself & Lenders When Shopping For A Mortgage!
Traditional Fixed Rate Mortgage? Graduated-Payment Mortgage? Adjustable Rate Mortgage? FHA Mortgage? Two-Step Mortgage?
You are wondering which kind of mortgage is best. The answer: There is no one correct answer. Deciding which type of mortgage will best fulfill your needs can be difficult. There are so many types of loans and different term lengths. Your choice is extremely important and can take some time and effort to research. While often neglected by homebuyers, a little research before choosing your mortgage can save you thousands of dollars in the long run.
There are several elements of a loan that should be analyzed. While one of these elements may suggest one type of loan, another may call for a different type. You must weigh each ingredient separately and collectively. You will find that your answers to the questions below will ultimately determine the type of mortgage that best fits your needs.
How long do you plan to stay in this home? Five years? Ten years? Thirty years?
The length of time you will be in the home will certainly play a part in determining which loan to apply for. If you only plan to be in the home for 5 – 7 years or less, you should seriously consider an adjustable rate loan. If you intend on staying 20 – 30 years, a fixed rate mortgage may be right for you.
How much risk are you willing to accept?
If you are the type of buyer that needs to know exactly what you will be paying each month for the term of the mortgage, a fixed rate mortgage will fulfill this need. The fixed rate loan, however, will also net a higher interest rate. If you are willing to take some risk of fluctuations in the interest rate, you may receive a lower interest rate.
What are your income expectations?
Plan for the future. Do you anticipate a gradual or dramatic increase in your income in the next few years? If you expect a big increase, a graduated payment mortgage may be best for you.
How much cash do you have available for upfront costs?
If you have the resources, you may want to make a larger down-payment to lower your monthly payment. By keeping a higher monthly payment, however, you might be able to shorten the term of the loan to a 15-year loan in order to pay it off quicker.
Keep in mind that you will have closing costs and fees to pay in addition to your down-payment. If you don’t have much cash saved for your upfront costs, do not despair. You may be forced to accept a higher monthly payment or could even lower your monthly obligation by choosing an adjustable rate mortgage.
In addition to choosing a type of loan, you must also consider which lender to use. Once again, several factors of a loan will influence your decision.
Annual Percentage Rate (APR)
This is most likely the best way to make an “apples-to-apples” comparison of lenders. The APR reflects the cost of credit on a yearly rate and includes any points and fees in addition to the interest rate.
Interest Rate
Find out the rate the lender will commit and how long the lender will guarantee it. Get any commitments in writing. As with any transaction, if it isn’t in writing it doesn’t exist.
Points and fees
These factors will vary greatly. Look out for hidden fees. Make sure the lenders disclose all fees; ask what they charge and what is included and what is not.
Loan Approval
Both approval and funding time should be considered. You don’t want to lose a prospective home because your lender takes weeks to fund your loan. A lender should be able to fund the loan within ten days.
Lender Reputation
Don’t rely solely on someone else’s recommendation. You, not your friend, must feel comfortable with your lender. If you do feel good about your lender and trust him, it will be much easier to trust his advice on what kind of mortgage will best suit your needs.
We sincerely hope these tips and ideas will be of value to you. The types of loans mentioned above are only a few of the multitude of loan types available. For more insider mortgage info click here or If we may be of any further service please contact our office. We would consider it a privilege to be of service to you! If you would like a free consultation call our office at 954-678-5796
You are wondering which kind of mortgage is best. The answer: There is no one correct answer. Deciding which type of mortgage will best fulfill your needs can be difficult. There are so many types of loans and different term lengths. Your choice is extremely important and can take some time and effort to research. While often neglected by homebuyers, a little research before choosing your mortgage can save you thousands of dollars in the long run.
There are several elements of a loan that should be analyzed. While one of these elements may suggest one type of loan, another may call for a different type. You must weigh each ingredient separately and collectively. You will find that your answers to the questions below will ultimately determine the type of mortgage that best fits your needs.
How long do you plan to stay in this home? Five years? Ten years? Thirty years?
The length of time you will be in the home will certainly play a part in determining which loan to apply for. If you only plan to be in the home for 5 – 7 years or less, you should seriously consider an adjustable rate loan. If you intend on staying 20 – 30 years, a fixed rate mortgage may be right for you.
How much risk are you willing to accept?
If you are the type of buyer that needs to know exactly what you will be paying each month for the term of the mortgage, a fixed rate mortgage will fulfill this need. The fixed rate loan, however, will also net a higher interest rate. If you are willing to take some risk of fluctuations in the interest rate, you may receive a lower interest rate.
What are your income expectations?
Plan for the future. Do you anticipate a gradual or dramatic increase in your income in the next few years? If you expect a big increase, a graduated payment mortgage may be best for you.
How much cash do you have available for upfront costs?
If you have the resources, you may want to make a larger down-payment to lower your monthly payment. By keeping a higher monthly payment, however, you might be able to shorten the term of the loan to a 15-year loan in order to pay it off quicker.
Keep in mind that you will have closing costs and fees to pay in addition to your down-payment. If you don’t have much cash saved for your upfront costs, do not despair. You may be forced to accept a higher monthly payment or could even lower your monthly obligation by choosing an adjustable rate mortgage.
In addition to choosing a type of loan, you must also consider which lender to use. Once again, several factors of a loan will influence your decision.
Annual Percentage Rate (APR)
This is most likely the best way to make an “apples-to-apples” comparison of lenders. The APR reflects the cost of credit on a yearly rate and includes any points and fees in addition to the interest rate.
Interest Rate
Find out the rate the lender will commit and how long the lender will guarantee it. Get any commitments in writing. As with any transaction, if it isn’t in writing it doesn’t exist.
Points and fees
These factors will vary greatly. Look out for hidden fees. Make sure the lenders disclose all fees; ask what they charge and what is included and what is not.
Loan Approval
Both approval and funding time should be considered. You don’t want to lose a prospective home because your lender takes weeks to fund your loan. A lender should be able to fund the loan within ten days.
Lender Reputation
Don’t rely solely on someone else’s recommendation. You, not your friend, must feel comfortable with your lender. If you do feel good about your lender and trust him, it will be much easier to trust his advice on what kind of mortgage will best suit your needs.
We sincerely hope these tips and ideas will be of value to you. The types of loans mentioned above are only a few of the multitude of loan types available. For more insider mortgage info click here or If we may be of any further service please contact our office. We would consider it a privilege to be of service to you! If you would like a free consultation call our office at 954-678-5796
Thursday, November 6, 2008
Want to Buy a Home In Miami, But Can't Qualify?
If you are like many Miami Home Buyers today, who are frustrated that they can't seem to qualify for a mortgage, worry no more, there is still a way for you to buy a home with the assistance of seller financing.
This type of transaction is beneficial to both buyers and sellers especially in today's market as sellers are having a hard time selling there homes, and buyers cannot buy because they can't qualify for a mortgage.
The closing cost on this type of transaction is very minimal compared to a normal real estate closing and the financing options are flexible as they are tailored to fit the individual buyer's budget without the strict guidelines of a traditional loan.
Now the benefits for the seller for selling his home with this method, is he can generate more interested buyers and in most cases they sell for their full asking price or very close to it. Other motivations for the sellers are that they can typically receive a better interest rate on their money when compared to such investments as Certificate of Deposit Accounts, Money Market Accounts and stocks. And there money will be secured by real estate. This seller financing will also reduce their overall taxes and monthly liabilities as the buyer will be responsible for the taxes, insurance, utilities and maintenance.
Seller financing are normally structures as a private mortgage, an assumable loan or a land contract. The Land Contract also known as Contract for Deed, simply put is a purchase contract that has a closing date of 2 to 3 years in the future versus 30 -45 days. This transaction will typically require a down payment and will specify the monthly installment payments. As long as the buyers fulfills his or her obligations of the agreement and makes all payments on time, then the seller will transfer the deed, if not, the seller can take back the property and maybe even sue the buyer. With a land contract the seller will remain on title until all obligations are met.
Seller financing with a mortgage is similar to a regular real estate purchase, except that the seller wear two hats, he is both seller and lender. The buyer and seller will go to regular closing thru a title company and will take ownership on title in exchange for a signed I.O.U or promissory note to the seller for the agreed sales amount. This promissory note will be attached to the property in the form of a lien, which gives the seller the right to collect payments as agreed and also foreclose if the buyer defaults on the agreement.
This mortgage can either be in the form as a first mortgage or second mortgage on the property. The buyer will pay off the sellers lien in a few years, which will normally be through a refinancing transaction as the buyers typically will rebuild there credit in a few years where they are able to qualify for a traditional mortgage with low interest rates. It is important to note that all payment to the seller should be in the form of a check, not money orders, cash or cashiers checks. Paying via check will provide the buyer with cancelled checks that will be necessary to qualify for a traditional mortgage.
Before entering into a seller financing transaction, it is important to speak to a qualified miami mortgage expert so they can advise you of how to go about qualifying for a mortgage in the future.
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in mortgage loans for people with Bankruptcies, Foreclosure or with other credit issues, as well as Commercial Mortgages. If you would like a Free Copy or to get instant access to Insider Miami Home Buyer Report Click Here
This type of transaction is beneficial to both buyers and sellers especially in today's market as sellers are having a hard time selling there homes, and buyers cannot buy because they can't qualify for a mortgage.
The closing cost on this type of transaction is very minimal compared to a normal real estate closing and the financing options are flexible as they are tailored to fit the individual buyer's budget without the strict guidelines of a traditional loan.
Now the benefits for the seller for selling his home with this method, is he can generate more interested buyers and in most cases they sell for their full asking price or very close to it. Other motivations for the sellers are that they can typically receive a better interest rate on their money when compared to such investments as Certificate of Deposit Accounts, Money Market Accounts and stocks. And there money will be secured by real estate. This seller financing will also reduce their overall taxes and monthly liabilities as the buyer will be responsible for the taxes, insurance, utilities and maintenance.
Seller financing are normally structures as a private mortgage, an assumable loan or a land contract. The Land Contract also known as Contract for Deed, simply put is a purchase contract that has a closing date of 2 to 3 years in the future versus 30 -45 days. This transaction will typically require a down payment and will specify the monthly installment payments. As long as the buyers fulfills his or her obligations of the agreement and makes all payments on time, then the seller will transfer the deed, if not, the seller can take back the property and maybe even sue the buyer. With a land contract the seller will remain on title until all obligations are met.
Seller financing with a mortgage is similar to a regular real estate purchase, except that the seller wear two hats, he is both seller and lender. The buyer and seller will go to regular closing thru a title company and will take ownership on title in exchange for a signed I.O.U or promissory note to the seller for the agreed sales amount. This promissory note will be attached to the property in the form of a lien, which gives the seller the right to collect payments as agreed and also foreclose if the buyer defaults on the agreement.
This mortgage can either be in the form as a first mortgage or second mortgage on the property. The buyer will pay off the sellers lien in a few years, which will normally be through a refinancing transaction as the buyers typically will rebuild there credit in a few years where they are able to qualify for a traditional mortgage with low interest rates. It is important to note that all payment to the seller should be in the form of a check, not money orders, cash or cashiers checks. Paying via check will provide the buyer with cancelled checks that will be necessary to qualify for a traditional mortgage.
Before entering into a seller financing transaction, it is important to speak to a qualified miami mortgage expert so they can advise you of how to go about qualifying for a mortgage in the future.
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in mortgage loans for people with Bankruptcies, Foreclosure or with other credit issues, as well as Commercial Mortgages. If you would like a Free Copy or to get instant access to Insider Miami Home Buyer Report Click Here
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