Understanding Points In Home Mortgages 1st And 2nd Mortgage Refinance Loan Houston First Mortgages Buy More House With A Buy Down Mortgage Buying A House After Bankruptcy Things To Consider Top Choices Of Houston Mortgage Brokers
If you are in the market for a mortgage to buy a house you’ve no doubt heard the term “points” being thrown about. No, they aren’t talking about the score from last night’s NFL game; they are actually talking about a fee that is paid to the lender of the mortgage you are taking out to buy your home. Points can have impact on your mortgage, both positive and negative, so being informed about how they can help and hurt you is crucial when determining if a mortgage loan is the right fit for you.
In the simplest form, points are a onetime fee that is paid to a lender and are used to secure a loan below the current market interest rate. Each point represents 1% of the mortgage amount. So if you have a mortgage for $150,000 then one point would be equal to $1,500. A seller would pay points on a loan to reduce the interest rate of the loan which could potentially save them much more than the points cost up front over the life of the loan.
Points are not always paid for by the buyer; they can sometimes be paid by the seller as well. A seller would typically pay for points when they are in a rush to sell the property or have been having a hard time finding buyers for the property. In this case it is used as an incentive to get the buyer to move on the property.
There are times when it may not be in your best interest to purchase points. A rather simple way of doing this is to determine the payback period, or length of time it takes you to pay back the points you purchased up front. First, determine your monthly payment amount without points, and then with points. If you are paying $900 without points and $800 with points, your monthly savings is $100. Now take the total cost of the points, say 2 points on a $150,000 mortgage which would be $3,000, and divide the cost by the monthly savings. $3000/100 = 30 months. It will take you 30 months to realize your savings of $100 per month. For a 30 year loan, it would make a lot of financial sense to purchase the 2 points up front if you can afford them.
Where you have to be careful with points is when you don’t plan to be in your current home long enough to reach the payoff. You also have to keep in mind that the cost for points is above and beyond your down payment on the house you want to purchase as well. It can add significant up-front costs, which is why it is a wise move only if you plan on occupying the house for a long period of time and have significant cash up front to be able to afford it.
One final note about points – they are tax deductible as they are considered prepaid interest. They are deductible by the buyer, even if the seller pays for them. Points are deductible fully in the year they are paid for a new purchase, and over the life of a loan for a refinance.
Refinancing a first and second mortgage requires some extra considerations. Depending on your equity, you may find that combining the two mortgages results in a higher interest rate. You may also find that you have to carry PMI with the refinanced mortgage.
Will Refinancing Benefit You?
Refinancing two mortgages allows you to consolidate your loans into one payment, often lowering your monthly bill. You may also find lower rates under the right circumstances.
Those with a large amount of equity benefit most from consolidating loans since they qualify for the lowest rates. It is important to look at interest savings, not just monthly numbers which can be misleading.
However, if you have less than 25% equity, you may end up qualifying for higher rates. With less than 20% equity, you will also have to pay for private mortgage insurance. Even with these factors, you may still find that you will save money by refinancing.
Have You Done Your Research?
To see if refinancing makes sense for you, research mortgage lenders. You can quickly go online and request quotes and terms. Look at the different offers, and work out the numbers. An online mortgage calculator can help you figure out monthly payments and interest costs.
An easy way to compare cost is to first add up your interest payments for both mortgages. Use this number to compare interest payments with each potential mortgage.
You also need to factor in the cost of refinancing. Just like with your original mortgage, you will have to pay fees and points. You want to be sure that you can recoup these costs with your interest savings.
Why Do You Want To Refinance Both Mortgages?
While refinancing both mortgages is convenient, you may decide to refinance only one or both separately. With your main mortgage, you can expect to get low rates.
A second mortgage will usually qualify for higher rates, but you can lock them in. You may also choose to convert from a line of credit to an actual mortgage. Again, you will want to investigate financial packages before signing up with a lender.
Planning for a new home, new property and other finances for the first time is not only a question of gathering money– it is a building a dream to create heaven for you and your loved ones. Though it is a hard fact that getting a mortgage loan is always a question of liability.
Houston based first time home mortgage companies offer easy solutions for those who are mortgaging for the first time.
They welcome first time homebuyers by offering programs to help you first-time homeowners by the home of their dreams. With their help you may qualify for low interest rates and reduced tax rates through the Housing Finance Agency (HFA) and the Mortgage Credit Certificate (MCC) program can help with reduced taxes. There are also low down payment loans available to qualified first time buyers and many more options.
Most Houston mortgage lenders offer first time buyers many loan options and assist the buyer in finding the best loan for them. For The Federal government has developed two loan programs to assist homebuyers that have a little or no down payment. These programs are called the Federal Housing Administration (FHA) and the Veteran’s Administration (VA). These programs are not solely intended for first time buyers, and your loan advisor will be able to determine if you qualify for either program. FHA and VA loans can be especially advantageous when combined with a HFA or MCC first time buyer program.
First time buyer programs are designed to help borrowers who may not have enough money to pay the full cost of the down payment or the closing costs on a mortgage. These programs make obtaining a mortgage more cost effective.
A buy down mortgage allows you to buy more house with your income and enjoy low monthly payments for a couple of years. With reduced payments, you can pay for move in costs and furnishings. You also qualify for a larger mortgage due to lower monthly payments.
Buy Down Mortgage Terms
Buy Down mortgages come in three packages. A temporary buydown loan, the most common, starts with a discounted interest rate for one to three years that increases to a fixed rate in yearly increments. You pay the difference in interest payment in an initial payout to the lender at the start of your home loan. Some lenders will pay this lump sum, but then charge a higher interest rate for the loan.
For example, you can have a mortgage with a 6% interest rate that is reduced to 4% the first year, then raised to 5% the second year, and finally reach 6% on the third year. The difference in the mortgage payments for the first two years will need to be paid to the lender at the time of settlement.
A compressed buydown mortgage works like a temporary buy down loan, but interest rates rise every six months. A permanent buydown loan has a low interest rate for the life of the loan, but that difference still has to be prepaid to the financing company.
Buy Down Mortgage Benefits
The chief benefit of a buydown mortgage is that you can qualify for a larger loan amount based on your income. This can be especially helpful if you expect your income to increase in the near future.
In addition, initial low monthly payments allow you to pay for the many expenses associated with buying a home. The cost of moving expenses, home furnishings, and landscaping can quickly add up those first couple of years.
Buy Down Mortgage Considerations
Buy Down mortgages should be considered along with other types of mortgages. In some cases if the large initial payment was used as part of a down payment, you may find better terms with a fixed rate or ARM. You may also find that if you are planning to move within seven years, an ARM can give you the same low monthly payments without the upfront cost.
No matter what type of home loan you choose, research lenders and loan terms beforehand. Compare interest payments and base your decisions on your financial goals.
Bankruptcy can make getting any kind of financing much more difficult. However, it’s not impossible anymore to get financing, even a few days after the discharge of a bankruptcy. But, is getting a loan soon after a bankruptcy a smart thing to do?
It can be tempting to buy a new home, new car, etc., after a bankruptcy discharge you have no debt left. You will probably feel like you can afford a larger house payment. Here are some factors to consider before committing yourself to a new house payment.
Pre-Payment Penalty – Almost every subprime loan (bad credit loan) now comes with a pre-payment penalty. This penalty is usually about 6 months worth of house payments. The pre-payment penalty period usually lasts 2-3 years. That means, if you want to refinance or sell your house in that period of time, that will make it very difficult, if not impossible to sell or refinance. That means that you are locked in. Once you sign those mortgage papers you absolutely have to make those payments. If you don’t have the amount of the pre-payment penalty in savings, you are locked into making the payments or losing the house.
Two Year Mark – Keep in mind that after 2-3 years from the date of the bankruptcy discharge, mortgage loans will be much easier to get. With a small down payment, you might even be able to get a mortgage loan without a pre-payment penalty. So, if you are within 6 months or so from the 2 year mark. It would be smart to wait it out and have more mortgage loan options.
Setting Yourself Up For Failure Again? Borrowing Too Much? – If you do decide to buy a house. Buy one that you know you will be able to afford. Don’t max yourself out on credit, living right up to the edge of your income. If your income suddenly drops, you’ll want to make sure that you can still afford your house payment. Be conservative with how much home you need to buy.
A brokerage, in financial terms, is a company that processes – or brokers – the transaction between an equities trader and a major equities exchange. A broker is also the party that mediates between a buyer and a seller, acting as a principal party in the deal.
In the past, banks and other lending institutions handled their own loans. But as the mortgage market has grown in size and competitiveness, mortgage brokers have become more common. In fact, in most markets, mortgage brokers are now the largest distributors of mortgage products for lenders. In order to ensure consumer protection, most mortgage brokers are regulated. The extent of the regulation depends on the jurisdiction.
The broker is responsible for providing advice that is appropriate for the borrower’s circumstances, and they’ll be held liable if their advice is unethical or damaging to the client. In some jurisdictions, a broker’s responsibility is limited to pointing the borrower in the direction of an appropriate lender, and they don’t otherwise advise the clients.
Tasks of a Houston mortgage broker:
1. It is the responsibility of a mortgage broker to conduct marketing strategies in order to attract clients.
2. It is the mortgage broker’s responsibility to properly assess the borrower’s circumstances, including credit history and the ability of the borrower to pay off debt.
3. Searching the market to find the right mortgage product for the client.
4. Applying for a lender’s agreement in principle (pre-approval)
5. Gathering all necessary documents.
6. Completing the lender application form.
7. Explaining the legal disclosures.
8. Submitting all material to the lender.
A Houston mortgage broker will usually work with several lenders to find the best financing for a borrower, whether they have perfect credit or bad credit. A mortgage broker will always search for the lowest mortgage rate at several institutions, unlike the loan officer at a neighborhood bank. Brokers are paid by adding on fees, or “points,” so it pays to shop around for a mortgage broker.
And to help you search for the top chosen Houston mortgage brokers you may try browsing on the internet since most of the reputable mortgage brokers are found online. A reputable online mortgage broker is ideal for mortgage lenders since they are able to save time and effort since all the information that they need is consolidated into one site.
Moreover, it also easier for borrowers to get quotes from online mortgage brokers and allows borrowers to conduct mass canvassing. The mortgage rate is usually based on current interest rates, the property’s location, the borrower’s credit score and employment history so it vital for a borrower to provide the mentioned information in order to receive a rate quote..
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