The Best Time to Buy that House?
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Buying a house is both exciting and scary, especially for the first-time buyer. Most people prefer to factor in timing, in order to get the best rates. But other than being able to understand market trends, there are other things you need to look at to see if you qualify for that home mortgage.
You have a steady source of income. Examine carefully your current cash flow. Qualifying for a home mortgage means you are capable of a long-term payment commitment so you will need to consider your situation years from now. Try to foresee future expenses, plans, job movements and changes.
You have enough money saved to last you at least three to six months in case your income source is cut or interrupted. This means that you can continue to pay for your mortgage (along with other bills) and the lender has nothing to worry about.
Your debts are under control. Sure you still make monthly payments on that student loan and that credit card and you still haven’t paid up the car loan, but if your debts are consistently paid with no bad marks at least a year or two from today, then you’re looking good. That means you can be trusted.
Your monthly total debt payments (mortgage, loans, credit cards) remain below or well below 38% of your gross monthly income. This shows the lender that you are capable of paying responsibly and that a home mortgage will not drive you to bankruptcy.
If your credit history is less than perfect, it will not automatically disqualify you for a home mortgage, but a good history means paying lower interest rates and monthly mortgage payments. Before talking to a lender, check your history from one of the three credit bureaus. There might be some errors you need to correct or you might want the best arrangement that can lift your credit rating a notch higher.
You can afford to pay down payment. You will need a sizable amount of cash to pay downpayment for your house of choice. That’s 20% of the total price. You may also choose a low or zero down payment scheme, but it may not be cost effective in the long run.
Decide to buy when you’re ready. A house is probably the biggest financial decision you will ever make in your life so be sure you go into it when you yourself feel that you can handle the responsibility. All that timing in order to qualify really depends on you.
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Money-Saving Guide for College Students
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During college, a student tends to take money for granted because of all the excitement generated by the activities, studying and hanging out with friends.
You would not want to put yourself in debt or overspend your allowance that is why you need to keep a close watch of your spending habits.
Here is an easy to follow guide on how a college student can save up those hard-earned bucks:
1. Make a list of your expenses.
By now, you should know how much money you expect to have for each week or month that you have classes. The money that you will live on could be from your parents, your part-time work or a student loan.
List down your spending essentials like food, school supplies and books. This should give you an idea of how much you would get to spend each week.
Do not forget to save some petty cash for unexpected expenses.
2. Avoid using your credit or debit cards.
It would be easier if you do not have a credit or a debit card with you all the time. Just keep them handy for a big expense that you really do not have cash for.
For small items that you need to purchase, it is better to still use the cash that you have with you to keep yourself from overspending.
3. Eat well.
Eating out a lot might save you time but it will definitely not save you money. In the long run, it will be more costly for you to eat each meal at fast food restaurants.
Instead, you can spend your food money on groceries and you can just eat in your dorm or apartment; and even pack your lunch when you have classes. With the right meal-planning, you would not just save money but you would also get to eat healthier.
4. Treat yourself once in a while.
By following this guide and keeping your luxury items to a minimum, you can save yourself a lot of money while studying for college. Who knows, you might even save enough to buy yourself a big item that otherwise, you would not even have the money for?
Sphere: Related Content The Secret of Home Mortgage Refinancing
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Refinancing your home mortgage comes with numerous advantages. Primarily, home mortgage refinancing could save you a lot of home on your payment. It can also allow you to pay off the full home mortgage faster, especially when you have feasible terms.
When you’re planning to refinance your home mortgage loan, make sure to consider these four important things to ensure it will not cause any problems afterwards:
* Learn the terms of your original mortgage
Before shopping around for the appropriate home mortgage lender, ensure that your original mortgage does not have pre-payment penalties or any kind of early payoff penalty.
Many people refinance their home mortgage not knowing that they will be charged for a pre-payment penalty. These penalties usually range from six months up to three years, plus another penalty for early payoff.
Although penalty amount varies, the average pre-payment penalty amounts to a six-month worth of mortgage interest. In order to justify refinancing mortgage loans with pre-payment penalties, you need to have significant payment and interest savings.
* Maximize your options
In order to ensure you’re getting the lowest rate in the market, apply for pre-approvals to several different lenders. However, make sure that the lender is not pulling out your credit history during an initial pre-approval application.
Be aware that every time your credit history is pulled, it slightly reduces your credit score. When your credit history has too many inquiries, this may prevent you from refinancing your mortgage loan with a low rate.
In addition, assess different lender offers concerning interest rate offerings and closing costs. Remember that these two factors will largely affect your lender choice. Choose a lender with feasible rates to maximize your mortgage refinancing benefits.
* Choose your lender
Once you have compared different lenders, you can now allow your choice of lender to pull your credit history. Then, make sure to get the interest rates and closing costs into writing. Ask your lender to provide you with a quotation in advance of all possible costs involved with your loan.
Ask for information about whether the refinancing loan, which you will be getting, has pre-payment penalties. Most lenders leave this important information out, knowing they might scare consumers away.
In refinancing home mortgage, make sure you shop around and assess different lending options. Do not grab the first opportunity that comes before you. Be a smart consumer and refinance your home mortgage with the lowest rate possible.
Sphere: Related Content Home mortgage loan types
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Choosing the mortgage that is right for you is essential when one is involved in the process of home purchasing. Thus it is important that all options are understood.
Basically, the two things one should consider when considering a home loan is what type meets best your home purchasing needs as well as which loan offers the most ideal schedule for repayment.
The fixed mortgage rate loan types
Fixed rate home mortgage loans have an interest rate that basically remain the same for the whole life of the loan.
These payments have predictable monthly fees yet you are immune to any rising interest rates. Therefore, your interest and principal payments will not increase.
The adjustable home mortgage rate
Mortgages that are adjustable in rate have rates of interest that adjust in a periodic manner as based on the exiting conditions of the market.
The rate is initially fixed during the period of its introduction (anywhere between one year to a decade) and is usually lower compared to a mortgage that has its rate fixed.
After this period, the rate then adjusts every year or about semi-annually as based on the index of the market, however it cannot go beyond the pre-determined cap adjustment.
Jumbo home mortgage loans
The amount given out on this type of loan exceeds the amount established by corporations. Since jumbo home mortgage loans are sold and bought on a scale that is smaller, they have rates that are a little high compared to other type of home loans.
B/C home mortgage loans
These types of loans are given to those borrowers that have filed recently for foreclosure or bankruptcy or those who have late payments on their reports of credit.
The purpose of B/C home mortgage loans is the offer of temporarily financing to applicants until they could qualify for type A conforming financing.
Government home mortgage loan programs
One type of government loan programs is VA loans. These types of loans are definitely guaranteed by the US Department of Veterans Affairs.
This allows service persons or veterans to acquire home mortgage loans with terms that are favorable (usually in the absence of a down payment).
RHS home mortgage loan programs
RHS means Rural Housing Service if the USDA or the US Department of Agriculture. This type of loan guarantees residents in the rural area with very minimum costs for closing. Down payments are also unnecessary.
All in all, there are a lot of home mortgage loan programs available. It all depends on your needs, wants and means.
Sphere: Related Content Saving for your Home Mortgage Down payment
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If one is faced with monetary constraints when buying a house, he will be forced to avail of a home mortgage plan. A home mortgage plan allows a person to pay up for a house for a longer period of time. A house can be paid up for by a buyer on an extended period, paying a certain percentage of the whole amount every paying period with some interest payment.
Depending on the agreement of the lender and the borrower, one can choose the amount of down payment that you would like to pay for the initial period. One can choose different amounts for the down payment.
What are some things to consider when choosing an amount to pay for the down payment of a home mortgage plan? Always remember that mortgage payments are always affected by interest rates. Interest rates can add up if it takes you longer to pay up for the principal payment. The longer it takes you to pay, the more you pay. Also, remember that if you can minimize the principal payment amount as you make a larger down payment, then it will always be better. It all depends on the amount of money that one has in his pocket today and how much he expects to make tomorrow.
How does one save for the down payment for a home mortgage? A house is one of the most important and probably one of the most expensive investments that one will get in his whole life, and paying the down payment can really dig a hole in one’s pockets. Saving is one of the most important things to consider when buying up a house.
There’s one rule that many people don’t realize about how they should save. For most people, savings is the leftover money after all the daily (and miscellaneous) expenses have been covered. The truth about savings is that it should be the first “expense” that should be made. Calculate the amount of money that you already have in your bank account that you are willing to allot to the down payment and divide the remaining balance of the down payment amount by the number of months that is left for you to pay the down payment. Save the said amount each pay day by prioritizing it as a first expense.
Following the step above is the only sure way to save for a home mortgage down payment. Make sure that you follow it before you seriously consider buying a house.
Sphere: Related Content Lowering Home Mortgage Interest Rates
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Interest payment for home mortgage arrangements is a very important thing to look at when paying up for a home. Many people pay more than they have to because they didn’t do a little research before making the arrangements for the home mortgage.
There are two basic major types of home mortgage that are available out there. One is called a fixed rate mortgage which involves a fixed amount of payment for the whole pay-up period. This means that regardless of the economic conditions, one has to pay a certain amount of money to the lender for each payment period.
Another basic type of home mortgage is the adjustable rate mortgage. This is an arrangement which allows a person’s payment to be pegged on economic indicators such as those of the money market. This means that a person’s interest rate payment can go up or down depending on the performance of the entire economy. Adjustable rate mortgages usually have lower interest rates than the fixed rate mortgages (because of the risks involved in the adjustable rate mortgage).
During the last few years, we probably have had the lowest interest rates for the last 50 or so years. This is a good indicator for most home mortgage payees, but it is also an indicator that for the next few years, the interest rates will probably go up.
Remember that interest rates and payments worsen after time. Paying up for a home mortgage all boils down to how much cash can you generate in the shortest period of time. This will determine how much interest payment you have to make for the house. The shorter time it takes you to pay up for the house, the lesser your expenses will be for the interest payment.
Interest rate movements are very dynamic and exciting. Having a strong view towards interest rates movements can determine one’s position in paying up for a mortgage. If one faithfully believes that rates are bound to go up, then he is better off availing of a fixed rate home mortgage, but if one sincerely believes that rates are still bound to go down, he should get an adjustable rate home mortgage to take advantage of the movements.
Having a good sense of interest rates and their movements can save one a lot of money. Ask your lenders about the different schemes and calculate how much you are bound to pay for each type of arrangement, weight the risks and potentials of the movements of the interest rates and choose the best payment scheme.
Sphere: Related Content Knowing the Best Time Period for a Home Mortgage
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Having a home that you can truly call your own is one of the necessities in life. A home is the center of all family activities and it is therefore important in building sturdy family ties. But paying for a home is not easy, and most of the time, one has to avail of a home mortgage to be able to buy up a house.
A mortgage is necessary for people who do not have enough cash to be able to pay for the house upfront. It is basically a payment scheme where the borrower can choose between different schemes and time periods (whichever is most comfortable for him) to pay up for the house.
There are different kinds of home mortgage schemes. One can avail of a fixed rate home mortgage scheme or an adjustable rate home mortgage scheme. In a fixed rate home mortgage scheme, one can avail of a house by paying the same amount monthly, for a certain period of time, regardless of the situation of the economy. An adjustable rate home mortgage scheme allows one to make use of the fluctuations on the interest rates to finance his home.
Whether one is availing of a fixed or adjustable rate home mortgage scheme, the time period for paying up is a very important issue. The period will be determined depending on the agreements between the borrower and the lender. The usual periods vary from 15 to 30 years. There are two basic yet very important tips to consider when choosing the time period for a home mortgage.
1. Study interest rates
Interest rates are bound to go up. Analyzing the interest rates movements can give one an idea of whether it would be worthwhile to spread the payment longer or shorter. One might need the services of a professional in this aspect, but it will be worth the pay.
2. Know your budget
If you have or if you know that you will have enough money to be able to pay for the house in a shorter period of time, then do so. A shorter period payment will always result in a lowered amount of payment overall.
Choosing the right time periods for paying up a home mortgage is half of the whole mortgage game. It will determine whether you have made the right decisions or not. So be wise in doing so.
Sphere: Related Content Re-Financing with Shorter Loan Terms
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For some homeowners there is the possibility of making a sound re-financing decision even when interest rates are stagnant, the homeowner does not have a great amount of equity in the home and the homeowner’s credit score has not increased significantly. You might wonder how this is possible. It certainly isn’t an option for every homeowner but those who can afford to pay significantly more each month can yield huge financial benefits by refinancing their loan terms from 30 years to 15 years. The benefits which may result from this type of re-financing include a significant overall savings, the ability to gain equity quicker and the ability to repay the balance of the loan quicker.
Higher Monthly Payments Increase Overall Savings
Re-financing with shorter loan terms is definitely not an easy option but homeowners who have a large monthly cash flow or who receive a sizable promotion at work might be able to consider the possibility of re-financing by decreasing the loan terms from 30 years to 15 years.
The result of this type of re-financing will be a significantly higher monthly payment which is not conventional but can be worthwhile if it meets the needs of the homeowner. In particular this type of re-financing option is a viable solution if the homeowner can afford the increase in monthly payments and has an overall goal of reducing the amount of interest they will pay over the course of the entire loan.
Reducing the amount of interest is critical to the overall savings plan because the homeowner does not have the option of reducing their original debt but they can drastically reduce the amount of interest paid over the course of the loan. Consider two loans with a 5% interest rate. One loan is to be repaid over a period of 15 years while the other loan is to be repaid over a period of 30 years. It is clear that in this example, the homeowner with the 30 year mortgage will pay more during the course of the loan.
Equity Gained Quicker
Another major advantage to re-financing by reducing the loan terms from 30 years to 15 years is the ability to gain equity in the home at a significantly faster rate. The amount of the equity in the home is equal to the amount of the principal loan which has already been repaid by the homeowner. Under a conventional loan, the homeowner typically pays a combination of principal and interest with their monthly payments. The amount of the principal which is repaid on two mortgages for the same amount and with the same interest rate will be different if one loan is a 30 year term and the other is a 15 year term. The homeowner with the 15 year mortgage will be paying more of the principal each month and will therefore be accumulating more equity each month. Gaining equity in the home quicker is ideal because it gives the homeowner greater flexibility. The equity in the home can be used for a number of purposes including home improvement projects, travel, educational pursuits and small business ventures.
Loan Repaid Quicker
One advantage of shortening the loan terms, which cannot be denied by some homeowners, is the ability to repay the loan quicker by re-financing to shorten the loan terms from 30 years to 15 years. In this case the homeowner will have completely repaid the home loan a full 15 years earlier than they would have under the conventional loan. This is advantageous because it can enable the homeowners to enjoy living mortgage free a full 15 years earlier. Once the mortgage is fully repaid, the homeowner may be able to make significantly more sizable contributions to his retirement plan. Some homeowners may even be able to afford to retire once their mortgage is repaid in full. This ability can have a significant impact on the quality of life for the homeowner. Homeowners may find themselves with the financial means to travel, assist family in educational pursuits or invest in a small business.
Sphere: Related Content Comparison Shopping When Re-Financing
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Homeowners who are re-financing their home for the first or even the second or third time should thoroughly research all of the available options to ensure the best possible interest rate and terms are secured. Homeowners are sometimes lazy when it comes to re-financing. There may a large drop in interest rates or a change in the financial situation which warrants a re-finance. Although the homeowner may be aware that a re-finance is warranted, the homeowner may not be aware that it sometimes takes a great deal of work to find the best possible rates and terms.
Homeowners are often inclined to re-finance with the same lender who granted the original mortgage or with the same lender who handled prior re-finances. The theory behind this reasoning is along the same lines as, “If it ain’t broke, don’t fix it.” These homeowners figure their current mortgage is adequate and they are happy with the current lender so there is no need to investigate further options. However, this cavalier attitude can be quite costly for the homeowners.
Try All the Options
Homeowners who are considering re-financing their home should contact a number of lenders and obtain rate quotes from each of them. When soliciting quotes the homeowners should consider all of their available options but should limit these options to established lender. While a newer lender may be offering fantastic rates and loan terms it is considered quite risky to go with this type of lender as opposed to a more established lender.
Homeowners who wish to further investigate smaller lenders who do not have an established history should proceed with caution. Unless the lender has trusted friends or family members who are willing to vouch for the lender, the homeowner should investigate these smaller lenders carefully. Visiting a website address is not the best way to ensure credibility. Designing a professional looking website is a fairly simple process. Most website designers could design and upload such a website in less than a day.
Friendly Competition
When comparison shopping for the most favorable rates, homeowners should make it well known that they are shopping around for rate quotes and are not making a decision immediately. Lenders who know they have some competition may be more likely to offer a lower interest rate than they would if they did not think the homeowner was considering other options. Although this may not seem quite fair to the lender, the business of re-financing is a competitive business. Just like a plumber might offer his most competitive rate if he knows the homeowner is seeking estimates from a number of different plumbers, lenders are apt to do the same. They make their money from homeowners and having a homeowner re-finance their mortgage does not help them out at all financially.
Some lenders may think the homeowner is bluffing and may not offer the best rate initially. However, if the homeowner rejects the offer and states they have a better offer with another lender, the first lender may be enticed to offer an even lower interest rate just to see if they can sway the homeowners. While cost is certainly important, it is not the only factor to consider. Some homeowners might re-finance with a lender who offers slightly higher rates if the homeowner feels as though this lender is more responsive to his needs.
Sphere: Related Content Is Re-Financing Always Worthwhile?
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This is a very important question which all homeowners should ask themselves both at the start and towards the end of the process of re-financing. The answer to this question can spur the homeowner to investigate re-financing further or convince the homeowner to table the thoughts of re-financing for the moment and concentrate on other aspect of owning a home.
Establish Financial Goals
This should be the first step in the process of determining whether or not re-financing is worthwhile. Without this step, a homeowner cannot accurate answer the question of the worth of re-financing because the homeowner may not fully understand his own financial goals. While financial goals may run the gamut from one extreme to another the most basic question to ask is whether the more significant goal is long term savings or increased monthly cash flow. This is important because re-financing can usually achieve these two goals.
Do You Want to Save Money in the Long Run?
Homeowners who establish a goal of saving money in the long run should consider re-financing options such as lower interest rates or shorter loan terms. Both of these options can considerably lower the amount of interest the homeowner is paying on the loan. This is significant because paying less interest will result in a greater cost savings.
Consider an example where a homeowner has an existing debt of $100,000, an interest rate of 6.25% and a loan term of 30 years. Just by reducing the loan term to 15 years the homeowner can significantly decrease the amount which is paid in interest during the course of the loan. However, this option will also result in an increase in the monthly payments made by the homeowner. Therefore this type of re-financing option may only be available to those who have enough cash flow to compensate for the increase in monthly payments.
Do You Want to Increase Your Monthly Cash Flow?
Some homeowners may have a chosen goal of increasing their monthly cash flow. For these homeowners the overall cost savings may not be as important as having more money available to them each month. These homeowners might consider a re-financing option in which they are able to extend their loan terms. This means they will be repaying the existing debt over a longer period of time. The homeowner will pay more in interest in the long run but will achieve their goal of lower monthly payments and an increased cash flow.
How Will Re-Financing Affect Tax Deductions?
This is another serious consideration for homeowners who are interested in investigating the possibility of re-financing. The interest paid on a home loan is often tax deductible. A homeowner who re-finances in a manner which results in less interest being paid annually may adversely affect their tax strategy. The implications of this type of chance can be amplified for homeowners who were previously just below a significant tax break line. A significant decrease in the amount of interest paid will mean a significant decrease in the deduction the homeowner is allowed to take. This reduced deduction can put the homeowner in an entirely different tax bracket and could end up costing the homeowner money in the long run. For this reason, homeowners who are considering re-financing should have a tax preparation professional determine the ramifications re-financing will have on their tax return before a decision is made.
Sphere: Related Content Is It Time to Re-Finance?
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Whether or not to re-finance is a question homeowner may ask themselves many times while they are living in their home. Re-financing is essentially taking out one home loan to repay an existing home loan. This may sound odd at first but it is important to realize when this is done properly it can result in a significant cost savings for the homeowner over the course of the loan. When there is the potential for an overall savings it might be time to consider re-financing. There are certain situations which make re-financing worthwhile. These situations may include when the credit scores of the homeowners improve, when the financial situation of the homeowners improves and when national interest rates drop. This article will examine each of these scenarios and discuss why they may warrant a re-finance.
When Credit Scores Improve
There are currently so many home loan options available, that even those with poor credit are likely to find a lender who can assist them in realizing their dream of purchasing a home. However, those with poor credit are likely to be offered unfavorable loan terms such as high interest rates or variable interest rates instead of fixed rates. This is because the lender considers these homeowners to be higher risk than others because of their poor credit.
Fortunately for those with poor credit, many credit mistakes can be repaired over time. Some financial blemishes such as bankruptcies simply disappear after a number of years while other blemishes such as frequent late payments can be minimized by maintaining a more favorable record of repaying debts and demonstrating an ability to repay existing debts.
When a homeowner’s credit score improves considerable, the homeowner should inquire about the possibility of re-financing their current mortgage. All citizens are entitled to a free annual credit report from each of the three major credit reporting bureaus. Homeowners should take advantage of these three reports to check their credit each year and determine whether or not their credit has increased significantly. When they notice a significant increase, they should consider contacting lenders to determine the rates and terms they may be willing to offer.
When Financial Situations Change
A change in the homeowner’s financial situation can also warrant investigation into the process of re-financing. A homeowner may find himself making considerably more money due to a change in jobs or considerably less money due to a lay off or a change in careers. In either case the homeowner should investigate the possibility of re-financing. The homeowner may find an increase in pay may allow them to obtain a lower interest rate.
Alternately a homeowner who loses their job or takes a pay cut as a result of a change in careers may hope to refinance and consolidate their debt. This may result in the homeowner paying more because some debts are drawn out over a longer period of time but it can result in a lower monthly payment for the homeowner which may be advantageous at this juncture of his life.
When Interest Rates Drop
Interest rates dropping is the one signal that sends many homeowners rushing to their lenders to discuss the possibility of re-financing their home. Lower interest rates are certainly appealing because they can result in an overall savings over the course of the loan but homeowners should also realize that every time the interest rates drop, a re-finance of the home is not warranted. The caveat to re-financing to take advantage of lower interest rates is that the homeowner should carefully evaluate the situation to ensure the closing costs associated with re-financing do not exceed the overall savings benefit gained from obtaining a lower interest rate. This is significant because if the cost of re-financing is higher than the savings in interest, the homeowner does not benefit from re-financing and may actually lose money in the process.
The mathematics associated with determining whether or not there is an actual savings is not overly complicated but there is the possibility that the homeowner will make mistakes in these types of calculations. Fortunately there are a number of calculators available on the Internet which can help homeowners to determine whether or not re-financing is worthwhile.
Sphere: Related Content Finding Re-Financing Information
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Homeowners who are considering re-financing but are not knowledgeable about the subject have a number of options available to them for finding more accurate information regarding the types of re-financing options available as well as the ways to obtain the best available rates and tips for finding a reputable lender. This information can be obtained through a number of resources including published books, Internet websites and conversations with experts in the financial industry who specialize in the area of re-financing. All of these sources can be very helpful but there are also precautions homeowners must take when using each information source. Taking these precautions will help to ensure the homeowner is receiving accurate information.
Using Books for Research
Published books are often considered to be one of the most reliable resources for researching re-financing options. However, not all books on the subject are created useful. Readers may find some books provide a great deal of useful, current information while others books are filled with outdated information and information which is not 100% accurate.
The best way to select a book or books when researching the subject of re-financing is to start the search with books that were only recently published. This is important because the financial industry is continually evolving and as a result books which were published only a few years ago may alr