Ever considered the rent-to-own route to homeownership? This innovative approach offers a unique blend of renting with an end goal of owning, providing a lifeline for those facing credit or down payment challenges. Dive into our comprehensive guide to understand the nuances of lease options, the potential benefits, and how to navigate this distinctive pathway. Whether you're looking to rehabilitate your credit, bridge the down payment gap, or simply seek financial flexibility, rent-to-own might be the key to unlocking your dream home. Discover if this unconventional route aligns with your homeownership aspirations. Continue reading...
Mortgage brokers act as agents for consumers looking for the best deal possible on a home mortgage loan. Lenders at banks may not be able to find the most competitive interest rates out there. Mortgage brokers can help consumers become more educated about the various kinds of loans out there, some of which are subsidized by the government. Mortgage brokers find and place mortgage loans with consumers who need it to buy a house. Continue reading...
Most mortgage companies today are brokerages that do not underwrite or fund the loans themselves. They help to place customers with the most competitive loans that make sense for their situation and personal finances. Many small mortgage companies went bankrupt in the housing bubble of 2008. Mortgage companies are known as loan originators since they pair customers with loans that suit them and get the process started. Some companies also fund mortgage loans, but most are basically brokerage services that do not lend the money themselves. Continue reading...
When a mortgage loan is made to a consumer, the bank or loan institution is the mortgagee, while the consumer is the mortgagor. Mortgages are long term loans secured by the real property of the individual borrowing the money, and they are generally used for homes, called home mortgages. The lending institution, which might be a bank or a mortgage company, is the mortgagee, lending money to the homebuyer, who is the mortgagor. Continue reading...
Mortgage Equity Withdrawals (MEWs) may effectively be a withdrawal when viewed in a balance sheet, but they are actually loans that use the equity in a home as the collateral. These are also known as home equity loans. A full liquidation of equity through such a loan is a reverse mortgage. When a homeowner has paid off their home, they have a lot of equity and collateral to work with if they would like to get some liquidity (money) out of a hard asset. Continue reading...
Mortgage fallout refers to the instance of proposed loans falling through before closing. This is something tracked by not only mortgage producers and their mortgage companies, but also economists who keep up with mortgages and the secondary market for mortgage derivatives. Since mortgages take two months or more to close, the fallout rate can indicate a stagnancy in the economy and trouble for the secondary mortgage market. Continue reading...
Mortgage fraud is misrepresentation in mortgage contracts designed to benefit one or more parties to the contract. Sometimes it can be as simple as an applicant lying about financial information to make himself seem more credit-worthy. Sometimes it can involve a few people, such as a real estate agent, an appraiser, and a lender, all colluding to split the profits on a property that isn’t worth as much as they say it is. Continue reading...
Mortgage insurance may refer to a few kinds of insurance that protects the lender in a mortgage loan. It might be mortgage life insurance, mortgage title insurance, private mortgage insurance (PMI), or another form of protection. Usually the borrower will pay the premiums for such insurances. Mortgage insurance protects the bank or lending institution from various risks that might prevent them from being repaid for their loan. This might include the risk that a borrower will default on payments or that the borrower might die. Continue reading...
Mortgage Interest Deductions are allowable income tax deductions that equal the amount of mortgage payments in a year that are attributable to interest rather than principal repayments. Mortgage insurance premiums may also be deductible. Interest deductions are subject to the Pease phaseout, while mortgage insurance premium deductions are not allowed over certain income levels. Interest payments on mortgages are generally deductible from income taxes. Continue reading...
Mortgage life insurance is any life insurance policy which covers the life of the borrower in a mortgage loan and assigns the mortgage lender as a creditor-beneficiary entitled to recoup their losses from the life insurance policy. The bank or lender will be designated as the assignee for the collateral of the life policy. Historically speaking, mortgage life insurance was a term policy with a decreasing death benefit, also called a face amount, that equaled the remaining amount due on the mortgage loan. As the home was paid off, the amount of life insurance required would decrease, and, in most cases, the premium with it. Continue reading...
Mortgage modifications are arrangements agreed to by the lender that are outside of the contractual mortgage agreement, in instances where the borrower experiences unique circumstances or hardship. An example of a mortgage modification is a loan forbearance, which is when a lender agrees to let the borrower temporarily stop payments for an agreed-upon span of time, before resuming payments with an added repayment stipulation for the time spent not paying. Continue reading...
Lenders have a different par rate for different types of borrowers, which is the base around which they have the ability to negotiate deals. The par rate will be based on the prevailing interest rate environment, with factors changing it slightly for different potential borrowers and the risk associated with them based on creditworthiness. Par rate is the fair market value of a loan for a person with certain risk characteristics, from a lending institution of certain size and qualities. The par rate is the reference point around which a borrower and a lender will strike a deal, even though this is often unknown to the borrower. If the lender, which might be a bank loan officer or a mortgage broker, gives the borrower a break on the front-end cost of the loan, the borrower might have some interest tacked on to the par rate to make up for it. Continue reading...
Mortgages take a while to process, but a broker or bank can lock in a rate for themselves or their clients. Locking-in rates costs money somewhere along the line, and the longer the rate is locked in, the more it costs. 60 days is generally the longest time frame you will see a rate locked in, due to the cost associated with that risk. Mortgage rates can be locked in for a period of time long enough to underwrite the loan. This might be for a period as short as 20 days or as long as 60 days. Continue reading...
A mortgage short sale occurs when a borrower and a lender settle for less than is owed on a mortgage because changes to the housing market or financial status has made it impossible to continue the arrangement. Lenders would rather take what they can get, while they still can, in this sort of situation. An example of a short sale would be an older couple reaching retirement age with a house that is bigger than they need in a neighborhood that has seen the property values decrease, and due to pension cuts they will have hard time affording the house in retirement. The lender would settle short to avoid having to go through a foreclosure and all that it implies. Continue reading...
Mortgage subsidy bond is another word for a mortgage revenue bond, which are municipal bonds which are used to fund mortgage relief programs and refinancing arrangements through the state or municipal government. In 1980, the Mortgage Subsidy Bond Tax Act established some rules and definitions surrounding mortgage subsidies and their bonds, and, more specifically, removing their exemption from federal taxation. Continue reading...
Mortgage suitability is a standard that does not technically exist in a regulatory way at this point, even though some legislators and consumer protection groups have sought such a standard. Some financial services representatives, for instance, operate under a suitability standard that takes the financial situation and goals of the individual into account when making investment recommendations. This protects consumers to the extent that it deters some professionals from taking advantage of the consumer and being possibly subject to fines, sanctions, and suspension or loss of license due to violations of the standard. Continue reading...
The mortgagor is the borrower in a mortgagor/mortgagee relationship, where the mortgagee is the lending institution that makes the mortgage loan. Mortgages are used to purchase real property, usually single family homes. The purchase of a home with a mortgage and the payments on the mortgage are one of the largest financial decisions or obligations that a mortgagor will ever make. If a mortgagor is delinquent on payments, he or she might be categorized as a home debtor, and the loan would be subject to foreclosure. If there is a foreclosure, the bank or lender will reposes the house, evict the former owner, and sell the house as quickly as possible, sometimes through an auction. Continue reading...
Most mortgages require that an appraisal or at least inspection is done before any loan is made. There are exceptions to this, in the form of no-appraisal mortgages which are available to lower-income homeowners, qualifying members of the military and its veterans, and some farmers. Most no-appraisal loans are through federal programs such as HARP, FHA, and the VA. The purpose of these loans is to keep people in their homes and to keep the economy relatively stable. These are generally not first mortgages, but are relief, modification, and refinancing arrangements to qualifying homeowners that already have a mortgage outstanding. Continue reading...
No-Cost Mortgages waive the initial closing costs by making a repayment structure for those costs into the interest payments on a mortgage loan. Closing costs can range from 2%-5% of the total cost of the home, and include attorney fees, underwriting fees, application fees, and so on. These costs are deferred and are paid in the form of additional interest on the loan. Closing costs are separate from down-payments of equity, and are a miscellaneous hodgepodge of a wide range of fees associated with closing a mortgage deal. These costs are sometimes covered by the seller, but most often they are paid by the buyer. Continue reading...
No-fee mortgages are synonymous with no-cost mortgages, which might apply to first mortgages or refinancing arrangements where the closing costs are paid by the lender, broker, or bank, but a higher interest rate is charged on the loan as a means of recouping those waived fees. Closing costs and fees are calculated based on the total amount being loaned, and might be about 3% for a first mortgage and 1.5% for a refinanced mortgage. When the fees and closing costs associated with a mortgage loan are waived for the borrower, they are usually baked in to a higher interest rate on the loan. Continue reading...