Thursday, July 30th, 2009 at
1:28 am
Basics
Your debt to income ratio is a basic measure that mortgage lenders use. It involves:
Total monthly debt loadTotal pretax incomeOverall ability to payTotal Monthly Debt Load Your total monthly debt load that a lender will analyze includes: Credit cardsStudent loansCar paymentsDepartment store cardsOther monthly debt paymentsYour mortgage paymentThis is the sum total of your usual monthly debt payments. In some cases a lender may ignore a debt totally. This is the case, for example, if you have a $500 a month car payment but there are only two more months left on the loan. The lender may choose to ignore this $500 per month debt load because they know if will go away shortly.
Lenders should be able to figure out the monthly debt balances and when they expire from your credit report, although you should also disclose relevant items to them in your mortgage application.
Lenders will also factor in the expense of the new mortgage your are applying for. This includes the mortgage payment, property taxes, home owner association dues, hazard insurance, and any other property related expenses.
Total Pretax Income The lender will add up all your pretax income, which may include:
Base salarySales commissionsBonusesOvertimeRental incomeInterest incomeOther incomeAll of this income is added together to figure out your pretax income. They may take an average of your past year’s monthly earnings. Temporary jobs or seasonal work may not be added into this total because it is not considered regular work or income.
Total Overall Ability To Pay The lender will compare the borrower’s total overall monthly debt load with their monthly pretax income.
If a borrower’s pretax income is $10,000 and their monthly debt payments are $4,000 then the borrower has a debt/income ratio of 40%. This is acceptable to many lenders.
New Opportunities Many lenders will now allow a total debt burden of as much as 55% of the borrower’s income.
This allows more people to be able to buy a property. Lenders may compensate themselves for the additional risk of this type of loan with a higher than normal interest rate.
By: Ben Afzal
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Wednesday, July 29th, 2009 at
9:56 pm
There are many people who are looking to purchase a home, but who can not afford a down payment. With down payment requirements ranging from 5-20 % of the total price of a home, many people find that this amount of money is simply out of reach. When this is the case, an individual may consider applying for a 100% mortgage loan. A 100% mortgage allows one to borrow money for the full amount of their home loan without coming up with a down payment. You will generally need good credit to secure this type of loan, but your credit doesn’t have to be perfect.
There are several ways to finance your 100% home loan. You may want to consider a 80/20 loan. This method requires that you take out two separate loans. You will in effect, have a first and second mortgage. Your first loan will be 80% of the full value of your home, while your second mortgage will cover the remaining balance. Your credit score will determine the amortization rate of your first loan. The second mortgage generally carries a higher interest rate then the first mortgage. The primary benefit of an 80/20 loan is that you it doesn’t require you to make a down payment and you can also avoid paying private mortgage interest.
A second type of 100 % mortgage loan is one that you will require you to finance all of the loan with only one mortgage. This type of loan will require that you purchase private mortgage insurance, but again, you won’t have to provide a down payment.
Many people looking to purchase a home may feel a little discouraged if they do not have the adequate funds to provide a down payment. They may worry about being able qualify for a loan, or being forced to pay higher, monthly payments. While these are legitimate concerns, there are opportunities for individuals who can’t afford a down payment to still be able to qualify for a home loan.
Yes, the subsequent payments will be higher then they would be if one could afford a down payment. However, one can still find a home that fits into their budget, even if they have to borrow all of the money for their home.
To find the best 100 % mortgage loan, it is best that you shop around. The mortgage industry is competitive and you will undoubtedly be able to play this to your advantage. Be sure that you are comfortable with all of the terms of any offers, as well as the required monthly payments. If you take the time to do your research and to comparison shop, you should be able to find a 100 % mortgage loan that you can live with.
By: Sam Rosenberg
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Wednesday, July 29th, 2009 at
2:41 pm
While each year many people refinance their home loans, most people are unaware that they can also refinance their auto loans. Especially for those who had bad credit when they received their current auto loan, refinancing could be a great way to reduce interest rates and payments. How do you know if auto refinancing is a good idea for you? And how can you use auto refinancing to improve your current credit situation.
Refinancing an auto loan is similar to home refinancing in that your old loan is paid off in full and replaced with a brand new loan. If you had bad credit when you bought and financed your current automobile then auto refinancing could be perfect for you. The interest rate you receive today could be much lower than your current interest rate, leading to thousands of dollars in interest savings.
You may want to take advantage of auto refinancing if:
• Your current car loan is older than 1 year
• All of your car payments have been on time
• The value of your car is higher than the amount you still owe on the loan
If these three things apply to you then the time may be ripe for you to refinance your auto loan.
Before you consider auto refinancing take the time to look into your credit report. Make sure your credit score is above 620 and that your credit report is fairly clean. You can access your credit report online and are entitled to one free credit report each year.
Next find out how much your car is worth. You don’t need to have a professional appraisal done, but you should get at least a rough idea of the current value of your automobile. Most auto loan companies won’t do a refinancing for less than $7500, so your car should be worth at least that much if you’re thinking of refinancing. You can get a rough idea of your cars value by looking at either Edmunds Buyer Guide or the Kelley Blue Book. Use a critical eye when determining the condition of the car as you can be sure the auto lender will.
Once you have those two things in line then start researching lenders. Your current lender may be willing to do a refinance, but chances are you’ll be able to get a better deal somewhere else. Get quotes from several lenders and compare the rates and fees and refinance the car as cheaply as possible.
While it may take a few hours of work to find the right lender when you’re considering auto refinancing, the time spent will be well worth it. You can save yourself quite a bit of money each month just by doing a simple automobile refinancing.
By: Steven Walters
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