What are Your Options Besides Refinancing?

What are Your Options Besides Refinancing?

Is your mortgage payment becoming more and more difficult to pay each month? Is refinancing your home to get a lower payment simply out of the question? If so, there are other options available to you.

Are you having problems making your mortgage payments but refinancing your mortgage loan just isn’t an option for you? If so, there are other options available if you are willing to do some legwork in order to make it easier to pay your monthly house payment. Here are three such options.

1.     Ask your lender if you can recast the amortization of your mortgage. For homeowners who have had their mortgage for at least five years and your loan payments have been on time every month, you may qualify to have your mortgage recast. A recast means that your mortgage loan is recalculated so that you can spread out the amortizing payments over the period of the loan.  This can be especially effective if have paid down the mortgage principal at some point. It is also possible to recast a mortgage so that the principal amortizes at a slower rate at the beginning of the loan (lowering payments in the near years since they are primarily interest payments).  In many cases, therefore, a recast will lower your monthly mortgage payment quite a bit to make it easier on your budget. However, since a recast delays paying off principal, it extends the loan and means that you will be paying more in the long run over the term of your loan.

2.     Ask for a lower interest rate. Mortgage lenders are often willing to work with you when you run into trouble making your payments. One thing that your lender may be willing to do is to lower your mortgage rates. If you have a good record of making your payments on time, you will be more likely to qualify for an interest rate reduction so be sure to send those payments when they are due.  Before you ask for a lower rate, you should be sure to check the current interest rates in your area.

3.     Ask about modifying your mortgage loan to an interest-only mortgage for a couple years. By turning your current traditional mortgage into an interest-only mortgage, you can lower your monthly payment significantly. However, this may be the most difficult option as many banks are not as willing to do this as they are the other options.

These are just a few options available to today’s troubled homeowners. But just because they are options does not mean that your mortgage lender will be willing to do it. If you have a history of late payments or other problems with your mortgage payments, your bank will be less willing to work with you. That’s why it is so important to contact your lender as soon as you start having financial problems. Never ignore the problem. The sooner you call your lender about your financial problems, the more options you have when it comes to working out an agreement.

See mortgage refinance rates where you live here.

Be a Smart Home Buyer - Using the Internet

Be a Smart Home Buyer - Using the Internet

The internet is one resource you should take advantage of by doing your own research. It is a great way to check the current mortgage rates, search for home prices, look to see which lender offers the best rates, apply for a loan, or find a real estate agent. According to the National Association of Realtors (NAR), during 2005 nearly 77% of all households used the Internet to conduct their housing search. These sites were primarily used to:

The internet is one resource you should take advantage of by doing your own research. It is a great way to check the current mortgage rates, search for home prices, look to see which lender offers the best rates, apply for a loan, or find a real estate agent.

According to the National Association of Realtors (NAR), during 2005 nearly 77% of all households used the Internet to conduct their housing search. These sites were primarily used to:

1. Research home listings

2. Learn more about a specific area

3. Find out more about a real estate agent

4. Apply for a loan

It used to be, when a home was listed for sale by an agent it would appear in the Multiple Listing Service (MLS). The sales agent would research the MLS to find a home that met your requirements (e.g., 3 bedrooms, 2 baths, swimming pool with a patio, etc.). Once found, you and your agent would look together at potential home sites.

Now, by using websites you can save time and money by doing your own investigative work online. Using their search criteria tools, you can specify an exact geographic area, the minimum and maximum amount you're able to pay, the number of bedrooms and bathrooms you require, and other requirements.

Once retrieved from a database of over 2 million homes, you can view a photograph of the property, the square footage, get a detailed description of the property features, and even take a virtual tour of the property inside and out -- all without actually stepping foot into the home.

You can also shop around for local rates to pick the best lender for you. Each lender details their fees so you can see exactly what they charge. During your lender selection, make sure the monthly payment quoted meets your budget. If not, discuss other options you are more comfortable with.

Using lenders online can save you time on the application process. Completing the application on your own gives you the flexibility to work at your own pace and access documents you might otherwise forget to bring when you meet with the loan officer. Since rates vary from state to state, make sure that the lender complies with Federal and State laws so that they are authorized to operate in your state.

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Compare the Four Main Types of Mortgage Lenders

Compare the Four Main Types of Mortgage Lenders

Borrowers have may choices when shopping for the right lender. Choices include banks, mortgage brokers, home builders, and internet lenders. Each has its advantages and disadvantages, and rates vary from lender to lender.

Borrowers have may choices when shopping for the right lender. Choices include banks, mortgage brokers, home builders, and internet lenders. Each has its advantages and disadvantages, and rates vary from lender to lender.

Type

Advantages

Disadvantages

Banks

  • Regulated by state and federal agencies
  • Current banking relationship can get you a reduced mortgage rate
  • Numerous branches provide you with face-to-face access
  • Limited to products only the bank has to offer
  • May not have the lowest rates
  • May lack negotiation leverage when it comes to publicized rates

Mortgage Brokers

  • Access to a variety of mortgages and lenders
  • Can save you money by shopping for the best rates
  • Can quickly find another lender if your initial loan application is turned down.
  • Some function as the lender's agent and have the lender's best interests at heart.
  • Free to set their own rates and may mark-up wholesale rates or charge additional points.
  • Service may vary from broker to broker.

Home builders

  • Good way for the first-time home buyer to qualify
  • The buyer does not take title to the property until the home is completed
  • May favor certain lenders and pressure you into getting their loan instead of using a different lender
  • Less lenders to choose from which may offer a higher interest rate

Internet Lenders

  • A greater learning curve for the borrower to understand the lending process

Typically, most lenders do not keep money on hand but instantly sell conforming loans to third parties like the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The most common source of home lending is a retail financial institution or credit union. They offer specific loan products and handle their own direct financing by taking consumer deposits and lending them to home buyers. Compare mortgage rates.

Mortgage brokers, on the other hand, act as the middleman and don't fund the loans themselves, but handle the mortgage financing for the borrower. Most earn their fees directly as a percentage from the lender and some from the borrower, or a combination of both. Since mortgage brokers have access to a wide variety of lenders they are usually on top of the latest rates, fees and lending practices.

Home builder financing is common in new developments where there is a single builder. The builder carries the construction costs until the homes are built. The builder works with a lender to set-up financing for the buyer and finances the construction costs. The buyer doesn't make mortgage payments until the property is finished.

The popularity of finding a mortgage on the Internet has grown in recent years. Many lenders offer competitive rates and the convenience of tracking your application through the approval process. Some can save you a significant amount in closing costs since everything is automated and the time to get approved can be shortened.

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