Get out of the clutches of foreclosure – Refinance with FHA mortgage

There are several benefits that you can reap from an FHA home refinance. It is not necessary that you have to have an FHA home loan initially to refinance into an FHA mortgage. When it comes to FHA loans there are a number of options available to you that can help you to refinance your home into an FHA mortgage. If you feel like you are not being able to make your financial payments and thereby falling in trouble, you should contact an FHA lender in order to save your home. There are some FHA-insured options for avoiding foreclosures that would require you to be up to date with your mortgage payments and thereby it is best for you to act as early as possible the moment you start anticipating that there might be a drop in your financial situation and you might not be able to keep up with the payments. Here are some different FHA mortgage refinancing options that you can avail.

1. Rate and Term FHA Mortgage Refinance – This kind of refinancing can be done for up to 96.5% of the value of your home. A rate and term refinance allows you to consolidate your first and second mortgage into a single loan. It is easier to obtain as it requires a credit score of minimum 620. If you have a bankruptcy that is older than 2 years or a foreclosure that is older than 3 years then you will be offered competitive rates.
2. Cash-out mortgage refinance – You can take out a cash-out refinance up to 85% of your existing FHA mortgage or new FHA mortgage of the value of your property. You can use this to consolidate your first and second mortgages into a single loan or use the cash that you get for bill consolidation programs.
3. FHA Streamline refinance – This kind of FHA refinancing is meant only for those who already have an FHA mortgage. In FHA streamline refinance there isn’t any cost interest rate reduction program or credit and income qualifications. Thus these are very easy to obtain. You can also avail refinance option that is zero cost and switch to amortization for adjustable to fixed rate or vice versa quite early. You can also shorten or lengthen the term of your existing loan quite easily.
4. FHA Secure refinance – You can refinance your mortgage at competitive rates through this even if you have a mortgage late on your credit report which is because of adjusting mortgage. The best part of FHA secure is that you can qualify for this even if you are currently in foreclosure.

The above 4 types of FHA refinance options can help you in home refinance.

Comparing home insurance deals

Have you got any home insurance in place? Most mortgage providers will insist that a term of your mortgage is to have buildings insurance in place. However, you may want to think about insuring your contents too. If you have ever considered it to be an optional extra, you may wish to think about what you might do if you house and its contents were ever destroyed. Would you be able to replace them from your own funds?

Home insurance may include buildings cover, contents insurance or both. Getting a combined policy may sometimes be more cost efficient than purchasing the two types of cover separately.

What insurers need to know

When you apply for home insurance, insurers may typically want to know:

• your name, address and telephone number;
• the address of the house cover is being sought for;
• the estimated rebuilding cost of your house (which should be on your homebuyer’s survey);
• the estimated value of the contents that you want insured;
• details of the security measures you may have in place.

Checking the quotes

Rather than just reviewing a line of prices for home insurance and picking the least expensive, you may wish to make sure that you are comparing them on a like for like basis.

So ask yourself whether the same risks are covered in the policies, and whether the level of customer service you could hope to receive is the same with each insurer.

The policies themselves

Unless you read it carefully, you may assume that the “small print” is the same for all insurers. However, this may not necessarily be the case. So you may wish to pay attention to:

• the excess. This is the lowest amount for a claim that an insurer will accept. As the insured person, you would have to pay the amount of the excess on any successful claim;
• the limitations and exclusions. This may be particularly relevant with the contents part of the policy, as some insurers may typically have limits on the minimum values on the amounts that they will pay out for individual items. Accordingly, if you have anything of very high value, you may wish to let your insurer now so that they can take special note of it and possibly charge a little extra for the cover;
• the claims procedure. Finally, how easy or difficult is it to claim on your home insurance? The time it takes to replace your contents may not be so urgent when it comes to clothes, books and shoes, but what about white goods and the time it takes to repair damage to the structure of your building? Having home insurance is only useful if the insurer is prepared to help you with a claim as soon as possible.

Secured and unsecured loans

If you are thinking about taking out a loan, you may be wondering about the differences between secured and unsecured loans.

Which would apply to your circumstances may be determined in part by a number of factors including:

• how much you want to borrow;
• whether or not you are a homeowner.

Unsecured loans

Unsecured loans are typically based on your credit rating plus your income and are commonly used for things like:

• debt consolidation;
• DIY projects;
• or perhaps a new car.

The amount of interest that you pay on an unsecured loan is based on how risky a proposition your lender perceives you to be based on your credit rating.

If you default on an unsecured loan, the lender may take recovery action but this does not necessarily mean that you would lose your home. You do not have to be a homeowner to take out an unsecured loan.

Secured loans

A secured loan is one where the loan is guaranteed by one of your assets. The most common asset used as security is your home and secured loans may sometimes be known as homeowner loans. Certain types of car loan may use the car as the securing asset.

For many lenders, if you do not own your property it is unlikely that you would qualify for a typical secured loan.

Secured loans tend to be for larger amounts of money where the lenders may feel that their risks are high and so want to guarantee that, in the event of something going wrong and the repayments stopping, they have a valuable asset that they can use to offset their losses.

The most common type of secured loan is probably a mortgage and your lender will hold the deeds or your property until your mortgage has been paid off.

The amount you could borrow with a secured loan based on your home may be determined in part by the amount of equity you have in your home.

The equity is the amount of money that you would have left over if you sold your house and paid off your mortgage.

Any further loan secured on your property would have to be paid off using the remaining equity.

If the value of your home were the same as the outstanding mortgage then, in theory, the sale of your property would only cover the balance of the mortgage.  There would be no money available to repay any other loan.

So in addition to being a homeowner to qualify for a secured loan, you would typically also have some equity in your property.

Home insurance to help protect your investment

If you own you home, then you may consider home insurance to be an essential component of keeping your home safe and protecting your asset.

In fact, if you have a mortgage, some lenders may require you to take out buildings insurance cover as part of the terms and conditions of the loan.

There are two main aspects of home insurance buildings and contents cover. They are typically sold separately but if bought together, some providers may offer discounts.

Buildings insurance

The main risks to the fabric of your building are from the weather storms, wind, flooding etc and from structural damage due to occurrences like subsidence, earthquakes and fires.  

These elements are collectively known as ‘perils’.

Buildings insurance provides financial protection for the repair or even the rebuilding of your property if damaged or destroyed by these perils.

In the worst-case scenario, if you have to rebuild your property then the amount provided by your insurer will be to the value of cover that you took out.  This is not necessarily the same as:

• the amount you bought the property for;
• how desirable a property it is;
• or the amount of your mortgage.

Rather it should reflect the actual rebuild costs of the building including things like architects fees, searches and permissions etc.  So it’s important that you make every attempt to get a realistic valuation, using a professional surveyor if necessary.

Contents insurance

Protecting your building is only half the battle. 

The contents of your home are probably not only very important to you from a sentimental point of view - if you have to repair or replace damaged or stolen items then the financial impact may be considerable.

As with buildings insurance, it is important to get as accurate a figure as possible when calculating how much contents cover you may need. There may be no alternative to just noting everything down and then adding up how much it would cost to go out and buy replacements.

Empty property

The status of you home insurance may change if your property is empty for prolonged period of time (usually around 30 consecutive days), so it may make sense to remember to inform your insurer if this situation arises as you may need empty property cover.

Mortgage Calculators: a short guide in six top tips

Mortgage calculators can be useful tools in planning your finances, and working out how much a lender may be prepared to grant you.

There are many different variations on what a mortgage calculator can look like. Some simply tell you how much the monthly payments on a particular amount would cost. Others offer a more detailed assessment of your own individual circumstances, and

Here are some top tips to bear in mind when using them.

1. The first thing to remember is that mortgage calculators may offer a general guide only. You cannot take it for granted that a lender may be prepared to advance the same amount at the same rate that the calculator seems to offer, as the deal may change once the lender has looked through your own individual finances with a fine toothed comb.

2. Have a bank statement on hand when you are filling in the fields that ask about your monthly expenditure. This may help you to include all of the things that you are really spending out every month, and may help you make sure that you do not miss anything.

3. Have a realistic (recent) valuation on hand. In the past few years property values have varied considerably. Accordingly, you may wish to have your property valued professionally to make sure that you have a realistic idea about its worth.

4. Don’t forget about fees. Mortgage calculators may give the figures for the monthly payments you may need to make, but the arrangement and booking fees for the mortgages that you are considering may be several hundreds of pounds, which may impact on the affordability of a particular deal.

5. Learn from the experience. For example, if a mortgage calculator reveals that your large credit card balance makes you an unsuitable candidate, you may wish to take heed of this advice and reduce the balance so that you may find it easier to get the most attractive deals.

6. Finally, do not assume that they are all the same. If the mortgage calculator for one bank or building society’s website does not offer you a decent deal, then you may wish to check another lender’s.

How to compare mortgage rates - Five top tips

Do the large amounts of money involved in getting a mortgage make you feel overwhelmed? If so, do not panic. Follow these top five tips to help you compare mortgage rates.

1. Look at the total cost of the borrowing. The interest rate that you are looking at is one way to compare mortgage rates, but you may also wish to bear in mind the fees and charges that may also be required to get a mortgage. The true cost of the borrowing is represented by the APR, which includes these amounts.

Some online mortgage brokers have comprehensive calculators that show you how much you can borrow, but also how much the payments for each loan are likely to be. Some not only offer calculators which show the cost of the payments, but they also have calculators that tell you about the wider cost of moving house. It can be an expensive business!

2. Be realistic about discounted rates. The “discount” (i.e. the reduction from the typical figure) does not go on forever. So the payments may rise after the discounted period ends. Accordingly, you may wish to make sure that you will be able to afford the repayments when the discounted period ends and the rate reverts to the standard deal.

3. Decide on your attitude to risk. Tracker mortgages may work on the basis that the lender’s own rate “tracks” the Bank of England’s base rate. If the Bank of England’s rate goes up, then your lender may typically raise their rates too. This means that your repayments may go up too. If the rates go down, your payments may follow.

If you cannot bear the uncertainty (and the potential for much higher as well as much lower rates), then you may be better suited to a fixed rate deal.

4. Weigh up the pros and cons of fixed rate deals. With fixed rate deals, you have more certainty than variable ones but you may be unable to benefit from lower repayments when rates stay very low.

5. Consider other aspects of the deals on offer. It is easy to become obsessed with interest rates, but there are other issues to consider when comparing the deals available. You may wish to bear in mind the fees and charges that are payable, and any early redemption penalties that may be due should you be in a position to pay off the mortgage sooner than you think.

Top six tips when you compare mortgages

Getting a mortgage can seem complicated. But your mortgage payments may be your greatest monthly expense. In fact, your house may be the biggest investment you will ever make. Accordingly, you may wish to compare mortgages to make sure that you get the most competitive deal for your own individual needs.

1. Make sure that you know how much you need to borrow. Some lenders may offer more than others. Moving house is expensive, and you may need to hold back some of your deposit for removal costs, stamp duty land tax and estate agent’s fees. Accordingly, it may be worth working out the total cost of the move before you compare mortgages.

2. Get a mortgage valuation. If you are remortgaging, you may wish to get a mortgage valuation before you compare mortgages. The amount that you are able to borrow may be dependant on the value of your house, as the amount you can borrow may be worked out as a percentage of this amount.  In certain deals some lenders, including the Nationwide Building Society may offer a free mortgage valuation.

3. Be prepared to think outside the box. Some lenders may offer an account which offsets your savings and the balance of your current account against the amount that you owe on your mortgage, so you only owe interest on the amount that is left. Such accounts may not suit everyone, but under certain circumstances, the deal may suit your needs.

4. Swot up on interest rates. If you are not used to dealing with financial terms, you may find the terminology around interest rates confusing. However, the more you read about the matter the more sense the different terms may make.

5. Decide between interest only and repayment. Until you have made this decision, it may be difficult to compare mortgages. Interest only deals involve only paying off the interest that is due on the loan, whilst repayments deals involve repaying the outstanding balance. Whilst interest only deals may look much cheaper, you may wish to factor in some kind of saving scheme that includes provision for repaying the outstanding debt.

6. Think of the worst case scenario. In order to make sure that you can afford your mortgage, you may wish to make sure that have provision in place for the possibility of losing your job. Nationwide Building Society may offer free mortgage payment protection insurance cover for some of the mortgage term with their Protector Mortgage and subject to terms and conditions. ING Savings may offer this cover as an additional extra, as may the Halifax.

Getting a remortgage? Top nine tips

1. Get your house valued first. In these challenging economic times, it is difficult to guess what your house may be worth. By getting your house valued before you start looking around for a remortgage, you will have some idea of the Loan To Value that you are looking at. The Loan To Value is the ratio of the equity in your house compared to the loan you have outstanding on it.
2. Discuss affordability. If you are looking to release some equity and increase your mortgage, you may wish to take a look at your monthly budget to see how much you can afford in repayments.
3. Take advantage of the many mortgage calculator tools online that help you work out roughly how much repayments will be and how much you can borrow etc.
4. Learn about interest rates. If you have not got a mortgage recently, you may be surprised at how many different types of interest rates are offered these days. Some deals are fixed for a certain length of time, others are variable, some track the Bank of England’s rate – there is a veritable menu of interest formulae available.
5. Decide between interest only or repayment. Repayment mortgages involve paying off some of the capital at the same time as the interest. With interest only mortgages, the capital remains outstanding. Accordingly, you may wish to look into having another vehicle to repay the capital.
6. Work out the timescale. Do you have a particular deadline about when you want your new mortgage in place? Ask the mortgage providers how long the process will take, so that you can manage your expectations.
7. Get your credit report in order. Your ability to get a new mortgage may depend on how good or bad your credit report is. It may be worth checking that the financial institutions that you have had dealings with have noted your history correctly, as mistakes could stop you from getting the deal you deserve. Visit Experian, Equifax or CallCredit for more information.
8. Get to know the deal. Are you familiar with the provisions of your remortgage? For example, do you know how much you can overpay per month without incurring a penalty?
9. Keep the paperwork in a safe place. Finally, make sure that you keep the paperwork for your remortgage somewhere that you can get your hands on it. If you have any questions about the deal, there is nothing worse than having to root through piles of paperwork to find it.

How to clean up your credit profile when applying for a mortgage

In order to maximize your ability to get the best interest rate possible, you need to know how to clean up your credit profile when applying for a mortgage. Improving your credit rating can make a tremendous difference in your ability to get a good interest rate and good terms on a mortgage. Your credit profile is the picture of your credit risk used by lenders to determine your likelihood of repaying a loan. There are some simple things that you can do, even in the waning moments before buying a home, to clean up your credit profile.

First, check your credit file for anomalies. There are actually three main credit agencies that are commonly used by lenders and other entities who want to know your credit rating. The items in your credit, such as your loan balances, repayment history, late payments, and other factors are reported on and updated by creditors you have been involved with. Some creditors are more prompt than others at updating records. Additionally, there are mistakes that do occur. Perhaps a false late payment was reported. Maybe there are loan balances still showing on your credit profile that you no longer have. It is important for anyone wanting to get the best mortgage rate to be sure to check your credit to make sure you are getting the rate you deserve.

Another important and often overlooked factor that contributes to your credit score is your placement on the electoral roll. To some people, properly registering to vote is more of a political and civic responsibility. However, lenders want to be sure, just as you do, that your credit profile is accurate and up to date. This means that it shows your current address and provides proof that your profile is current. The three credit agencies purchase the updated lists of the electoral role at the end of each year to create the current snapshot for your profile. Some lenders will decline a mortgage application simply because the applicant is not listed on the current electoral role. Their feeling is that your credit profile may not be current if you are not on the role.

The most important thing to keep in mind is that the credit reporting process is not without flaws. Although it serves as a fairly reliable method for creditors to assess your credit risk, there is potential for errors in reporting. Ultimately, you want to get the full benefit of the work you have performed in establishing good credit. A good general rule is to take a look at your credit report at least once a year and make sure that all of the information is accurate and current.

Remember these key points to understand how to clean up your credit profile when applying for a mortgage:

• Check your file for anomalies
• Make sure all of your information is accurate and updated
• Make sure you are on the electoral role as lender’s consider this factor

Choosing a Mortgage as a First Time Buyer

Buying your first home can be a daunting and exciting prospect at the same time. The best way to deal with the ‘daunting’ part is to make sure that you base your decisions on the best possible information and that you ‘do your homework’ by researching all your options as you move towards the first step on the property ladder. This is made more difficult by the sheer amount of jargon-filled information that you are faced with as soon as you indicate that you are investigating your first mortgage.

It is quite easy to lose yourself in all the information that is available or to simply ‘fall’ for the first lender that makes a semi-persuasive case. It would therefore be a very good idea to set out a clear roadmap of how you would like to approach the process. This will prevent you from getting sidetracked by all the available options. A possible roadmap could perhaps include the following:

• Determine how much you can afford. The answer to this question will, to a large extent, determine your house-hunting and mortgage options. One part of the question is easily answered. Mortgage lenders will currently lend around 3.5 times annual income to individual first time buyers, and 5 times annual income to joint buyers. The other part of the question is more complex and will require a bit of homework and an honest assessment of your financial state. It is: “Would I be able to afford the repayments if I borrow X amount?”
• Get an agreement in principle. Most mortgage lenders will be able to supply you with an ‘Agreement in Principle’ to assist you with the house-hunting process. Having this in hand will show estate agents that you are serious about finding a property. It could also help to flag up any credit problems even before you make a formal mortgage application.
• Determine the size of your deposit: Lenders will require a deposit to be paid before a mortgage is formally issued. The size of the required deposit will differ from context to context and institution to institution but expect to pay at least between 5 – 10%. It would be a very good idea to pay more than this if you have the funds available since a large deposit can sometimes translate into a slightly lower interest rate.
• Choose the best product: There are a huge number of choices that you will have to make before deciding on a mortgage product. Some of these include: Fixed rate vs. variable rate, repayment vs. interest only and also what you would like to term of the mortgage to be.
• Decide on any ‘extras’ that you would like to be included with your mortgage: All mortgages are not created equal and there are some ‘non standard’ features that you may want to request from your lender. Some possibilities include:

• The ability to ‘underpay’ if necessary without being penalised
• The ability to ‘overpay’
• The option of taking ‘payment holidays’
• The option of having fees associated with the home buying process added to your mortgage
• Having your interest calculated daily (this can translate into a significant saving over time)

Once you have done your homework all that is left would be to find the home of your dreams and to formally apply for the mortgage from the institution of your choice. If you feel however that you will need constant advice and the ability to access a huge variety of possible mortgage deals it might be worth your while to consider using a professional mortgage broker. He/she might be able to put you in touch with lenders that specialise in ‘first time buyer’ mortgages and that can therefore tailor a package around your specific needs.

Summary:

• The first step in choosing the right mortgage is to determine how much you can afford, both in terms of the asking price and your monthly repayments.
• It is a good idea to get an ‘Agreement in Principle’ before beginning the ‘house hunt’
• There are many different options that you will need to choose from in getting the best possible mortgage. Be sure to make decisions on the basis of what is best for you and not on what the lender wants to sell to you.
• There are many ‘extras’ that you can add to your mortgage. Be clear about what you want before you formally put in your application.