Budgeting Your Project

What Are Sale Strategies?

Short sales are house sales in which the creditor takes less than what is owed to the mortgage. A dealer initiates a brief sale when his house is worth significantly less than the mortgage and he can’t keep up with the mortgage obligations. A creditor isn’t required to take a brief sale; it may choose to foreclose rather than

Sellers: Work with Your Lender

A 2008″Washington Post” article looking at short sales in northern Virginia reported that just one in 20 short sales offers there actually resulted in a sale. The reason? The lender review process. Each creditor has its own review process and time line, which range from weeks to months. Because lenders don’t need to encourage borrowers to default on loans just because their houses are”under water” (the home is worth significantly less than the loan), they create borrowers establish they can’t continue to make payments. This is referred to as the hardship review. Likewise, the creditor wants to verify the house is indeed under water and that the selling cost is as close to market value as possible. This entails the lender’s review of a comparative market analysis (CMA) or evaluation. If the sellers have not worked with the creditor before they record their land, the hardship and CMA testimonials happen in tandem with all the lender’s review of the purchaser’s offer. In the best of worlds, the reviews are finished in 45 days. In the worst, the creditor never responds and the seller wakes up into some foreclosure one morning a few weeks or months later. The Homes Affordable Foreclosure Alternatives program (HAFA), begun in the spring of 2010, offers incentives to lenders and borrowers alike to streamline the brief sale process. It requires lenders to provide vendors with its sale provisions and review CMAs and hardship applications up front. Lenders in the application agree to operate within standard real estate transaction time frames and deadlines throughout the sales process. If you are a seller, speak to your lender before you list your house. Ask if your lender participates in HAFA, and it will be a voluntary program. If not, request a CMA and hardship review. Ask about time frames for offer reply and give your lender with whatever it asks for in its own review.

Buyers: Patience is the Key

1 consequence of long delays in brief sales is that each and every time a prospective buyer walks away from a bargain, the cost is very likely to return. Short sales are generally advertised as such in multiple listing services. If you are a buyer, know up front that the trade-off for a possibly excellent price on a brief sale is a lengthy wait in the contract review process. If you are in a hurry to close, stay away from short sales. But if you’ve found your dream house and it is a brief sale, hunker down. It may take months to close, but if you’re not in a hurry, you won’t have missed anything.

Agents: Educate Your Clients

As the broker of a short-sale buyer or seller, the most important move you can make is to highlight how long the process may take. Don’t gloss over the frustrations likely to arise after days and weeks of no response from the lending company. Instead, prepare your customers for struggle when learning everything you can about the lender’s process and its history in local short sales. Instead of customers who walk out of a deal possibly blaming you, you’ll have customers recommending you to others as a short-sale specialist.

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GNMA Fund Risks

GNMA funds are mutual funds which have mortgage-backed securities issued by the Government National Mortgage Association, or Ginnie Mae. The U.S. government ensures the payment of interest and principal from Ginnie Mae bonds. GNMA funds are a choice for investors looking to get a higher but safe rate of interest, but these funds still have a few dangers.

Interest Rate Risk

The Ginnie Mae bonds held with GNMA funds are marketable securities, and their worth is dependent on current market interest rates for similar securities. Bond costs, such as GNMA bonds, vary inversely to changes in rates of interest. If prices rise, the market cost of the Ginnie Mae bonds in a portfolio will decline. The fund reflects these cost declines with a decreasing share price. In a rising rate environment, the share value of a GNMA fund can diminish faster than the interest paid makes up for the decline. This result is particularly detrimental to investors that are taking their fund dividends in cash and see their principal value decreasing.

Prepayment Risk

A GNMA mortgage protection is compensated from a pool of mortgages with the same interest rate and maturity. Ginnie Maes are securities. As the homeowners at the pool make their mortgage payments, the Ginnie Mae bond holders receive monthly payments of principal and interest. When mortgage interest rates decline, the homeowners can decide to refinance their mortgages, and the GNMA fund owning the bonds will start to receive larger principal payments from the bonds it holds. Bonds with fixed maturities will see their market values increase when prices drop. GNMA funds will see their principal come in faster, which will have to be reinvested at lower rates of interest. Investors at a GNMA fund will probably find their dividend rate decline at a faster speed than with a fund which owns fixed-maturity bonds.

Duration Risk

The open-ended length of GNMA securities has exactly the contrary effect if prices rise. Homeowners whose mortgages make up the Ginnie Mae pools will be less likely to refinance their low-rate mortgages, and the expected length of their GNMA bonds will lengthen. This usually means a Ginnie Mae fund will receive principal payments in a slower rate. Less principal repayments means less money which can be reinvested in the higher current interest prices. In a rising rate environment, GNMA fund holders will see their share values drop, and the capital will probably require longer to have the ability to pay the higher prices of their current bond market.

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Mortgage Calculation: How Much Can I Borrow?

People looking for a mortgage usually begin by asking,”How much can I borrow?” That question may be better phrased as,”How much does lenders allow me to borrow?” Banks and other lenders use formulas to determine the maximum amount that they think you can manage based on how much cash you have and the amount of the income is already spoken .


Lenders look at your mortgage application with two numbers in mind. The first is the gross income, or how much money you make each month before taxes. The next is the total amount of money you spend each month on household debt obligations –everything from house and car payments to credit card debt and student loans. Lenders refer to this relationship between those amounts as the”debt-to-income ratio,” or DTI, and it is expressed as a percentage. By way of example, if your before-tax household income is $7,000 per month, and your total monthly debt payments add up to $2,100, then your DTI will be 30 percent ($2,100 will be 30 percent of $7,000). Lenders also look at the”housing ratio” That’s the portion of your gross income that would be eaten up from your house payment. Say that your debt obligations, $1,800 is for a house payment. Your housing ratio is about 26 percent.


Most lenders do not wish to see a DTI higher than about 36 percent and a housing ratio higher than about 28 percent. If your gross monthly income is $7,000, you are able to afford a maximum house payment of about $1,960, out of a maximum monthly debt load of about $2,520. If your monthly debt obligations are already pretty high on your income, then that’s going to decrease the quantity that mortgage lenders are willing to give you.


Once you’ve determined your maximum monthly payment, then you can start to figure out how much you can borrow. Use the above illustration of a $1,960 maximum payment. The very first point to notice is that, so far as lenders are concerned, your house payment does not just include the principal and interest you’re repaying the bank. Additionally, it includes the costs of real estate taxes and insurance premiums. These vary based on where you live, which means you’ll have to do some research. As an example, in California in 2010, the average cost of homeowners insurance has been 730, based on HomeInsurance.com. That comes out to about $60 per month. And state your property taxes come out to $3,600 a year, or $300 per month. Blend both –$360–and subtract it from your maximum monthly payment. In this case, you get $1,600.


There are lots of easily available mortgage calculators that you can use to interpret your own monthly payment to some mortgage figure. You’ll need to get some idea of what interest rates can be found. Using the Bankrate.com calculator, for example, you find that a $268,000 mortgage for 30 years at 6 percent interest provides you a monthly payment of about $1,600. Does a $240,000 loan at 7% interest, or a $280,000 loan at 5.5 percent.


The 28 percent and 36 percent thresholds”went off” for a while during the housing bubble of the early 2000s, when important lenders were accepting DTIs of as large as 49 percent, based on Bloomberg Businessweek. The tighter lending standards that followed the bursting of this bubble created 28 percent and 36 percent regular again.

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Factors Affecting the Prime Rate

The prime rate is among the most important amounts for the U.S. economy. Lenders rely upon it to ascertain what interest rates they’ll charge on mortgage loans, home equity lines of credit and credit cards. This rate, which relies on the federal funding rates set by banks, fluctuates very little over time. There are some factors, however, that may make it fall or rise.

Federal Funds Rate

The biggest factor influencing the United States’ prime rate is the federal funds rate. Here is the rate that banks charge each other for the overnight loans that they create as a way to fulfill federally set funding requirements. Generally, the prime rate will endure about 3 percentage points above the federal funds rate. The U.S. prime rate really changes very little.

The Wall Street Journal

The financial newspaper The Wall Street Journal is actually the market of, and really sets, the prime rate. Before the end of 2008, The Wall Street Journal mechanically changed the prime rate whenever 23 from 30 of the nation’s largest banks changed their federal funding rates. Today, however, the Wall Street Journal bases its prime rate on the base rates charged by the nation’s top 10 banks. When seven of those 10 have changed their base prices, the paper changes its prime rate so. This has caused a stable rate: The Wall Street Journal has retained its prime rate at 3.25 percent since December of 2008.

Open Market Committee

According to the Fed (U.S.) Prime Rate Website, the prime rate is most likely to change after a meeting of the Federal Reserve Board’s Open Market Committee. This body retains its meetings eight times annually, though it may hold emergency meetings at any moment.

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What Do Landlords Search for on a Credit Check?

Many landlords possess the properties they rent out to tenants. If a tenant damages the property, or fails to pay the rent required to live inside, the landlord might be left with additional expenses related to the property. A landlord would like to ensure that he chooses a responsible renter who will take care of his house and pay the rent in time. Performing a credit check on a potential tenant may give a landlord a reasonable indication of what to expect from that tenant.


Landlords look at a potential tenant’s credit report for evidence that the candidate has created consistency, stability and predictability. Consistency is demonstrated by what a potential tenant does over and over fiscally. If a credit check reveals that a debtor has on-time payments with several accounts, over many decades, then she is consistent. Stability can be determined by a number of factors. The number of years at work, the number of accounts available, and the payment history all contribute to equilibrium. A potential tenant that can deal with her financial responsibilities and works for the same employer longterm is a financially secure individual. Landlords check credit reports to forecast the behaviour of the person who will be renting the house.

Rental History

Landlords can conduct credit checks to learn more about a potential tenant’s past rentals. The leasing history of a renter is utilized to ascertain a tenant’s behaviour in future lease situations. Any landlord who reports a tenant’s payment history to a credit bureau, will show up on a credit rating. Landlords can check a credit report to see whether any money is owed to your prior landlord. A landlord may use rental history information to determine where a tenant has lived and make inquires about those rental agreements.


A tenant’s debts have an influence on the tenant’s ability to pay for a particular lease. The tenant should be able to pay her rent together with all of her other financial obligations each month. A potential tenant’s credit to find out how much debt a renter gets may be checked by A landlord. When the landlord knows the potential tenant’s debt load, he can compare that to your income and ascertain whether she is able to rent the area.


Credit reports include both open accounts and closed accounts. Open accounts are usually revolving credit–where there is a payment due monthly until the whole balance is paid off–just like using a credit card. Closed accounts may either be paid in full or using a balance due to the creditor. Credit checks which contain”fulfilled balances” are closed accounts which have been paid in full. A credit score report detailing several accounts paid on-time greatly helps a potential renter come out ahead in a credit rating. Landlords seem to see that the potential tenant has more accounts paid more than reports which were not.


Landlords check credit reports to see whether there are any bankruptcies. Bankruptcies remain on credit reports for up to ten decades. A bankruptcy listing allows a landlord to observe all of the accounts and companies included in the potential tenant’s insolvency. There is a difference between a discharged bankruptcy (finished ) and also a pending bankruptcy (ongoing). A potential tenant having a discharged bankruptcy is typically a better risk than one with a impending bankruptcy. When a bankruptcy is pending, it is possible for a tenant to be relieved of all current financial obligations–such as any remaining rental payments because of a landlord. For this reason, landlords check credit reports to make sure that there are not any impending bankruptcy activities.


Some landlords may carry out a credit check to find out whether there are some foreclosures in a potential tenant’s past. A foreclosure is a legal act in which a lender repossesses a home. In many foreclosures, the borrower is left with a balance to pay after the land is removed and resold. A landlord may do a credit check to see if any monies are owed in the aftermath of a foreclosure proceedings.

Credit Bureaus

It is very important to be aware that there are three different credit agencies that a landlord may use to conduct a credit check on a potential tenant. These credit bureaus are Equifax, Experian and Transunion. The credit bureaus are independent of one another and each can contain different information from a different bureau. A landlord may use any or all of the bureaus to check credit information of a potential tenant. Many landlords also charge a credit report fee to potential tenants.

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Questions to Ask About Home Equity Loans

Homeowners tap into the equity of their property regularly to pay for expenses that don’t fit in their everyday budgets, including major house repairs, education expenses and health care expenses. Not all home equity loans will be the same plus a homeowner can benefit from studying before signing a loan agreement as much as possible about this kind of financing.

What Is the APR on the Loan?

The yearly percentage rate, or APR, tells you the percentage of interest that is currently going to be charged for financing. APR alone can be misleading though, since it doesn’t take into account additional charges, such as points and closing costs, that are connected with a home equity loan. So that you are able to compare the total cost of the loan 16, Speak to creditors.

Is Your Rate of Interest Variable or Fixed?

Whether the loan is in a interest or variable, ask. Most home equity loans are at a varying rate, so make sure that you inform the lender that you want a fixed-rate mortgage if you’re looking to keep your payments level throughout the life span of loan. A fixed-rate mortgage will often be put at a slightly higher interest rate than a variable loan, but you’ll have the assurance of knowing that your payments are not likely to increase.

Which Are the Repayment Terms?

Request about penalties for late payments, even if there’s a penalty for early payoff of the loan, and under what conditions the lender can consider you in default and demand immediate full payment. Your property is behaving as collateral for this loan and you don’t wish to do anything to risk losing your house.

Is My Loan Tax Deductible?

Most often, the interest is tax deductible. While your situation could be different on account of your yearly income, it might be well worth finding out in advance if you’ll be able to use this loan for a deduction.

What Are My Options For Repayment?

Ask the lender if you can make your payments from your bank account or can pay online. Learn whether there’s a manner he prefers payments to be made, such as or by email.

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FAQs on Property Taxes

Nobody enjoys paying taxes, but most people enjoy the benefits taxes provide: rescue services, decent roadways, schools and parks. Property taxes can be especially controversial, particularly when the county’s assessed value of a home is nowhere near what the homeowner thinks it to be. It may help to understand the way property taxes are figured and what can be done if you believe your invoice is wrong.

How is My Home Tax Determined?

Your home is evaluated by the county with its money or market value. That value is the foundation for how much your tax burden is likely to be. The less valuable the appraisal, the smaller the tax invoice. The higher the value, the higher your property taxes.

What If I Had With My Home Assessment?

If you disagree with the evaluated value, you can contact your regional Office of the Assessor to inquire how the value was established. If you do not find the explanation acceptable, ask them for a phone number so you can contact the county Assessment Appeals Board to appeal the findings. Even if you appeal the appraisal, you are still responsible for paying your entire property tax invoice by the deadlines. If you prevail together with the appeal, you will be given a refund of the tax overage paid.

What If My Bill is Paid Through My Mortgage Business?

A copy of your tax bill is sent to both you and your mortgage lender. However, if you owe a supplemental tax bill it’ll simply be sent for you. Call your creditor to learn who’ll cover the supplemental tax bill.

How Do I Read My Home Tax Assessment?

An annual tax invoice should incorporate the following: property location and description, assessed value, the number of taxes due, a breakdown of those taxes being collected, if there is an exemption and how much it is, and finally, a message telling you that you are tax-defaulted if you are delinquent in paying a prior year’s taxes.

How Did My Taxes Boost While the Value of My Home Has Remained Stagnant?

In the event your tax bill has grown while the value of your home has remained stagnant or even decreased, it is possible that the taxing authority has increased the rate of its earnings.

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What's the Use of an Underwriter at a Mortgage?

The most significant person in the mortgage approval process is that the person you’ll never see or meet. That man or woman is the underwriter. No lender closes or funds onto a loan without the acceptance of an underwriter. Occasionally her job is to just check over the amounts, make sure all paperwork is in order and provide her acceptance. Other times, she needs to look over all the paperwork and make a sound decision based on her expertise and decent judgment.

Loan Approval Requirements

Mortgage loan acceptance rests on a number of things: income, credit history, debt ratios and savings. A buyer has to be able to demonstrate the income needed to afford the obligations within a verifiable and stable job history. He should have a credit record which reveals a record of repaying duties and financial responsibility. His additional monthly debt has to fall within acceptable limits as determined by the loan application guidelines. Finally, he needs to be able to demonstrate that the money used for his downpayment is his rather than borrowed, in addition to the fact he has a few months of mortgage payments stashed away in the event of emergency.

Underwriter’s Role

It’s the job of underwriters to make sure all these factors meet specific loan guidelines. They make sure all the tax, title, insurance and closing documentation is set up. Underwriters also examine the appraisal to make sure that it’s accurate and thorough, so the home is really worth at least the purchase price. The underwriter has final acceptance and closing responsibility for the loan. Oftentimes an underwriter’s refusal can be appealed to the head underwriter or other superior, however, the truth must be set up to support any portion of an underwriter’s decision.

Automated Underwriting

There are automated underwriting systems set up that take data fed into a computer application, assess the risks based on formulation and provide an approval or denial. These programs need strict adherence to instructions and will not entertain any deviations or gray areas. An endorsement on those files requires an underwriter to look over all verifications and documents, along with the appraisal, to make sure that each of the data matches the information inputted into the automatic system that generated the acceptance. If the information does not match, the underwriter sends the file back to the processor with conditions that must be fulfilled prior to final acceptance. This usually involves getting additional information or verifications.

Manual Underwriting

Many times a loan file requires manual underwriting since it falls into a gray area that the automatic system cannot address. Manually underwritten FHA (Federal Housing Administration) files are quite common, since FHA loan guidelines permit for free history and troubled credit buyers, and much more flexible debt rules. The loan officer and loan processor carefully compile manual files to read almost like a narrative, with lots of detail. They provide not just the basic details about income, employment and savings along with a credit report, but they may also incorporate a credit history to get no-credit debtors, added details about charge blips in a purchaser’s previous or explanations for discrepancies in earnings or job history information. This documentation gives the underwriter that the”whys” which allow her to create a more informed decision about the purchaser’s situation in order to truly determine how strong a risk the buyer is.

Underwriter’s Significance

An underwriter who is conducting an investigation, especially a manual , has to take a calculated risk and do his best to ascertain whether a file adheres not to only the letter but the intent of the loan application guidelines. When he is incorrect and the loan defaults, it can lead to a hefty cost to the lender. When he works for a mortgage broker, too many defaults could cost his company its relationship with the lenders who finance their loans.

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How Can You Refinance Your House?

Refinancing your house offers many benefits. It can lower the interest rate on the loan and reduced monthly payment. Some refinancing programs allow you to pull the equity out of the house to use for other purposes. You can change the loan program into some fixed-rate loan and prevent payments which change each year. No matter your reason, knowing the procedure protects you from creditors who wish to make the most of you.

Decide why you want to refinance. Know what your objective is together with the refinance. Don’t start the procedure hoping to lower your payment. Know exactly what your current loan terms are and determine what the minimum benefit must be. If your current rate is 6 percent, you may determine the new rate must be lower than 5.5 percent to proceed.

Ask friends, family and trusted business associates for referrals of loan officers. Obtain three to five loan officers to contact. The more companies you contact, the better picture you may have of your loan options. If you can’t find enough referrals, talk with your bank for a quote. Another source is your current mortgage business.

Request the loan officers send you quotes to your new mortgage in composing. Make sure they are provided on a good-faith-estimate, or GFE, as demanded by the Real Estate Settlement Procedures Act, or RESPA. This federal law requires mortgage lenders to disclose the costs of a mortgage by means of a GFE. This standardized form will let you compare the loans .

Compare the quotes using the section labeled”Together with the shopping graph” located on page three of the GFE. This section allows comparison of up to four loans simultaneously. If you would rather fixed-rate loans, eliminate each of the adjustable-rate loans, or ARMs, or vice-versa. Find the loans with the lowest estimated payments.

Subtract the estimated payment from your existing payment. This may determine your monthly savings. Divide the estimated settlement fees by the monthly savings. This will determine how many months of savings are needed to pay for the refinance. If your loan requires settlement fees of $3,500 and conserves $250 a month, it takes 14 months to pay for the refinance until you realize any actual savings.

Estimate how long you’ll be at the house. If you know you’ll be at the house for five decades, or 60 months, then you’d save $250 per month for 46 weeks. Saving $11,500 over five decades probably is well worth the effort to refinance your home.

Negotiate with the creditors to get the best mortgage possible. Utilize the other GFEs to support the loan officers to lower their rates and fees. Informing the loan officers which there’s competition for your company encourages them to lower their prices and prices or risk losing your loan. Apply with the lender offering the very best loan for your situation. Work with this creditor before your loan closes.

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