Mortgages: What is an Underwater Mortgage?
March 10, 2011
Debt is practically inevitable in today’s society. Everyone wants things but often cannot afford them, so people just open credit card after credit card to get what they want. Credit cards make controlled spending very difficult.
Credit and Debt
If you have good credit, the likelihood of being approved for a loan for whatever reason is fairly high. If your credit rating is outstanding, you may be approved for a loan larger than what you initially planned to take out. It is important that you budget your spending so that you are able to afford the things you need, like a reliable source of transportation or a place to live. The average American consumer is about $43,000 in debt. When applying for a mortgage loan, make sure you only take as much as you need.
Underwater Mortgage: Definition
An underwater mortgage does not typically occur with taking out the first mortgage on a home. It is possible to face an underwater mortgage upon the second or third mortgage you take out on your home. An underwater mortgage is a mortgage that leaves the homeowner owing more on the home than its current market value. According to the online article “The Average Amount of Debt,” as of June 2010, consumer debt is nothing compared to the amount of housing debt alone. The outstanding mortgage debt totaled over $13 trillion for the US. Breaking this number down for individuals, it translates to more than $60,000 of just housing debt for each adult.
Underwater Mortgage: How it Happens
Refinancing existing mortgages is one of the most common ways to drown yourself in an underwater mortgage. Be careful if your lender presents you with an offer to take out money based on the current equity of your home. This could be a good or dangerous option for you. If equity built up is high enough, then it may work. Then again, you could end up in housing debt if the equity is significantly smaller and you refinance your home.
Make sure before you decide to refinance your home a second or even third time, that you check the market value of your home. This will help eliminate the possibility of falling into housing debt. Americans suffer from enough debt. Don’t let housing debt be among the forms of debt you experience.
Buying a House: Tips to Improve Your Experience
March 2, 2011
Looking to buy a home? Before you even start searching for a new home, you should brainstorm and sort out your family’s needs. Create a checklist of priorities. It contains three main aspects that you should keep in mind when you are ready to go house hunting.
Your Family
Perhaps you and your spouse just got married. You have talked about whether you want children. If you come to the conclusion that children are in your near future, make sure you are looking for a home that either immediately accommodates this decision or has property with enough room for any necessary additions to the home. The size and setup of your home depends largely on the number of people who will be living in the home.
Along with considering the size of your family, make sure to take the passing of time into account as well. If you already have children, how long will they continue living with you? You will not want to live in a large, empty home in two to three years. On another note, perhaps your elderly mother with advanced needs is living with you. You know that you will need a home that is both handicap-accessible and functional for her.
Your Budget
Determining how much you are willing to spend is another crucial addition to your home-buying checklist. In addition to how much you will pay for a home, make sure you take note of the amount of money you want to invest in repairs if necessary. (Make sure to get a home inspected before you move in.) Also, discuss with your spouse how much each of you plans to contribute to bills, including school taxes, electric, water, and other costs.
Your Location
One last thing to include in your checklist before browsing homes for sale is where you would like to live. These are two categories to consider.
Income
You will want a home close to your job if you work at a specific address on a regular basis. How long of a commute are you willing to make each day? Consider the cost of transportation, whether personal or public. If you rely on public transportation, is your home close to a bus stop? If you drive every day, is there a limit you are willing to set for the amount of money you pay to fill your vehicle on a regular basis? If your business requires you to travel extensive distances, you should be reasonably close to an airport. This could save money in your overall transportation, also.
Lifestyle
Another thing to consider when deciding on location is what you are looking for around your home. Would you like to be near a shopping center? If you have or are planning to have children, the home that appeals to you most should be near a good school and near doctor’s and dentist’s offices. Parks are another perk for families, whether they are local or amusement parks. Perhaps you are a churchgoer. Is there a church that suits your beliefs nearby? Do you like to go out with friends? Perhaps you would like to be near a movie theater or a few nice restaurants.
When you finally determine your needs as a family, how much you are willing to spend, and your location, you are ready to begin your search. Refer to your checklist whenever a specific home catches your eye—does it meet most, if not all, of your criteria? Find the perfect home that suits you with the use of your own personal checklist!
Foreclosures: Deed in Lieu
February 4, 2011
What is a Deed in Lieu?
In the real estate world, a deed in lieu of foreclosure is a document submitted by the homeowner to hand over the rights of ownership to the lender. This document of agreement allows you to avoid foreclosure. It is often the ideal option if you can no longer afford to make payments on your mortgage. However, if your lender believes you are still able to make your mortgage payments, you will most likely be unable to file for a deed in lieu of foreclosure.
Why Choose a Deed in Lieu of Foreclosure?
As mentioned above, a deed in lieu is a reasonable alternative for foreclosure if you are unable to make mortgage payments. This means you can get rid of your monthly interest payments. Your home is turned over to your lender, and you are not forced to face the troubles of the foreclosure process.
By going through with a deed in lieu, you do not have to put your home on the market. This is because if you were to put it on the market, you would still be paying on your mortgage since the home would not yet have sold. Only time can tell how long your home would otherwise be on the market.
Choosing a deed in lieu over a foreclosure will not damage your credit ratings nearly as badly as choosing to foreclose your home. Of course, a mark will still go on your record; but a foreclosure does much worse damage to your credit.
In addition, if the home is under joint ownership and only one of the two is unable to pay, then a deed in lieu of foreclosure only applies to the party unable to make his interest payments on the property.
If you decide to submit a deed in lieu of foreclosure, a wise decision would be to talk to an attorney specializing in foreclosure options to be sure your lender is following through with the correct procedures and not preventing you from choosing the best alternative for you.
Natural Disasters
January 29, 2011
In addition to the number of characteristics of the house itself to check when looking into purchasing a home, it is also important to take into consideration what sorts of natural disasters may occur around your preferred location. If you are looking for home in an area that is mostly flat land, then your home may very well be at risk to experience at least one of the following three catastrophes.
Flood
If you find a home you are interested in purchasing near a small body of water, even a narrow river, keep in mind that if the area receives heavy rains there is a strong possibility of flooding occurring. In some places, just parts of roads are flooded out, but then there are areas in the United States in which flooding is a serious problem, causing severe damage to vehicles and homes. If you do not have flood insurance on your home, the price of repairs can be quite costly.
Hurricane
Beachfront homes are often at high risk of experiencing a large portion of the danger caused by hurricanes. Seeing as hurricanes form above large bodies of water, you need to be sure that the homes you are interested in are equipped to outlast this natural disaster. Be sure the homes have the ability to withstand high winds and possible flooding. Many beachfront properties have homes on “stilts,” so to speak. They are raised high enough in preparation for the worst weather possible. This prevents severe flood damage to the interior of the home. These houses often attract onlookers with their elaborately designed outsides, especially the staircases leading up to the house. Driving by, you will find many homes with spiral staircases, some with regular stairs, and some with stairs that wrap around part of the house.
This past hurricane season 2010 brought 19 named, or significantly powerful, storms along the southeastern United States border. According to the National Oceanic and Atmospheric Administration (NOAA), it was one of the busiest hurricane seasons in the books, third highest to be exact. A total of 12 of these storms turned into hurricanes for the first time since the same number appeared 1969, which is the second highest number to date. If you are looking for a home on the beach in Florida, make sure you are prepared to deal with heavy winds and rain and the likelihood of hurricanes occurring throughout the month of June all the way to the end of November.
Tornado
Tornadoes are another problem for some homeowners. Often unexpected, tornadoes can completely destroy your home, leaving nothing but the floorboards. They are much more likely to occur in areas with fairly flat land, rural areas, as opposed to living on or between mountains or hills. Basements are one of the key safety features to utilize during a tornado, so being sure your prospective home has one is a must.
So, just like making sure things like the electricity and plumbing work perfectly in a new home, you as a future homeowner should always take into consideration the location of your ideal home and the possible natural disasters associated with that area.
Stairway to Home Value
January 26, 2011
A staircase can accentuate the appearance of any room in your home, and it also increases home value. Of course, easy access to your second floor is a given reason as to why you should own a staircase. What type of staircase you have will also affect the overall appearance of your home.
Covering Your Stairs: Flooring
There are a number of options available as far as materials to use when constructing your indoor staircase. The two that seem to be the most popular are carpeting and hardwood flooring.
Benefits of Hardwood Floors
Hardwood floors are a great way to provide elegance and class to a room or to make a room more countrified. Its simple and natural grain allows for a more relaxed aura for the room. It is not cluttered with detail, as some tile floors. Another benefit to having hardwood floors and stairs to match is the ability for wood to hold heat. It acts as an insulator and traps the warmth, which is especially pleasant for the owner in the wintertime.
If you have little ones, you know that you will be unable to avoid the inevitable messes and spills that come along as they patter up and down the staircase. These spills are so much easier to clean up on a hardwood staircase because the liquids do not soak into the wood right away, unlike carpets which liquids can stain. Wooden stairs are much easier to keep clean overall, with much less maintenance than other flooring.
Wooden staircases also make gorgeous spiral staircases, adding to the aura of elegance in your home while saving you space. They are not all that expensive.
Benefits of Carpeted Stairs
Carpeted staircases are a wonderful way to add a stronger sense of comfort to your home. It is one of the most popular favorites among homeowners today. The varieties for your carpet choices are seemingly endless. You can choose from a wide array of colors and patterns and even textures for your stairs. Another great option is the choice between a running carpet to cover the stairs completely or carpet tiles that only cover the tops of each individual step, leaving a beautiful wooden finish between each stair. And another most enjoyable benefit is the price. Carpet tiles and running carpet prices are significantly less costly than the other forms of flooring available for your staircase.
Running carpets or carpet tiles are ideal for family homes because the texture of the carpets is much safer for younger children than tile or hardwood stairs that have a higher risk of their users slipping. Maintenance on carpeted stairs is much more detailed than the maintenance procedures for hardwood or tile-covered stairs.
When purchasing or remodeling your home, pay close attention to what the staircase does for each home you go to see. Other options include but are not limited to ceramic tile and laminate or vinyl flooring. Which type of flooring fits your lifestyle?
New Years Resolution: Buying a Home
January 20, 2011
With a new year comes more resolutions, maybe you are even still focused on ones from last year that you never fully accomplished. If you are looking into making a good investment, buying a house might just be the perfect option for you. Buying a home can be very beneficial financially.
Save Money: Buy a Home!
There are so many ways that you can save money just by purchasing a home, there are very few reasons not to consider buying now!
Tax Deductions: Income Tax
As a new prospective homeowner, you may not be aware of the tax benefits that come with purchasing a home. Take a look at the statistics here and ask yourself, does this seem like the right move for you?
Your taxable income can be reduced by purchasing a home. How? Well, look at it this way: you can subtract the interest tax and property taxes you pay that year from your gross income. This in turn lowers your overall taxable income. As an example, perhaps the balance of your loan for your new home is approximately $140,000 and has an interest rate of about six percent. If this is the case, you would most likely be paying around $8400 interest annually. This amount of interest counts as a tax deduction, allowing you to take out that $8400 from your taxable income.
Buy or Rent?
It is still not too late to start the new year with a BANG by fulfilling one of your top resolutions: buying a home. Many people assume it is much easier to just rent a home on a yearly or sometimes even monthly lease, but the fact is that purchasing a home makes more sense when all is said and done. Why is this, you may be wondering. When renting a living space, there is no doubt that the amount you are paying will increase at a given time, often yearly but sometimes even sooner. If you stay at that location for a certain amount of years, the prices just climb higher and higher. And if you choose to move from that area and rent another home, you can expect the same in return.
After a while, moving from home to home will get tiresome and become quite a hassle. If you buy a home and sign for a fixed rate mortgage, you will pay the same amount each month for your mortgage for a good 30 years (assuming that is the length of your mortgage loan). So, if you are looking to settle in an area, especially if it is closer to your job, purchasing a home is the much smarter way to go.
Buying a house is a great long-term investment with tax deductible benefits, and it is an easy way to save money. You do not have to expect a raise in monthly costs with a fixed mortgage rate, and you know your interest and property taxes can be removed from your gross income when tax time rolls around!
Increase Your Home Value: Own a Fireplace
January 12, 2011
It’s that time of year again—the winter season brings with it blustery winds and wet, menacing snow. Sure, central heat is a plus, but nothing beats the welcoming warmth of a fireplace and cup of hot cocoa after a morning of intense shoveling. Investing in a home with a fireplace is a great way to secure a nice portion of your home value. Having a fireplace installed in your home will no doubt increase your home value, adding an extra thousand or two to the overall value. Adding a fireplace to your living room or family room will also increase the comfort level of that room.
Fireplace or Wood Stove
Have you recently remodeled your room that contains a fireplace, adding different furniture or changing the color scheme, and now your fireplace seems out of place? There are ways you can spruce up your fireplace to better fit your new and fresh living or family room. For instance, people sometimes paint their fireplaces to match the color scheme. They used to use regular paint on brick fireplaces, but now there is a type of paint specially designed for bricks that does not alter the texture of the actual brick. Replacing bricks can put a rather deep hole in your pocket, so if all you are looking to do is remodel, painting them is the better option.
Yes, fireplaces burn wood; but there are also wood burning stoves that have doors to hold in the fire and embers. People have been using wood stoves for centuries—they have many different purposes. A wood stove is especially convenient to have these days in case of the unfortunate event of losing electricity. Your wood stove makes for a reliable cooking surface; whereas, a regular fireplace typically only has a mantle, so cooking over it is out of the question.
Coal and Pellet Stoves
Coal stoves are handy to have in an unfinished basement of a one-story home. They do well in heating the majority of the rooms above the area in which it is located in the basement. However, coal can be an expensive investment. These days, pellet stoves are becoming the latest heating trend because they are cheaper in the long run and easier to maintain. The pellets last hours longer than coal, and cleaning the stove is much easier and needs to be done less often. Pellet stoves are also safer to use because you are not working directly with the flames of the fire.
Gas Fireplace
Owning a gas fireplace is highly convenient. They can be cheaper than your regular fireplace or coal stove and fit in homes where fireplaces with chimneys cannot. Some of them can even be moved from room to room with no problem whatsoever because they do not need to ventilate outside. Others do need to be up against a wall because they need a connection to the outside. Some gas fireplaces can be hooked up to a fireplace with a chimney, which is convenient if you know your gas fireplace will save you money; and it will look just as nice. Gas fireplaces are less of a hassle to clean because, nowadays, most of the logs are made of porcelain and do not collect the debris from running the fireplace.
Now is as good a time as any to take a look at prices of installing or purchasing a new fireplace for your home. Do not forget—adding a fireplace will increase your home value, no matter which kind you choose, so pick the type that suits your needs best at a price best for your budget.
Should You Change Jobs Before You Buy a Home?
January 10, 2011
That all depends on what type of job you have at the current point in time. In most cases, it is best to wait until after you apply and are approved for a home mortgage to change jobs. Below, you will find job types and reasons as to why it is a good or bad idea to switch jobs right before buying a home.
Salary Employee
If you have a job at which you earn a steady salary but are looking for a new job, it should be alright for you to switch jobs before you purchase a home. It is important, however, that you remain in that same type of work—find another salary-paid job within the same field. As long as you do not receive income on top of your salary (i.e., from regular bonuses or commissions), there is no reason why a lender would not consider you reliable enough for a mortgage. Often changing jobs leads to a higher salary, which in turn will provide a higher chance of you being qualified for a loan.
Full Time Job
If you have a job at which you are investing a complete 40 hours of work each week at a decent steady pay, then you should have no problem whatsoever applying and being approved for a mortgage. Lenders want someone whom they can trust to meet their payment amounts and deadlines, so having enough of a steady income proves that they can rely on you to make your payments on time every time. If you are going to change your job to another full time position making the same amount as or even more money than your current job, you should have few issues with lending companies when applying for a mortgage.
However, if you receive overtime pay, be careful about whether you decide to change jobs. If you work more than 40 hours a week but the number of hours fluctuates, the lenders will take that into consideration when you apply for a loan. Many companies assign different levels of overtime and perhaps even different amounts in pay because of it, so switching your job may not be the best option because lenders may not consider the overtime rates of your new job.
Part Time Job
With a part time job, you need to be careful when deciding to change your job. Part time jobs mean you are not working 40 or more hours a week, and your hours may fluctuate depending on the type of work you do. Being paid by the hour for a part time job is good if you have a set amount of hours each week, but if a lender sees that you switched your job and are working for a different company, he may not approve your loan. It is easy for the lender to calculate your earnings if you have had your job for at least two years, so changing your job right before purchasing a home is not a good idea.
As you can see, the type of job you have influences your probability of being accepted for a mortgage loan. Switching jobs may or may not be your ideal move before making your final move in purchasing a home, especially if the house has a high home value. Lenders often look at your income levels over the course of the two years prior to your loan application, so unless you know you will be making a significantly larger amount of money at a set rate, changing jobs is not your best move.
Reverse Mortgage: The Myths
January 6, 2011
There are so many questions people generally have in regard to reverse mortgages. They assume the worst when offers like this sound too good to be true, but just take a look at the reverse mortgage information listed below and see for yourself how convenient reverse mortgages really are for senior citizens.
Reverse Mortgage Myth 1: In order to be approved for a reverse mortgage loan, I have to have both a good credit score and a fixed income.
This is completely untrue. Neither credit score nor regularity of household income is taken into consideration when you apply for a reverse mortgage.
Hence, also, the fact that you do not have to be debt free to qualify for this type of loan if you are able to continue making payments to your debtors; and you can even use money from your reverse mortgage to help pay off your debts! Who would have thought that there would ever be a mortgage plan that helps eliminate debt?
Reverse Mortgage Myth 2: I have to be in good health standing to qualify for a reverse mortgage.
Not true. One of the many benefits of this type of loan is that no physical or health examination of any kind is necessary, so clearly your health status is not one of the deciding factors upon whether you qualify for a reverse mortgage. Not everyone over the age of 60 is in impeccable health, so it makes sense for that not to be calculated into the equation of qualifications.
Reverse Mortgage Myth 3: If the amount of my loan turns out to be higher than my home value, I will owe the lender money.
Also another false assumption. You as the homeowner with a reverse mortgage loan will never owe your lender any amount of money exceeding your home’s value. Reverse mortgages are a type of non-recourse loan, meaning no matter how much money you borrowed you are legally allowed to accumulate a balance due that is not higher than what your home is worth.
Reverse Mortgage Myth 4: The terms of my contract will change if the loan is sold.
Absolutely not. Reverse mortgage lenders never change the terms of your loan, even if it is sold to another company. Though it is highly probable that your reverse mortgage will be sold, you do not need to worry about a change in your reverse mortgage terms. Once you sign that contract, you are guaranteed the terms provided in your contract throughout the life of your loan.
So before you decide that reverse mortgages do not sound very reliable, make sure you look at all the angles. Throughout the web, you can find tons of information on this kind of loan as well as more myths and their counterparts. Be sure to look into every aspect before making your final decision. Consult your local lender today to see how reverse mortgages and home value both resemble each other and differ from one another to help you choose the path for you.
Home Value and Reverse Mortgage
January 4, 2011
What is a Reverse Mortgage?
A reverse mortgage is a plan in which payments are disbursed to the homeowner as opposed to the homeowner paying a set amount for a mortgage each month. Payment disbursement is determined by at least three main factors. First is the age of the applicant. The older the applicant, the more likely he or she is to get a slightly higher monthly payout rate. Second is the present rate of interest, and thirdly is the approximate appraised value of the home receiving the reverse mortgage plan. However, there are also specific stipulations involved in such a contract.
Who is Eligible for a Reverse Mortgage?
Reverse mortgage programs are only offered to people 62 years of age or older. This is ideal for people who have retired or are planning to do so in the near future, especially if they do not have a whole lot of money to support themselves upon retirement. The money paid out in a reverse mortgage can be used for any purpose. The uses are endless!
What are the Requirements of Reverse Mortgage Programs?
Aside from being a senior citizen aged 62 or older, you must also reside in and partially own the home that you intend to apply the reverse mortgage to. If you decide to move, you will lose the reverse mortgage plan on that house.
Reverse Mortgage Disbursement Options
There are a few different ways you can receive the money from the reverse mortgage plan once you have been approved. You can receive everything in one lump sum, which can be helpful if you are trying to get out of a significant amount of debt in a timely fashion. You may instead choose to go with a tenure plan, which allows you to receive a set amount of money every month for as long as you continue to live in that particular house. Another option is a term payout in which you get a set amount of money each month for a specific period of time, usually over the course of a number of years (as long as you remain living in that house). You may also decide to choose a sort of credit program during which you are able to withdrawal at any given time, as long as the line of credit is not exhausted. By speaking with your lender, you may also create a compilation of these options for your reverse mortgage plan.
As mentioned above, one of the greatest benefits of having a reverse mortgage plan is that the money paid out to you can be used for whatever you wish. So, if you are 62 years of age or older, talk to a mortgage lender about payment options on your home and see if you specifically qualify for a reverse mortgage. It very well may be the best investment you make for the rest of your life!