Wednesday, February 27, 2013

Risky Home Mortgage Loans New Ban

Due to the collapse of the housing market, a new rule announced is aiming to prevent the return of high-risk no-document home loans. This has only happened now and for the very first time, federal regulators are enforcing out rules to make sure borrowers can afford to pay the cost of their mortgages. The Consumer Financial Protection Bureau will necessitate lenders to offer loans that don’t ensnare borrowers. Late this yaer or early next year if the new law takes effect, upfront fees will be limited and interest-only loans will be curtailed. Lenders would be obligatory to verify and inspect borrowers’ financial records.

 Today’s current strict credit standards would not tighten but the new rules are intended the kind of no-holds-barred lending that was seen during the housing bubble before 2008. Loading homeowners with burdensome loan payments would do anymore; financial firms are banned to do so. They cannot require the borrower to pay the total more than 43 percent of their income. But this on the other hand could make it harder for people with lower incomes to qualify for a mortgage if banks are tempted to ease their requirements.

 According to the Mortgage Bankers Association, four out five home loans are now “re-fi’s.” Most 30-year fixed rate mortgages are close to record lows and are well under 4 percent. A cheap rate can make a big difference over time. “At the end of 30 years you can save thousands upon thousands of dollars in total interest,” says Pat Esswein of Kiplinger’s Personal Finance. Refinancing usually makes sense “if you will stay in your home long enough to recoup the closing costs that you have to pay to do the re-fi.” To calculate re-financing costs and long term savings, Esswein says “go to an online mortgage payment calculator and see what you can save by reducing your interest rate.” The rumble in re-financed mortgages is projected to continue this year.

 The fresh system seek out a middle ground by protecting consumers from bad loans while giving banks the legal assurances they need to increase lending. Teaser rates that adjust upwards and large "balloon payments" that must be made at the end of the loan period are rules bound features. Lenders will be obliged to confirm and check borrowers' financial records. They generally will be prohibited from saddling borrowers with loan payments totaling 43 percent of the person's annual income.

 Balloon payments would be allowed for certain small lenders that operate in rural or underserved communities, because other loans may not be available in those areas

Sunday, February 10, 2013

Make Yourself Creditworthy of Home Loans

Responsible Credit Card User. Having and using credit card is not bad the user oftentimes makes it bad to have a credit card. The secret is being responsible. One of the best ways to build and maintain good credit is to use your credit cards, but to maintain them at a balance that you can afford to pay off in full each month. 

Improve Your Credit Score. The better the credit history, the higher the credit score in turn the higher chance to become creditworthy to the lenders. To improve your credit score you must know how to calculate it.

 • 35% of your credit score is derived from your payment history, so always making your payments on time boosts your score
 • 30% relates to account balances, which have to be at manageable and reasonable amounts • 15 % is the length of relationships with creditors (credit card companies, mortgage companies, auto loan lenders and more)
 • 10% is related to credit types because the credit scoring agency likes to see you can manage different types of credit such as credit cards, student loans, auto loans, mortgages, etc. • 10% is about establishing new credit, so it can improve your credit score to apply for new credit, preferably a type of credit that you may not already possess 

 Start or Continue to Make Bill Payments on Time. You should always pay your bills on or before the due date. Late payments continue to drag down your credit score so start making your payments on time right away. Keep up or improve your credit score once you know it by using the factors that influence your credit score. Get Your Credit in Order. This goes beyond just paying bills on time; it is also your responsibility to check to credit report. Review your credit report to spot incorrect and negative information and to get an idea on what is showing in your credit report. If there is mistaken information on your report, contact the credit agency to discuss the erroneous items. The law entitles you to one free credit report a year from each of the bureaus by Clean or Freshen Up Your Credit. Contact the creditor or collection agency as soon as you saw some negative items such as late payment, write-offs or collection accounts. Clarify you want to take care of the debt or issues and work out payments arrangements or a reduced payoff balance to resolve the flaw on your credit. And insist on getting an arrangement so that you can work out to take care of your debts. You should keep all of your credit reports up-to-date. Carefully look for these negative items that may appear on your report: • Inaccurate information • Late payments • Collection accounts • Charged off accounts Be Credit Wise. Always remember that lenders review credit reports to verify your ability to manage credit loans you already have. The type of credit also determines getting approval of the mortgage being applied for. If your credit cards are maxed out then it’s a bad sign, it will be better if you have variety of loan types such as auto loan, student loan, credit cards and other revolving accounts. Do not max out any credit and never use the full credit amount you have. Long Relationships Count. Having too many open credit accounts and loans can drag down their credit score, this is not necessarily true. Close newer established accounts before you close old accounts if you decided to start closing accounts. The length of your relationship with a creditor does benefit your credit score. Be Patient but Follow-up. So now everything seems to be in order after you pulled your credit reports in turn you should be credit worthy and ready to apply for mortgage. Applying for a home loan is not an overnight process. Be patient and to follow-up with the creditors, collection agencies and credit bureaus until the negative and inaccurate items are corrected and your credit score improves if you need to make yourself creditworthy. Patience is a virtue.